Properly used tax expenditures can play an important role in implementing countries’ economic and social policies. But they often go unnoticed because they take many forms of revenue forgone, from tax exemptions to tax credits. Without subjecting tax expenditures to the same scrutiny most countries apply to the spending sides of their budgets it is impossible to know the cost and efficiency of tax expenditures or whether they might be better allocated.
Tax Expenditure–Shedding Light on Government Spending Through the Tax System discusses conceptual and methodological issues relating to tax expenditures, provides a framework for evaluating them, offers case studies on government treatment of tax expenditures from developed and transition economies, and outlines generally applicable policy options. It also provides in individual chapters case studies of the treatment of tax expenditures in Australia, Belgium, Canada, China, the Netherlands, Poland, and the United States. Each chapter presents how the nation defines tax expenditures and the corresponding benchmark tax system. Some chapters also examine specific topics, such as methods for estimating and evaluating tax expenditures for policy analysis, how this analysis can contribute to policy debate, and how to budget for the cost of tax expenditures. The experiences of two transition economies, Poland and China, illustrate the consequences of implementing tax expenditure policies without an adequate institutional and analytical framework.
A valuable addition to global knowledge on fiscal risk and responsibility issues, this book will assist governments and development partners in improving fiscal transparency and financial stability, and in continuing progress in broader economic and social areas.