Description

Tax relief granted by a government to an enterprise (e.g. a farm) for the production of a strategically relevant and / or new product. This is usually linked to the achievement of certain economic, social and environmental policy targets.

The macroeconomic costs of tax incentives are difficult to estimate in advance and could in some cases be associated with considerable differences between planned and actual losses of revenue.

Requirements

• A properly functioning country-wide administration and monitoring system with access to the relevant information and sufficient technical and human capacities for its design, implementation and monitoring
• Clear and coherent political strategy and targets for policy-makers and public authorities
• Clear responsibilities in public authorities
• Compatible regional and world trade law (WTO conformity)
• Constant market surveying and forecasting
• Country-wide register of farms and / or enterprises involved in the agri-food sector
• Definitions of good agricultural practice in respect of soil, water, climate and air, as well as biodiversity
• Good knowledge of good agricultural practices
• Open-access to all farms, regardless of size and location
• Functioning tax authorities
• Transparent tax system

Possible Negative Effects

• Negative wealth distribution effects, e.g. if the tax relief benefits unintended groups of people
• Loss of efficiency as a result of a more complex tax system
• Free rider effects