2006年-世界发展银行全球_Managing_the_Effects_of_Tax_Expenditures_on_National_Budgets_31页_324kb

Summary of "Managing the Effects of Tax Expenditures on National Budgets"

Core Content

This paper discusses the concept, size, effects, and fiscal accountability and transparency of tax expenditures, which are government spending programs implemented through the tax system. It argues that tax expenditures should be treated as spending rather than revenue-raising mechanisms and integrated into the budget process to ensure fiscal accountability and transparency.

Main Points

1. Definition and Concept of Tax Expenditures

• Tax expenditures are tax provisions that deviate from a normative or benchmark tax structure.
• They take various forms such as exclusions, exemptions, deductions, credits, preferential tax rates, and tax deferrals.
• Tax expenditures are functionally equivalent to entitlement programs, as they provide financial assistance to taxpayers.
• A normative tax structure is essential to identify tax expenditures. It includes the Sanz-Haig-Simons (S-H-S) economic definition of income and business accounting techniques.

2. Tax Expenditures vs. Tax Incentives and Tax Penalties

• All tax incentives are tax expenditures, but not all tax expenditures are incentives.
• Tax expenditures increase revenue loss, while tax penalties (which increase government revenue) are their opposite.
• Tax expenditures should be treated as positive figures, and tax penalties as negative figures in fiscal analysis.

3. Size of Tax Expenditures

• Tax expenditures vary significantly by country. In 2003, they accounted for:
  • Australia: ~3.8% of GDP
  • Canada: ~6.6% of GDP
  • Netherlands: ~2.0% of GDP
  • US: ~7.0% of GDP
• In Poland, tax expenditures are large in number and scale, with some provisions estimated at 1% of GDP.
• In Turkey, the estimated cost of tax expenditures was 1.6% of GDP, but with additional provisions, it could reach 5% of GDP.
• In China, there are estimated to be over 1,000 tax expenditures, with a potential cost over 10% of GDP in 2002.

4. Fiscal Effects of Tax Expenditures

• Tax expenditures affect the budget balance by reducing tax revenue, thereby increasing deficits or decreasing surpluses.
• They prioritize resource allocation, often receiving higher budget priority than direct expenditures.
• They reduce the effectiveness and efficiency of public resource allocation due to overlap, conflict, and lack of coordination with direct spending.
• They increase the complexity of the tax system and complicate tax administration, leading to potential abuse and revenue loss.

Key Information

• Tax expenditures are not just a revenue loss but also represent government spending.
• Fiscal accountability and transparency are essential for effective budget management. Tax expenditures must be:
  • Formalized in legal and policy frameworks.
  • Audited and published with comprehensive analysis.
• The normative tax structure should be legally defined and transparent, and imputed tax revenue should be published alongside other budget components.
• Tax expenditure accounting is common in high-income countries (e.g., OECD members), but not widely used in low-income and developing countries.
• Periodic review and budgetary control of tax expenditures are necessary to ensure they remain relevant and efficient.

Building Blocks for Strengthening Fiscal Accountability and Transparency

The paper outlines four building blocks to improve the fiscal management of tax expenditures:

1. Formalizing the Normative Tax Structure

   • Legally define and publish the normative tax structure.
   • Include imputed tax revenue in budgetary reports.

2. Integrating Tax Expenditures into the Budget Process

   • Treat tax expenditures as spending items, not just revenue losses.
   • Add them to total government expenditures for better fiscal oversight.

3. Enhancing Fiscal Accountability and Transparency

   • Ensure periodic review and oversight of tax expenditures.
   • Publish detailed analysis and performance data to track their impact.

4. Improving Tax Administration and Coordination

   • Address the complexity of tax systems caused by tax expenditures.
   • Ensure coordination between tax expenditures and direct spending programs to avoid overlap and inefficiency.

Conclusion

Tax expenditures are a crucial but often overlooked component of government spending. They have significant fiscal implications, including effects on budget balance, resource allocation, and public efficiency. The paper emphasizes that developing countries, in particular, need to adopt tax expenditure accounting and integrate these into the budgetary process to ensure fiscal accountability and transparency. Without such measures, tax expenditures may lead to fiscal unsustainability, inefficient resource use, and potential abuse by taxpayers and officials.