Global Tax Expenditures Database – Official Launch

Governments use a wide range of policies to pursue public objectives. An important part of their toolkit are the benefits they provide to certain taxpayers through tax breaks – or as many call them “tax expenditures”.

Tax expenditures come in many shapes and forms such as tax incentives for firms, tax deductions for households, and lower tax rates for specific goods. In the United States, tax expenditures reduce federal government revenue by more than 1.4 trillion Dollars a year: that is almost 7% of GDP and roughly one third of federal government spending. The average fiscal cost of tax expenditures across the European Union lies around 4% of GDP, and can even exceed 10% as in Czechia and Finland. Tax expenditures in developing and emerging economies are also significant.

For instance, they amount to more than 4% of GDP in Brazil and South Africa, and come close to 8% in Colombia and Senegal.

Yet, despite their magnitude and the fact that their net impact on government budgets is the same as direct spending, tax expenditures are often opaque and hidden from public scrutiny. As a consequence, they are hardly ever assessed in terms of costs and benefits. This is particularly worrisome since tax expenditures are often ineffective in reaching their stated goals and can trigger negative social and environmental side effects, such as exacerbating inequality and contributing to climate change.