The Principles are intended to support governments in developing the rationale for tax incentives and in strengthening their design, implementation, and evaluation
The Platform for Collaboration on Tax (PCT) has released the final version of the Tax incentives Principles. on 19 May 2025.
These aspirational principles are intended to support governments in developing the rationale for tax incentives and in strengthening their design, implementation, and evaluation.
They address common risks—including revenue loss, economic distortions, and governance challenges—and cover the full life cycle of a tax incentive. Accompanying remarks provide further detail and references to relevant guidance.
They tackle key risks such as revenue loss, market distortions, and governance issues, and span the entire lifecycle of a tax incentive. The core principles include:
- Principle 1: Justification – An incentive may be justified only if net social benefits can reasonably be expected, for reasons that are publicly articulated.
- Principle 2: Design – Incentives should be designed to promote the favored activity while avoiding unnecessary distortions to other activities and limiting the revenue cost.
- Principle 3: International Considerations – Incentive design should be sensitive to international commitments and circumstances, and with an openness to mutually beneficial cooperation.
- Principle 4: Legislation – Incentive legislation should be clear, integrated into tax law, and subject to effective oversight;
- Principle 5: Implementation – Tax incentives should be implemented so as to promote voluntary compliance, mitigate revenue and governance risks, and provide the data needed to evaluate them.
- Principle 6: Evaluation – All tax incentives should be subject to periodic, public, and evidence-based ex post evaluation.
