Improving Tax Expenditure Reporting To Enhance Tax Expenditure Policy Making

Tax expenditures (TEs) are preferential tax treatments that lower government revenue and the tax liability of the beneficiary. Their impact is sizeable: according to the Global Tax Expenditures Database (GTED), the global average revenue forgone over the 1990- 2022 period is 3.8 percent of GDP and 23.0 percent of tax revenue. Yet, despite the fact that TEs have similar effects on public budgets as direct spending, the lack of transparency is striking: according to the GTED, more than half of the 218 jurisdictions worldwide do not publish any reports on TEs. Moreover, even when information on TEs is published, the quality, regularity and scope of disclosure are very diverse, and in some cases the effectiveness and efficiency of TEs can hardly be assessed. The Global Tax Expenditures Transparency Index (GTETTI) provides the first systematic and comparative account of worldwide TE reporting. Based on a normative approach, the GTETI allows to identify key areas of improvement in TE reporting, which is vital to increase transparency and accountability. This policy briefpresents four specific and actionable policy recommendations for the G20: 1. Agree on minimum standards for regular, comprehensive and detailed TE reports. 2. Improve the availability of good quality data, including revenue forgone estimates and results from the evaluation of TE provisions. 3. Incorporate TE analysis into the budget cycle. 4. Share TE information with stakeholders and the general public in a timely manner.