Fase de evaluación del modelo de medida

The ex-ante assessment considers whether or not to introduce a new TE into a tax system and focuses on the rationale behind the government’s intervention in a particular area of public policy, the planning of the policy as well as the design of the policy.74 Thus, this assessment is a very useful tool for evaluating Canadian fiscal measures before they are introduced into the Nigerian legal system. According to the OECD, the ex-ante assessment involves three stages. The first stage relates to examining the need which the new TE intends to address and the suitability of using the tax system for that particular objective. The second stage deals with identifying and setting the objectives of the proposed TE. The last stage relates to appraising the use of the tax system as the tool for achieving the objectives against other alternative policy options.75

In order to address the above considerations, there are five (5) major areas which should be assessed before the introduction of a new TE.76 _{These areas relate to the objective of the TE, the}

70 _{Ireland, supra note 66 at 8.} 71 _{Ibid at 2}

72 _Ibid. 73 _{Ibid at 30-5.}

74 _{Ireland, ibid; OECD Choosing, supra note 40 at 76.} 75 _{OECD Choosing, ibid at 76-7.}

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market failure the TE proposes to address, the efficacy of the TE in achieving the policy objectives, the likely economic impact of the TE as well as the expected cost of the TE.77 These are discussed further in the subsequent paragraphs.

i. What objective does the TE aim to achieve?

Prior to introduction of a TE, the desired outputs, outcomes and possible targets which the government intends to address through the tax system should be very clear.78 _{For instance, the}

objective of the proposed TE can be to increase research and development in the oil and gas industry or to assist the small and medium scale enterprises in the oil and gas sector. Ideally, the objectives of a TE should be “specific, measurable, achievable, relevant and time-bound (SMART)”.79 _{This is because such objective(s) provide a benchmark with which to assess the}

proposed TE after its implementation. These objectives are also instrumental for identifying the alternative policy options that may be available to the government to deliver the policy objectives.80 The failure to identify clear objectives at this introductory stage makes it difficult to describe, examine and assess the consistency of the proposed policy with other government policies.81

ii. What market failure is being addressed?

In addition to identifying the objectives of the proposed TE, it is also necessary to justify the government’s intervention in relation to the policy objective.82 _{In other words the ex-ante}

assessment should examine: (i) whether there is a need for government intervention in the area of the proposed policy83 and (ii) why and how a tax break would address that need.84 Thus, an ex- ante assessment must confirm that the proposed TE addresses an actual need which is consistent with the government’s policy priorities.85

iii. Is a TE the best approach to address the market failure?

77 _{Ibid at 8-9.}

78 _{OECD Choosing, supra note 40 at 76} 79 _Ibid.

80_Ibid.

81 _{Ireland, supra note 66 at 8.} 82 _Ibid.

83 _{OECD Choosing, supra note 40 at 76.} 84 _Ibid.

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Even though the existence of a market failure could provide a strong justification for the government’s intervention in the area of the proposed policy, it does not imply that the tax system is the most efficient means to remedy the market failure.86 This is because there could be other alternative policy options available to the government for addressing the market failure.87 Thus, the ex-ante assessment must consider whether a TE is the most appropriate method of government intervention.88 This can be done by comparing the benefits and limitations of TEs with alternative delivery options.89 _{The comparison can be done in terms of accessibility of the proposed TE to}

beneficiaries, administrative cost of implementing the policy as well as the similarity of the TE with existing policy intervention in order to avoid duplication of policy measures.90

iv. What economic impact is the TE likely to have?

Upon identifying the objective(s), the market failure and the suitability of the proposed TE, it is important to assess the expected impact of the TE.91 This can be done by looking at the design of the TE in terms of meeting the policy objectives as well as the influence the TE will have on connected sectors of the economy.92 Such an evaluation can be conducted by drawing on the result of impact assessments conducted on similar (existing) TEs within or outside the jurisdiction in which the proposed policy is to be implemented.93 This stage of the ex-ante assessment should also “set out criteria against which the impact and efficiency of the scheme will be evaluated at the ex-post stage.”94 This is particularly important so that arrangements for the collection of the necessary data that will be used in the ex-post stage can be put in place at the introductory stage of the TE program.95

v. How much is the TE expected to cost?

86 _{Ireland, supra note 66 at 9.} 87 _{Supra note 42.}

88 _{Ireland, supra note 66 at 9.} 89 _Ibid. 90 _Ibid. 91 _{Ibid at 11.} 92 _Ibid. 93 _Ibid. 94 _Ibid. 95 _Ibid.

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An ex-ante assessment should also examine the opportunity cost of implementing the policy through the tax system.96 According to the OECD, the “revenue foregone” method is the most practical approach for estimating the expected costs of the proposed TE.97 This revenue forgone method considers the cost of the TE in monetary terms.98 The calculation in monetary terms is based on the assumption that the behaviour and revenues from other taxes remain constant.99 _Even

though the calculation fails to acknowledge the behavioural aspects of the tax incentive and any likely interactions the TEs may have with other TEs, it provides an estimate of the revenue lost or voluntarily waived by the government as a result of departure from the normal system of taxation.

100 _{However, a cost-analysis of tax measures that will be proposed in this thesis is a highly specific}

exercise which is beyond the scope of this thesis. Thus, the thesis would place more reliance on first four questions in evaluating the suitability of the proposed tax measures in Nigeria’s legal system.