Tax incentives (tax subsidies)
Tax relief granted by a government to an enterprise (e.g. a farm). This is usually linked to the achievement of certain economic, social and environmental policy targets.
A distinction is made between tax incentives intended to control, i.e. where the benefit is granted in order to induce a particular behaviour, and tax incentives with a distributive purpose, i.e. where the benefit granted helps correct a particular situation in the distribution of wealth.
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.
- 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
- Transparent tax system
- Functioning tax authorities
- Open-access to all farms, regardless of size and location
- Good knowledge of good agricultural practices
- 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
- Constant market surveying and forecasting
- Compatible regional and world trade law (WTO conformity)
- Clear responsibilities in public authorities
- Clear and coherent political strategy and targets for policy-makers and public authorities
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