Why Worry About Tax Expenditure?
Tax expenditures are concessions that
fall outside tax norms or benchmarks. These norms include
accounting conventions, the structure of tax rates, the
deductibility of compulsory payments, provisions to
facilitate tax administration, and norms related to
international fiscal obligations. Tax expenditures are
deviations from these norms, implemented to encourage
behavior deemed desirable by policymakers, and can take a
number of forms-including tax exemptions, allowances,
credits, deferrals, and relief (see OECD 1996). The classic
example is a tax deduction for charitable contributions,
where the reduction in tax revenue is more than offset by
the increase in support for charitable activities. Tax
expenditures are not a free lunch, however. They can lead to
inefficiencies and inequities, stimulating no additional
activity and making the tax regime more regressive. For
instance, a tax concession granted to employers who hire
unskilled workers might go to employers who would have hired
such workers anyway. Tax expenditures also affect government
budgets, because they imply forgoing revenue that could be
used to fund direct government expenditures.
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Bibliographic Details
| Main Authors: |
Swift, Zhicheng Li,
Cavalcanti, Carlos B. |
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| Language: | English |
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| Published: |
World Bank, Washington, DC
2003-01
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| Subjects: | ACCOUNTING,
BUDGET PROCESS,
DEDUCTIONS,
ECONOMIC DEVELOPMENT,
ECONOMICS,
EFFECTIVE TAX RATES,
ENTITLEMENTS,
EXPENDITURES,
FEDERAL GOVERNMENT,
FISCAL,
FISCAL TRANSPARENCY,
GOVERNMENT BUDGETS,
GOVERNMENT EXPENDITURES,
GOVERNMENT SPENDING,
INCOME,
INCOME TAX,
MINISTERS,
MINISTRY OF FINANCE,
POLICY RESEARCH,
PRESIDENCY,
PRIVATE SECTOR,
PRIVATE SECTOR PARTICIPATION,
PRODUCERS,
PROVISIONS,
PUBLIC EXPENDITURE,
SOCIAL DEVELOPMENT,
SOCIAL PROGRAMS,
TAX,
TAX ADMINISTRATION,
TAX BASE,
TAX BENEFITS,
TAX BRACKETS,
TAX DEDUCTION,
TAX EXPENDITURE,
TAX EXPENDITURES,
TAX LAWS,
TAX LIABILITIES,
TAX PAYMENTS,
TAX RATE,
TAX RATES,
TAX REGIME,
TAX RETURNS,
TAX REVENUE,
TAX REVENUES,
TAX SYSTEM,
TAXABLE INCOME,
TAXATION,
TAXPAYERS TAX EXPENDITURES,
BENCHMARKS,
FISCAL POLICIES,
POLICYMAKERS,
TAX EXEMPTIONS,
ALLOWANCES,
CREDITS,
DEFERRALS,
CHARITABLE CONTRIBUTIONS,
UNSKILLED WORKERS, |
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| Online Access: | http://documents.worldbank.org/curated/en/2003/01/2518855/worry-tax-expenditure
https://hdl.handle.net/10986/11327
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