# The right incentives? The risks of undue influence in tax policy URL: https://www.transparency.org/en/publications/the-right-incentives-the-risks-of-undue-influence-in-tax-policy Type: Publication or report Published: 2021-05-21 Updated: 2021-05-21 --- 21 May 2021 Companies operating in developing countries receive over US$2 billion in tax incentives every week. Governments all over the world promote tax incentives as a tool to attract domestic or foreign investments, asserting a trickle-down effect for the public good and the country overall. However, taking a closer look at their effectiveness, there has been no irrefutable proof or data to determine whether this has worked. In many surveys, investors even consider tax incentives to be among the least important factors affecting decisions to invest. So why do governments still widely grant tax incentives in favour of specific companies, industries or sectors? With this report, Transparency International illustrates the risk of corruption driven by powerful interest groups in the process of designing and granting tax incentives. It presents three case studies: the automotive industry in Brazil, the textile industry in Madagascar and the Controlled Foreign Company law in the UK. These cases demonstrate how tax incentives may have been granted as a result of undue influence by powerful interest groups and not as the result of a proper assessment of the need for such incentives and of the social-economic benefits they would bring. The report concludes with recommendations for strengthening the transparency and accountability of tax incentive regimes, restricting the opportunities for undue influence and ensuring political integrity in the decision-making process. ### Related publications ## [Ending Debt Secrecy: Recommendations to the G20 on Anti-Corruption in Sovereign Borrowing and Lending](https://www.transparency.org/en/publications/ending-debt-secrecy-g20-recommendations) Publication • 04 September 2026 Recommendations to the G20 to strengthen transparency, accountability and integrity in sovereign borrowing and lending ## [Monitoring political finance: Compendium of citizen initiatives and good practices](https://www.transparency.org/en/publications/monitoring-political-finance-compendium-of-citizen-initiatives-and-good-practices) Publication • 18 August 2026 This compendium aims to provide ideas for stakeholders interested in monitoring political finance. It presents seven monitoring and disclosure solutions from around the world,… ## [Annual Report 2025](https://www.transparency.org/en/publications/annual-report-2025) Publication • 17 July 2026 In 2025, Transparency International pursued its mission to stop corruption and promote transparency, accountability and integrity at all levels and across all sectors of society. ## [Whistleblowing Authorities in Europe: Roles, challenges and lessons learned](https://www.transparency.org/en/publications/whistleblowing-authorities-in-europe-roles-challenges-and-lessons-learned) Publication • 19 June 2026 This report examines the institutional design, mandates and functioning of national whistleblowing authorities across Europe. ## Priorities - [Political integrity](https://www.transparency.org/en/our-priorities/political-integrity) ## Countries - [Brazil](https://www.transparency.org/en/countries/brazil) - [Madagascar](https://www.transparency.org/en/countries/madagascar) - [United Kingdom](https://www.transparency.org/en/countries/united-kingdom) ![](https://images.transparencycdn.org/images/2021-Report-cover-The-right-incentives-The-risks-of-undue-influence-in-tax-policy.png?auto=compress&fit=crop&fm=webp&w=1200) [Download](https://images.transparencycdn.org/images/2021-Report-The-right-incentives-The-risks-of-undue-influence-in-tax-policy.pdf)