Tax Expenditures : Shedding the Light on Government Spending Through the Tax System - Lessons from Development and Transition Economies

by International Forum on Tax Expenditures; Valenduc, Christian; Swift, Zhicheng Li; Brixi, Hana Polackova; Brixi, Hana Polackova; Valenduc, Christian; Swift, Zhicheng Li

• ISBN13: 9780821356012
• ISBN10: 0821356011
• Format: Paperback
• Copyright: 2003-10-01
• Publisher: World Bank

Summary

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.

Table of Contents

Foreword	x
Preface	xi
The Editors and Authors	xiii
Acronyms and Abbreviations	xv
1 Tax Expenditures: General Concept, Measurement, and Overview of Country Practices	1	(18)
Zhicheng Li Swift, Hana Polackova Brixi, and Christian Valenduc
Tax Expenditures, Contingent Liabilities, and Direct Spending	2	(1)
General Concept	3	(5)
Tax Expenditure Reports among OECD Countries	8	(8)
Conclusions	16	(3)
2 A Framework for Evaluating Tax Measures and Some Methodological Issues	19	(26)
Gordon J. Lenjosek
Relevance	20	(1)
Effectiveness	20	(1)
Efficiency	21	(2)
Methodological Issues	23	(6)
Summary	29	(4)
Appendix A: Estimating the Change in Excess Burden per Dollar of Tax Expenditure	33	(12)
3 Tax Expenditures in Australia	45	(24)
Colin Brown
What Is a Tax Expenditure?	45	(1)
Purpose of the Tax Expenditures Statement	46	(1)
Measuring Tax Expenditures	47	(4)
Defining Tax Expenditure Benchmarks	51	(4)
Classification of Tax Expenditures	55	(6)
Conclusion	61	(1)
Appendix A: Cash versus Accrual Estimates	62	(1)
Appendix B: Details of the Australian Tax Expenditure Benchmarks	63	(6)
4 From Tax Expenditure Reporting to Tax Policy Analysis: Some Experience from Belgium	69	(28)
Christian Valenduc
Tax Expenditure Reporting in Belgium	70	(1)
The Benchmark Tax System	71	(7)
Revenue Cost from Tax Expenditures	78	(8)
From the Revenue Cost to the Economic Cost of Tax Expenditures	86	(11)
5 Federal Tax Expenditures in Canada	97	(34)
Marc Seguin and Simon Gurr
Defining Tax Expenditures	98	(9)
Calculation and Interpretation of the Tax Expenditure Estimates	107	(4)
Estimation Methods Used in Canada	111	(12)
Conclusion	123	(3)
Appendix A: List of Personal Income Tax Expenditures Calculated Directly from the T1 Model	126	(3)
Appendix B: List of Corporate Income Tax Expenditures Calculated Directly from the T2 Model	129	(2)
6 Tax Expenditures in the Netherlands	131	(24)
Leo van den Ende, Amir Haberham, and Kees den Boogerf
History of Tax Expenditures in the Netherlands	131	(2)
Tax Policy as a Part of General Government Policy	133	(1)
Definition of Tax Expenditure	134	(2)
Definition of Benchmark Tax Structure	136	(1)
Use of Tax Expenditures	136	(2)
Annual Tax Expenditure Report of the Budget Memorandum	138	(3)
Budgeting the Costs of Tax Expenditures	141	(1)
Criteria for Introducing New Tax Expenditures	142	(1)
Calculation of the Budgetary Consequences of Tax Expenditures	143	(6)
Appendix A: Estimates of Tax Expenditures: Taxes on Income, Profits, and Property, 2001-07	149	(4)
Appendix B: Estimates of Tax Expenditures: Indirect Taxes, 2001-03	153	(2)
7 Tax Expenditures in the United States: Experience and Practice	155	(18)
Emil Sunley
U.S. Practice	156	(2)
Definition of Tax Expenditures	158	(5)
Measurement of Tax Expenditures	163	(2)
Usefulness of Tax Expenditure Budgeting	165	(3)
Conclusions	168	(5)
8 Establishing a Tax Expenditure Administrative System That Achieves a Sound Fiscal System in China	173	(17)
Yaobin Shi
Importance of Establishing a Scientific, Uniform, and Efficient Tax Expenditure System	173	(2)
China's Current Tax Expenditures and Major Issues	175	(4)
Policy Options for Improving China's Tax Expenditures	179	(1)
Reinforce Industrial Tax Expenditure Policies, but Impose Restrictions on Introducing Regional Tax Expenditure Policies	179	(2)
Good Practices: Cross-Country Comparison	181	(5)
Establishing a Tax Expenditure Administrative System in China	186	(4)
9 China's Current Tax Expenditure System: Issues and Policy Options	190	(13)
Guogiang Ma
Definition of Tax Expenditure	190	(3)
China's Current Tax Expenditure System	193	(3)
Problems with the Current Chinese Tax Expenditure System	196	(3)
Policy Options: Building a Well-Functioning Tax Expenditure System	199	(4)
10 Poland: Reforming Tax Expenditure Programs	203	(24)
Carlos B. Cavalcanti and Zhicheng Li Swift
Tax Expenditure Programs in Poland	204	(2)
Economic Effectiveness, Efficiency, and Equity of Personal Income Tax Expenditure Programs	206	(3)
Cost Estimates of Personal Income Tax Expenditure Programs	209	(2)
Strengthening the Administration of Tax Expenditure Programs	211	(5)
Appendix A: Available Tax Relief per Tax Bracket	216	(3)
Appendix B: Analysis of 18 State Tax Expenditure Programs and Direct Expenditures (in Zlotys thousands)	219	(7)
Appendix C: Estimates of Revenue Loss through Tax Expenditures, 1998	226	(1)
11 Managing Tax Expenditures: Policy Options	227	(7)
Hana Polackova Brixi
Proposed Policy Options	228	(4)
Conclusions	232	(2)
Index	234