Publication: Tax Expenditures--Shedding Light on Government Spending through the Tax System : Lessons from Developed and Transition Economies
Loading...
Date
2004
ISSN
Published
2004
Author(s)
Abstract
Recently developing countries have focused attention on the usefulness of tax expenditures' in shaping prudent and transparent fiscal policy. In adopting a market economy, developing countries commonly use tax expenditures as major fiscal policy instruments. However, with limited theoretical understanding of, and ad hoc experience with, applying tax expenditures, developing countries now confront not only revenue losses higher than they had anticipated but also the erosion of their tax bases in systems that generally have been in existence fewer than 10 years. Fortunately, the experience and practice of developed countries offer insights into understanding and applying tax expenditures. Most developed countries have established tax reporting systems, which provide empirical information on their tax expenditures. Such tax reporting systems tend to be part of a country's overall fiscal system for strengthening government finance and contribute significantly to fiscal transparency. Using the information available, several governments attempt to analyze the cost and economic effects of individual tax expenditures. Some governments even bring tax expenditures into the budgetary process and subject them to a level of scrutiny similar to that for direct expenditures. This book contains several papers on how both developed and transition economies define and apply tax expenditure systems. The developed countries-Australia, Belgium, Canada, the Netherlands, and the United States-have established tax expenditure accounting and, in varying degress, brought tax expenditures into budgetary process. The experience of China and Poland shed light on why it is important for developing and transition economies to ensure fiscal transparency and to perform systematic fiscal analysis when implementing tax expenditures, as well as how to address these issues in relatively new tax systems.
Link to Data Set
Citation
āValenduc, Christian M.A.; Polackova Brixi, Hana; Swift, Zhicheng Li. Polackova Brixi, Hana; Valenduc, Christian M.A.; Swift, Zhicheng Li, editors. 2004. Tax Expenditures--Shedding Light on Government Spending through the Tax System : Lessons from Developed and Transition Economies. Ā© World Bank. http://hdl.handle.net/10986/15067 License: CC BY 3.0 IGO.ā
Associated URLs
Associated content
Other publications in this report series
Publication Democratic Republic of Congo Urbanization Review(Washington, DC: World Bank, 2018)The Democratic Republic of Congo has the third largest urban population in sub-Saharan Africa (estimated at 43% in 2016) after South Africa and Nigeria. It is expected to grow at a rate of 4.1% per year, which corresponds to an additional 1 million residents moving to cities every year. If this trend continues, the urban population could double in just 15 years. Thus, with a population of 12 million and a growth rate of 5.1% per year, Kinshasa is poised to become the most populous city in Africa by 2030. Such strong urban growth comes with two main challenges ā the need to make cities livable and inclusive by meeting the high demand for social services, infrastructure, education, health, and other basic services; and the need to make cities more productive by addressing the lack of concentrated economic activity. The Urbanization Review of the Democratic Republic of Congo argues that the country is urbanizing at different rates and identifies five regions (East, South, Central, West and Congo Basin) that present specific challenges and opportunities. The Urbanization Review proposes policy options based on three sets of instruments, known as the three 'I's ā Institutions, Infrastructures and Interventions ā to help each region respond to its specific needs while reaping the benefits of economic agglomeration The Democratic Republic of the Congo is at a crossroads. The recent decline in commodity prices could constitute an opportunity for the country to diversify its economy and invest in the manufacturing sector. Now is an opportune time for Congolese decision-makers to invest in cities that can lead the country's structural transformation and facilitate greater integration with African and global markets. Such action would position the country well on the path to emergence.Publication Entrepreneurship Education and Training Programs around the World : Dimensions for Success(Washington, DC: World Bank, 2014-04-23)Entrepreneurship has attracted global interest for its potential to catalyze economic and social development. Research suggesting that certain entrepreneurial mindsets and skills can be learned has given rise to the field of entrepreneurship education and training (EET). Despite the growth of EET, global knowledge about these programs and their impact remains thin. In response, this study surveys the available literature and program evaluations to propose a Conceptual Framework for understanding the EET program landscape. The study finds that EET today consists of a heterogeneous mix of programs that can be broken into two groups: entrepreneurship education and entrepreneurship training. These programs target a range of participants: secondary and post-secondary education students, as well as potential and practicing entrepreneurs. The outcomes measured by program evaluations are equally diverse but generally fall under the domains of entrepreneurial mindsets and capabilities, entrepreneurial status, and entrepreneurial performance. The dimensions of EET programs vary according the particular target group. Programs targeting secondary education students focus on the development of foundational skills linked to entrepreneurship, while post-secondary education programs emphasize skills related to strategic business planning. Programs targeting potential entrepreneurs generally are embedded within broader support programs and tend to target vulnerable populations for whom employment alternatives