This report provides policy options for tackling negatively assessed tax expenditures. The selected tax expenditures do not function adequately, have high costs and complicate the tax system. This report shows that by adjusting, transforming, or abolishing tax expenditures, policy objectives can be better achieved, with a less complex tax system and lower tax rates.
Tax expenditures are frequently used to achieve policy objectives; however, they often prove ineffective, outdated, or unnecessarily complicate the tax system. Currently, around 200 tax expenditures (TEs) have been identified, of which 125 are actively monitored, representing an estimated €167 billion in 2025. This amounts to over 40% of total tax revenues. Collectively, these schemes make the tax system difficult for citizens and businesses to understand, and challenging for the Tax and Customs Administration to administer. While some complexity is defensible—most schemes were introduced to serve specific policy goals—TEs must, in practice, deliver on their objectives at the lowest possible social cost, such as lost revenue and increased administrative burden for taxpayers and the tax authorities. Since the actual effectiveness of these schemes often only becomes apparent over time or may change as circumstances evolve, these TEs are regularly evaluated. The 2023 official report Approach to Tax Expenditures reviewed a large number of such schemes. Since then, several additional evaluations have been conducted. Only a small portion of the TEs have been positively assessed; many were found to be ineffective or poorly targeted, complex to implement, burdensome for taxpayers, or outdated.
Maintaining the tax system is essential, and it offers opportunities to simplify, reduce rates, and improve policy. For TEs assessed negatively, policy options have been developed to abolish, adjust or redesign them. Depending on the policy choices made, this could generate up to €35 billion in savings (from total tax revenues of around €425 billion). These savings could, for example, fund tax rate reductions for citizens and businesses, making the benefits widely felt
across society. Income tax rates, for instance, could be lowered by over 5 percentage points. Alternatively, the funds could be used to address pressing social challenges.
For several areas where substantial gains can be achieved, integrated policy directions have been developed. By grouping TEs into clusters, a more coherent approach becomes possible, taking a broader policy perspective.
Read the official report