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The West African Giveaway: Use & Abuse of Corporate Tax Incentives in ECOWAS



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This report examines corporate tax incentives and their impact in the Economic Community of West African States (ECOWAS), with a focus on four countries: Nigeria, Ghana, Cote d’Ivoire and Senegal.

The report finds that:

  • Corporate tax incentives – reductions in tax offered by governments presumably to attract investment - significantly reduce domestic revenue collection and are not necessary to attract foreign direct investment (FDI).
  • Due to the lack of reliable and complete data it is not possible to accurately calculate how much the ECOWAS states are losing through the granting of corporate tax incentives. However, our research shows that three countries alone – Ghana, Nigeria and Senegal – are losing up to $5.8 billion a year. If the rest of ECOWAS lost revenues at similar percentages of their GDP, total revenue losses among the 15 ECOWAS states would amount to $9.6 billion a year.
  • These potential revenues lost could be used for spending on public services such as health and education, thus supporting sustainable development and creating favourable conditions to attract better investment.
  • Despite serious questions about the effectiveness of corporate tax incentives in achieving economic objectives and the losses to national budgets, they remain a commonly used policy tool in ECOWAS member states.
  • Corporate tax incentives are often managed by multiple, uncoordinated entities in each country and are granted arbitrarily, rather than according to cost-benefit analysis.
  • Despite years of granting generous incentives to investors, the objectives of increased job creation and employment have not been realised in most ECOWAS countries. Foreign direct investment to West Africa1 has increased but not in the sectors that create the most jobs, such as manufacturing. Neither is such investment the result of corporate tax incentives but rather the existence of natural resources, namely oil and gas.
  • Only limited regulation exists to coordinate tax policy on the ECOWAS level, and this regulation contains loopholes.
  • The use of corporate tax incentives is causing a competitive race to the bottom among countries in West Africa which is detrimental to national revenue bases and regional integration.