application process, large firms are more likely to be able to take advantage of these benefits, whereas they can be too confusing or complex for smaller firm to apply.<sup>52</sup> They can also introduce discretionary layers and loopholes into the tax system as a whole, and increase government administrative costs.<sup>53</sup> In low‐income countries, tax incentives generally rank low in investment climate surveys, and are often found to be redundant, meaning that the investment or activity would have been undertaken even without them.<sup>5455</sup>

# **Design considerations**

Schemes involving tax incentives should consider:

- **Incentivizing firms’ behavior or activities when lack of action is** **_not_ primarily due to immediate financial constraints** . If failure to hire or promote women is simply due to short‐term financial constraints (e.g. if firms are not able to financially invest in policies conducive to female employment, such as childcare and parental leave), grants or subsidies may offer a more responsive solution.

- **Adopting performance‐based incentives** that directly tie the gender‐related objective to the provision of the incentive (e.g. by providing allowances based on female employment levels) rather than using blanket exemptions or reductions.

- **Designing for maximum clarity and transparency** to promote accountability and reduce opportunities for rent seeking and corruption. Tax incentives should be transparent from a legal (i.e. having a foundation in tax laws), economic (i.e. costs and benefits clearly laid out), and administrative (i.e. criteria should be clear, simple, and objective) standpoint.

- **Setting up time‐limited programs** . It is important that the incentives are sustainable and reflect market conditions. Applying sunset provisions creates the need to regularly evaluate whether the incentive should be continued or not. Making incentives time‐limited also mitigates the risk that they will become entitlements for firms.

# **Country Example 4. Malaysia: Tax incentives aim to train women and encourage them to return to the workforce**<sup>5657</sup>

**Program:** In 2013, the Malaysian government began offering tax incentives to encourage employers to train women who have re‐entered the workforce after a career break (e.g. for childcare purposes). The incentive was available when a company hires a woman for a managerial role who has been out of the workforce for at least two years and provided her with a career development program designed by TalentCorp, a government partner responsible for addressing workforce talent needs in Malaysia. In conjunction, TalentCorp developed a database of female professionals intending to return to work,

> 52 “The Role of Incentives on Job Training.”

> 53 Duanjie, “Framework for Assessing Tax Incentives: A Cost Benefit Analysis Approach.”

> 54 “Options for Low Income Countries’ Effective and Efficient Use of Tax Incentives for Investment.”

> 55 M Andersen, B Kett, and E von Uexkull, “Corporate Tax Incentives and FDI in Developing Countries,” World Bank: Global Investment Competitiveness Report 2017/18 (Washington DC, 2017).

> 56 “PM Announces New Measures To Optimise On Malaysian Graduate And Women Talent,” May 29, 2012, https://www.talentcorp.com.my/media‐centre/press‐office/press‐releases‐and‐statement/pm‐announces‐new‐measures‐to‐ optimise‐on‐malaysian‐graduate‐and‐women‐talent.

> 57 Jamny Rosli, “Minister: One‐Year Tax Break for Women Rejoining Workforce,” _Malay Mail_ , November 26, 2018, https://www.malaymail.com/news/malaysia/2018/11/26/minister‐one‐year‐tax‐break‐for‐women‐rejoining‐ workforce/1697183.

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