Coming Back Stronger – Reforming Tax Expenditures

A significant amount of government funding worldwide is channeled through tax breaks, aka “tax expenditures” (TEs), in the form of exemptions, deductions, credits, deferrals, and reduced tax rates.

Despite their magnitude and the fact that their net impact on government budgets is the same as direct spending, new TEs are introduced regularly without adequate scrutiny. Moreover, transparency on existing TEs is limited. As a result, TE provisions are hardly ever subject to sound analyses and debate. This lack of attention and evaluation is particularly alarming as TEs are not only often ineffective in reaching their stated objectives, but also frequently trigger negative social and environmental side effects.

Against this background – and with heightened urgency in view of the challenges from COVID-19 – the reform of TEs is vital. As governments worldwide face growing funding needs to respond to the pandemic, they cannot afford to lose revenues to ill-designed tax breaks. They cannot afford to continue offering tax deductions that disproportionally benefit higher-income households. And they cannot afford to maintain tax incentives that harm the environment and thus the sustainability of their societies. To come back stronger, reforming TEs is critical.

With this in mind, CEP is launching a webinar series to put a spotlight on the urgent need for TE reform. We start in January with a focus on Europe and deep-dives into TEs related to corporate income taxes, personal income taxes and consumption taxes.

Further details and registration information will be available here soon.