may be limited. While programs serving practicing entrepreneurs focus on strengthening entrepreneursā knowledge, skills and business practices, which while unlikely to transform an enterprise in the near term, may accrue benefits to entrepreneurs over time. The study also offers implications for policy and program implementation, emphasizing the importance of clarity about target groups and desired outcomes when making program choices, and sound understanding of extent to which publicly-supported programs offer a broader public good, and compare favorably to policy alternatives for supporting the targeted individuals as well as the overall economic and social objectives.Publication Options for Aged Care in China(Washington, DC: World Bank, 2018-11-20)China is aging at an unprecedented rate. Improvements in life expectancy and the consequences of the decades-old family planning policy have led to a rapid increase in the elderly population. According to the United Nations World Population Prospects, the proportion of older people age 65 and over will increase by about one-fourth by 2030, and the elderly will account for about one quarter of the total population by 2050. Population aging will not only pose challenges for elder care but also have an impact on the economy and all aspects of society (World Bank, 2016a). The government is aware of the need to develop an efficient and sustainable approach to aged care. To this end, the General Office of the State Council issued the 12th Five-Year Plan for the Development of Aged Care Services in China and the Development Plan for a System of Social Services for the Aged (2011-2015). It is now in the process of formulating the 13th Five-Year National Plan on Aging, which will further elaborate and finalize the reform roadmap for 2016 to 2020. The Plan is expected to be finalized and launched by June 2016. The National Development and Reform Commission (NDRC) helped draft these plans and is now leading the development of policy measures for the provision of social services for the elderly. This volume has been prepared to support the translation of the broad ideas on aged care provision expressed in the 12th and 13th Five-Year Plans and other government plans into reality and to help the government tackle the challenges described above. It strives to identify a policy framework that fits the Chinese context and can be put in place gradually. Specifically, it aims to provide an up-to-date understanding of the evolving aged care landscape in China; review international experiences in long-term care provision, financing, and quality assurance and assess their relevance to Chinaās current situation; discuss implications of current developments and trends for the future of aged care in China; and propose policy options based on available evidence and best practices.Publication At a Crossroads(World Bank, Washington, DC, 2017-05-02)Higher education (HE) has expanded dramatically in Latin America and the Caribbean (LAC) since 2000. While access became more equitable, quality concerns remain. This volume studies the expansion, as well as HE quality, variety and equity in LAC. It investigates the expansionās demand and supply drivers, and outlines policy implications.Publication An Investment Framework for Nutrition(Washington, DC: World Bank, 2017-04-12)The report estimates the costs, impacts and financing scenarios to achieve the World Health Assembly global nutrition targets for stunting, anemia in women, exclusive breastfeeding and the scaling up of the treatment of severe wasting among young children. To reach these four targets, the world needs $70 billion over 10 years to invest in high-impact nutrition-specific interventions. This investment would have enormous benefits: 65 million cases of stunting and 265 million cases of anemia in women would be prevented in 2025 as compared with the 2015 baseline. In addition, at least 91 million more children would be treated for severe wasting and 105 million additional babies would be exclusively breastfed during the first six months of life over 10 years. Altogether, achieving these targets would avert at least 3.7 million child deaths. Every dollar invested in this package of interventions would yield between $4 and $35 in economic returns, making investing in early nutrition one of the best value-for-money development actions. Although some of the targetsāespecially those for reducing stunting in children and anemia in womenāare ambitious and will require concerted efforts in financing, scale-up, and sustained commitment, recent experience from several countries suggests that meeting these targets is feasible. These investments in the critical 1000 day window of early childhood are inalienable and portable and will pay lifelong dividends ā not only for children directly affected but also for us all in the form of more robust societies ā that will drive future economies.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Moldova Public Expenditure Review : Capital Expenditures - Making Public Investment Work for Competitiveness and Inclusive Growth in Moldova(Washington, DC, 2013-06)This public expenditure review (PER) for Moldova is the result of a body of programmatic fiscal work. This PER focuses on capital expenditure. It supports the first pillar of the country partnership strategy (improving economic competitiveness) and complements the 2012 development policy operation. In the context of economic recovery and stabilization, government requested World Bank assistance in improving its capital allocation mechanism, as its fiscal consolidation program attempted to create space for critical infrastructure whilst gradually reducing the state's footprint in the economy. This report recommends ways to strengthen public investment processes, institutions, and sector policies to achieve better outcomes for public capital expenditures in Moldova. This report suggests reforms in public investment management and sector policies to raise cost-effectiveness and allocative efficiency of capital expenditures. Three key areas of