Fiscal Policy

Taxation and government spending have significant influence on economic trajectories. We focus on the design and reform of tax expenditures for sustainable prosperity. We also work on advancing coherent fiscal policies for affordable, secure and clean energy.

TAX EXPENDITURES

Tax expenditures – tax deductions, exemptions, reduced tax rates, and other forms of preferential tax treatment – continue to represent one of the most important, and yet least examined dimensions of fiscal policy. Their use amounts to average losses in government revenue of 4% of GDP. Yet, close to half of all jurisdictions worldwide still do not report on the revenue they forgo due to these provisions. Among those that do, many provide only minimal data with little, if any, evaluation of their effectiveness.

This lack of scrutiny is striking – even more so given the growing constraints in fiscal space around the globe. Tax expenditures often rival, and in some cases exceed, direct spending programs in fiscal magnitude – yet they rarely receive comparable attention. Unlike budgetary expenditures, which are typically subject to annual parliamentary approval and public oversight, tax expenditures are frequently embedded in the tax code for years without systematic review. Their fiscal costs accumulate silently, shaping market incentives, distributional outcomes and environmental footprints in ways that remain largely invisible to policymakers and citizens alike.

Against this background, CEP works on advancing tax expenditure design and reforms to create fiscal space for the green transition, social protection, and other national priorities, and to ensure the effectiveness of tax expenditures in supporting these objectives.

To that end, together with our partner IDOS, we host the Global Tax Expenditures Database (GTED), the Global Tax Expenditures Transparency Index (GTETI) and the Tax Expenditures Lab as a resource for a global community of practitioners and researchers. We also publish a series of country reports on tax expenditures and engage directly with finance ministries and tax authorities on tax expenditure reporting, evaluation and reform.

FISCAL POLICIES FOR SUSTAINABLE ENERGY

Delivering affordable, secure and clean energy ranks at the top of policy agendas worldwide. The pursuit of these goals is closely intertwined with further priorities, including economic development, jobs and climate action. Fiscal policies play a critical role in advancing these objectives.

Yet, there are no silver bullets. Advancing sustainable energy requires a coherent mix of measures, combining fiscal tools – energy taxes, carbon pricing, fiscal incentives, and public funding – with regulatory action. Finance ministries are core players in designing these packages, sequencing their components, and putting them into effect.

With that in mind, CEP aims to strengthen fiscal policies in support of affordable, secure and clean energy.

In pursuing this objective, we engage bilaterally with finance ministries and related stakeholders, as well as through our role as an institutional partner of the Coalition of Finance Ministers for Climate Action. In that context, we had the lead for a key report by the Coalition on “How ministries of finance can support coherent climate policy packages”, and are currently finalizing a policy brief on economic policy packages for sustainable energy across four sectors: electricity, transport, housing and heavy industry.