How to Evaluate Tax Expenditures

By Sebastian Beer, Dora Benedek, Brian Erard, Jan Loeprick

November 30, 2022

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Sebastian Beer, Dora Benedek, Brian Erard, and Jan Loeprick. How to Evaluate Tax Expenditures, (USA: International Monetary Fund, 2022) accessed December 21, 2024

Summary

Governments use tax expenditures (TEs) to provide financial support or benefits to taxpayers. The budgetary impact of TEs can be similar to that of direct outlays: after the support is provided, less money is available to fund other government priorities. Systematic evaluations are needed to guide informed decision-making and to avoid a situation where the narrative on the benefits of TEs is primarily driven by profiting stakeholders. By TE “evaluation,” this note refers to a process that seeks to systematically inform policymakers on the desirability of introducing or maintaining specific tax benefits by gathering and analyzing available quantitative and qualitative information on their effects. Evaluation processes can be tailored to different levels of data availability and analytical capacity. An evaluation should focus on the policy objective of a TE and whether it effectively and efficiently contributes to that policy objective. Although important lessons can be learned from country practices in implementing increasingly ambitious evaluation processes, there is no single best-practice approach to replicate.

Subject: Expenditure, Public financial management (PFM), Revenue administration, Tax policy, Taxes

Keywords: Compliance costs, Cost-benefit assessment, East Asia, Global, Post evaluation, Public policy evaluation, Publication order, Publication service, Sample evaluation, Tax expenditures, Tax incentives, Title page, Value-added tax

Publication Details

Pages:

19
Volume:

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DOI:

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Issue:

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Series:

How-To Note No 2022/005
Stock No:

HTNEA2022005
ISBN:

9798400221507
ISSN:

2522-7912

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