reform are: (i) raise the quality of new projects by improving preliminary screening and project appraisal mechanisms; (ii) improve selection of new projects and ensure continuity of funding for ongoing projects through better prioritization and budgeting processes; and (iii) strengthen monitoring of project implementation for cost efficiency and timely delivery of public services. The report has four chapters. The first chapter presents the macroeconomic outlook and its implications for fiscal policy, particularly with respect to the capital budget. The second chapter presents the structure and classification of the capital budget as well as recent trends in capital expenditure levels and execution, and reviews the adequacy of resource allocations and utilization across sectors, given investment needs, national priorities and implementation capacity. The third chapter reviews public investment management processes and presents recommendations to improve the efficiency of public capital expenditure in Moldova. The fourth chapter discusses specific sector challenges and offers recommendations for improving capital expenditure outcomes.Publication Managing Fiscal Risk in Bulgaria(World Bank, Washington, DC, 2000-01)To understand the fiscal position of a country, contingent liabilities and other sources of fiscal risk need to be considered. The authors develop a framework to assess and manage fiscal risk in Bulgaria. Bulgaria's Currency Board Arrangement has effectively imposed fiscal discipline, but leaves only limited room to accommodate potential fiscal shocks. Through risks embedded in the portfolio of government contingent and direct liabilities, significant fiscal pressures could arise in the future. Major sources of risk include environmental liabilities and investment requirements, collection capacities of the social protection institutions, and further engagement in off-budget programs, such as government guarantees. To limit the Government's exposure to risks, yet accommodate investment needs crucial to growth and development, Bulgaria must find an optimal strategy for liability management, fiscal reserves, and risk mitigation. Priorities for dealing with existing risks and limiting further accumulation of risks include: 1) Mitigating currency and interest rate risks in the government liability structure. 2) Implementing proposed institutional and finance reform of the country's pension and health care systems. 3) Building adequate contingency reserves. 4) Introducing risk-sharing arrangements. 5) Prioritizing and placing strict limits on the amounts of new guaranteed obligations. 6) Developing government capacity to analyze and manage risks. 7) Fully integrating fiscal risk management with other policy considerations in fiscal management, as part of an integrated asset and liability management strategy.Publication Government at Risk : Contingent Liabilities and Fiscal Risk(Washington, DC: World Bank and Oxford University Press, 2002)Conventional fiscal analysis fails to address contingent fiscal risk. The government budget process and documentation generally fail to scrutinize the substantial claims on public resources that are associated with government contingent liabilities, realized and potential. This report fills gaps on our understanding of fiscal risks and develops suitable frameworks for managing them. It offers new analytical concepts, presents country case studies, and based on country case studies, provides a menu of practical ideas for policymakers and scholars to bring fiscal risk within the ambit of public finance. The book is divided into two parts: Part I of this book gives an overview of different approaches to dealing with government fiscal risks. The country examples in this part offer additional conceptual approaches and illustrate some of the discussion in the earlier chapters. Part II presents analytical and institutional approaches that governments might consider when facing risks in specific government programs or sectors. The book indicates that countries differ greatly in their treatment of contingent liabilities and other fiscal risks. In this respect, the book illustrates that contemporary practices have yet to be standardized.Publication Stabilization and Fiscal Empowerment : The Twin Challenges Facing India's States, Volume 2. Detailed Report(Washington, DC, 2004-05-10)India, home to more than one billion people, has experienced rapid growth over the past decade, averaging about six percent per year between 1992/93 and 2003/04. The agenda backed in this report is one that receives widespread support from both the central and state governments in India. The fiscal stress of the late nineties gave rise to an intense state-level reform effort. Six years on, this report documents the many initiatives undertaken by the states to restore fiscal sustainability, and become more effective agents of development. It outlines successes, lessons learnt, and highlights further challenges, on both the expenditure side (chapter two) and the revenue side (chapter three). It also looks at the incentive framework within which the states operate (chapter four), and asks whether there is a feasible reform package that will take the states not only out of fiscal crisis, but strengthened to meet the development challenges which confront them. This chapter provides the context for what follows by outlining the role and increasingly divergent performance of the state governments (section two), and then in turn, the genesis of the fiscal crisis (section three), its developmental impact (section four), the reform response of the state and central governments (section five), and the reform challenges facing the states today (section six). Although associated with an increase in public spending, the fiscal crisis weakened the developmental and poverty impact of state governments, especially in the poorer states; it also called into question India's overall fiscal sustainability. This report is written to help share the lessons and success-stories to date, and to assist states and the central government