ECLAC Report: Evaluation of Tax Expenditures – Conceptual Frameworks and International Experiences

By Agustin Redonda, Christian von Haldenwang and Sofia Berg

The Economic Commission for Latin America and the Caribbean (ECLAC-CEPAL) has published the report “Evaluation of tax expenditures – Conceptual frameworks and international experiences”.


Tax expenditures are deviations from the benchmark tax system which provides preferential tax treatment. Governments use them to pursue different policy goals, such as boosting innovation, creating employment or greening the economy. Their fiscal cost can be significant since the global average revenue forgone, estimated at around 4% of GDP and 25% of tax revenue, has remained stable over the last 30 years. Evaluating tax expenditures against their stated policy objectives and the potential side effects or externalities they might trigger is a crucial step for the rationalization of tax expenditures, with implications for domestic resource mobilization and the alignment of tax policies with growth and development strategies.

This report analyses tax expenditure evaluation as a key element of the tax expenditure policy cycle and highlights the need for integrated frameworks that link ex-ante assessments with ex-post evaluations. It also provides an international overview of the state of tax expenditure evaluations, showing that it remains
relatively underdeveloped, not only in Latin America and the Caribbean, but also across the world.

The report is structured as follows:

  • Section 1 introduces the TE policy cycle.
  • Section 2 discusses evaluation frameworks (both ex-ante and ex-post) as well as the methods that have been used to evaluate TE policies.
  • Section 3 provides an international overview of the state of TE evaluations.
  • Section 4 builds on Section 3 with concrete country-cases and discusses the main findings of each.
  • Section 5 puts the TE evaluation discussion in the context of the policy cycle and explains why evaluations are necessary for the design and effectiveness of public policies