How to Evaluate Tax Expenditures

Sebastian Beer, Dora Benedek, Brian Erard () and Jan Loeprick

No 2022/005, IMF Fiscal Affairs Department from International Monetary Fund

Abstract: 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.

Keywords: tax expenditures; cost-benefit assessment; public policy evaluation; sample evaluation; publication order; publication service; title page; post evaluation; Tax incentives; Compliance costs; Value-added tax; Global; East Asia (search for similar items in EconPapers)
Pages: 19
Date: 2022-11-30
New Economics Papers: this item is included in nep-pbe, nep-pub and nep-sea
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