in implementing the national agenda of state-level fiscal stabilization and empowerment. Given the low levels and the worrying recent trends in both the quantity of expenditure in priority expenditure areas, and the quality of expenditure across the board, there is an urgent need for expenditure restructuring to free up fiscal resources and for reforms to improve the quality of spending. Focus in this chapter on areas where expenditure can be cut rather than where it should be increased is not because we think there are no areas of underfunding. However, which particular areas should be increased, and by how much, will likely vary from state to state, depending on initial conditions, and identified priorities. The areas where savings can be made have much more in common across states, and so are the focuses of this report.Publication Public-Private Partnerships in the New EU Member States(Washington, DC: World Bank, 2007)Public-private partnerships (PPPs) operate at the boundary of the public and private sectors, being neither fully public nor fully private. PPPs are defined in this paper as privately financed infrastructure projects in which a private firm either: (i) sells its services to the government; or (ii) sells its services to third parties with significant fiscal support in the form of guarantees. Despite these common elements of PPPs across sectors, there are differences in the type of arrangements that are typical in each sector. This study focuses on whether and when using PPPs can create fiscal space for additional infrastructure investments in the EU8. In doing so, the paper will examine the fiscal risks of PPPs and the role of fiscal institutions in this regard, including how these affect the use and design of PPPs and thus the potential for creating fiscal space while promoting investment in infrastructure. Chapter 2 distinguishes the illusory from the real fiscal effects of PPPs. Chapter 3 relates the extent to which PPPs reduce fiscal costs to the nature of fiscal institutions. Chapter 4 explains how fiscal institutions can be improved to encourage fiscal prudence in the use and design of PPPs. Chapter 5 concludes.
Users also downloaded
Showing related downloaded files
Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure studentsā literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication World Development Report 2006(Washington, DC, 2005)This yearās Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a personās chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The reportās main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005ā¹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.Publication Lebanon Economic Monitor, Fall 2022(Washington, DC, 2022-11)The economy continues to contract, albeit at a somewhat slower pace. Public finances improved in 2021, but only because spending collapsed faster than revenue generation. Testament to the continued atrophy of Lebanonās economy, the Lebanese Pound continues to depreciate sharply. The sharp deterioration in the currency continues to drive surging inflation, in triple digits since July 2020, impacting the poor and vulnerable the most. An unprecedented institutional vacuum will likely further delay any agreement on crisis resolution and much needed reforms; this includes prior actions as part of the April 2022 International Monetary Fund (IMF) staff-level agreement (SLA). Divergent views among key stakeholders on how to distribute the financial losses remains the main bottleneck for reaching an agreement on a comprehensive reform agenda. Lebanon needs to urgently adopt a domestic, equitable, and comprehensive solution that is predicated on: (i) addressing upfront the balance sheet impairments, (ii) restoring liquidity, and (iii) adhering to sound global practices of bail-in solutions based on a hierarchy of creditors (starting with banksā shareholders) that protects small depositors.Publication The Journey Ahead(Washington, DC: World Bank, 2024-10-31)The Journey Ahead: Supporting Successful Migration in Europe and Central Asia provides an in-depth analysis of international migration in Europe and Central Asia (ECA) and the implications for policy making. By identifying challenges and opportunities associated with migration in the region, it aims to inform a more nuanced, evidencebased debate on the costs and benefits of cross-border mobility. Using data-driven insights and new analysis, the report shows that migration has been an engine of prosperity and has helped address some of ECAās demographic and socioeconomic disparities. Yet, migrationās full economic potential remains untapped. The report identifies multiple barriers keeping migration from achieving its full potential. Crucially, it argues that policies in both origin and destination countries can help maximize the development impacts of migration and effectively manage the economic, social, and political costs. Drawing from a wide range of literature, country experiences, and novel analysis, The Journey Ahead presents actionable policy options to enhance the benefits of migration for destination and origin countries and migrants themselves. Some measures can be taken unilaterally by countries, whereas others require close bilateral or regional coordination. The recommendations are tailored to different types of migrationā forced displacement as well as high-skilled and low-skilled economic migrationāand from the perspectives of both sending and receiving countries. This report serves as a comprehensive resource for governments, development partners, and other stakeholders throughout Europe and Central Asia, where the richness and diversity of migration experiences provide valuable insights for policy makers in other regions of the world.Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentinaās growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentinaās potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentinaās context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the countryās growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.