The administration and impact of manufacturing incentives on the manufacturing sector

Abstract

Abstract provided by author:

The Manufacturing Incentives are in two categories, viz (i) tax-based incentives which include 50 per cent tax abatement and 25 percent allowance on taxable income derived from export of manufactures, and 25 percent deduction of training and production line wages; and (ii) non-tax-based incentives made up of cash grants subsidies for industrial studies

The paper shows that the incentives applied for are almost exclusively tax-based. We have also shown that the split of the administration between two Ministries causes duplication and argued that the process can be simplified by either splitting the incentives in such a manner that the Ministry of Finance is only responsible for the tax incentives and the Ministry of Trade and Industry for the administration of the non-tax based incentives. Alternatively, we suggest that a single body outside the Inland Revenue be tasked with the administration of the whole scheme in order to relieve the hard pressed tax officials of Inland Revenue of this burden

While the manufacturing incentives are based on the premise that they will act as stimuli for manufacturing growth, we found the link between the performance of the sector and the incentives to be weak. However, we argue that an unintended outcome of the incentive scheme is that it has strengthened investors' confidence in the government's attitude towards business generally

This view is buttressed by the opinions of our limited sample of interviewees who were all up beat about the manufacturing incentives, which they regard as "attractive"

In conclusion, the paper argues for a revision of the manufacturing incentives in order to remove duplication, simplify the administration and rationalize the bureaucracy of delivery