In the tax world, this is significant because businesses react to tax policy. Tax policy, in turn, stimulates the interest of both local and international investors who are the key drivers of economic growth. Therefore, the challenges of the economic downturn will be more glaring and significant for African countries, who have a greater reliance on tax revenue from large taxpayers than more advanced economies.
As evidence shows that tax incentives are not key drivers of investment and the opportunity cost of the incentives are high with dire implications for the health sector in Africa, it becomes pertinent for African countries to re-evaluate and reform their tax incentives frameworks. To achieve this, African countries need to ensure that all tax incentives are only considered after conducting a cost-benefit analysis of the potential impact of the incentives.
Based the observation from Ghana and Kenya, there is the need to improve the efficiency and effectiveness of investment tax incentives to ensure transparency, accountability, reduce associated costs, and check abuse.