Governments worldwide use preferential tax treatments – called tax expenditures – to pursue different policy objectives. These measures cause huge immediate public revenue losses while their effectiveness is often in doubt. Against this background, many governments seek to rationalise the use of tax expenditures.
All too often, however, reforming ineffective or harmful tax expenditures proves to be challenging. Lack of reliable information about the fiscal impact of tax expenditures and their effects, but also about the tax expenditure regimes of other countries, is one of the factors that play a critical role in this regard. Above all, such information should come from comprehensive and detailed government reports on the use of tax expenditures; however, not all reports fulfill this purpose.
The side event introduces key features of tax expenditure reporting, derived from good international practices and showcased in the Global Tax Expenditure Transparency Index (GTETI). Based on two successful country experiences (Brazil and Indonesia), it discusses how such key features can be put into practice, and how good tax expenditure reporting contributes to the rationalisation of tax expenditures and strengthens domestic revenue mobilisation.
Draft Outcome Document of the FfD4 Released
The outcome document of the Fourth International Conference on Financing for Development has been endorsed by all Member States. The “Consenso de Sevilla” reflects the renewal of the global financing for development framework, building on the 2015 Addis Ababa Action Agenda.
The Heads of State and Government and High Representatives that will gather in Sevilla (Spain) from 30 June to 3 July 2025 have reaffirmed their commitment to realize sustainable development, including effectively implementing the 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals and upholding all principles enshrined in it.
This is a crucial process, even more so as the world is going through a significant turmoil in the finance for development field and beyond. The Tax Expenditures Lab team is delighted to see the first ever explicit mention to tax expenditures in one of the finance for development outcome documents:
“We will promote budget transparency and accountability, including by implementing transparent data-driven procurement systems, enhancing oversight and ensuring strengthened, resourced, independent and professional supreme audit institutions and parliamentary oversight or equivalent bodies. We will also consider outcome-based financing mechanisms. We encourage enhanced oversight and management of tax expenditures, including through transparent tax expenditure reporting.”
Whereas the statement could have been more ambitious, we are confident that that it will work as a catalyzer for better TE policy making worlwide and, ultimately, as a trigger for the much neede rationalization of tax expenditures particularly (but not only) in low- an middle-income countries.
RELATED PUBLICATIONS
- FfD4 Countdown: A Watered-Down Proposal on Tax Expenditures Risks Undermining Countries’ Domestic Revenue Mobilization
Alexandra Readhead / Agustin Redonda / Christian von Haldenwang / Giovanni Occhiali / Hazel Granger (2025)
IDOS Blog, 22 April 2025 - Rationalising Tax Expenditures – a Core Element of Financing for Development
Christian von Haldenwang / Agustin Redonda (2025)
IDOS Blog, 20 February 2025