Exploring the relevance of tax incentives in the brewing industry in Africa

Abstract

Tax incentives are widely researched; however, the findings from the existing literature are predominantly from the perspectives of developed countries, inferring that tax systems are inundated with tax incentives which lead to ineffective tax revenue collection. As the tax systems of developed and developing countries are vastly different, the exploration of tax incentives as features of the tax systems in developing countries is required. The contribution of this study lies in the uniqueness of exploring the tax incentive known as a local sourcing initiative (LSI), which is encapsulated in the excise duty policies applicable to the brewing industry in Africa. The following research question guides the study: What are the economic and social impacts of the LSI in the brewing industry in Africa to determine the relevance of such a tax incentive? A mixed method, multiple case study research approach was followed to gather supporting evidence in the pursuit of understanding the relevance of the LSI. Each case constitutes an individual African country for which a quantitative and a qualitative method was applied. The economic impact was determined using a quantitative analysis through a Social accounting matrix multiplier model. The social impact analysis was conducted by means of a qualitative document analysis. Methodological triangulation was conducted on each case study. The research was concluded through a synthesis of the findings between the cases. From the research, it was confirmed that the LSI is relevant in the brewing industry in Africa and that it has resulted in addressing the LSI objectives to some extent. However, challenges such as poverty and limited economic growth and development persist. A final conclusion is that tax incentives are relevant in developing countries.