ATI Regional Workshop on Tax Expenditures (East Africa) – Estimation, Reporting and Evaluation

The ATI Regional Workshop on Tax Expenditures (East Africa) was co-organised by the Addis Tax Initiative (ATI), the Council on Economic Policies (CEP) and the German Institute of Development and Sustainability (IDOS), together with the African Tax Administration Forum (ATAF) and the Kenya Revenue Authority (KRA) as regional partners.

The workshop report is available for download on the ATI website.

  • With around 50 participants from 9 countries attending, the workshop proved the growing engagement of different stakeholders in the region concerning the topic of tax expenditures monitoring and reform.

    Similarly to the first regional workshop held in Lagos, the conclusions from Nairobi confirm the key takeways: countries in the region have been increasing their efforts to improve TEs systems, but much remains to be done.  More specifically, the following points were exposed:

    • A TEs governance framework, should involve both the Ministry of Finance (MoF) and Parliament. Defining a benchmark tax system is not always straightforward and there is no general blueprint.
    • Governments need to address technical and methodological challenges, but often there is also a political dimension to the question whether a specific provision should be considered a TEs or part of the benchmark system.
    • Almost all governments use the so-called “revenue forgone” approach to assess the costs of specific TEs. Yet, due to data and modelling limitations uncertainty might be considerable.
    • While more and more governments have started to publish data on tax expenditures according to the Global Tax Expenditures Database (GTED), several challenges still prevail, going from lack of human as well as technical resources (e.g. electronic tax returns) to insufficient coordination across institutions and a lack of political will.
    • Significant tax incentives are granted to the extractive sector in the region. Monitoring and evaluating tax expenditures in this particular sector is crucial.
    • The use of tax incentives for investment is widespread. The impact of the recently agreed international tax deal and in particular of the Pillar Two solution, will be significant when it comes to their prevalence. There will be strong reasons for governments to reform tax incentives being affected by the new tax rules.
    • Ex-ante as well as ex-post evaluation frameworks are strikingly rare and, yet crucial to identify which provisions are cost-effective and which ones need to be reformed. The quantity and quality of data are key to ensure that tax expenditures are comprehensively assessed.
    • Tax expenditure reforms should aim at improving the effectiveness of tax systems, ensuring that they are better aligned with governments’ policy goals. Yet, reforming tax expenditures is challenging due to the vested interests often associated with individual preferences and institutional mechanisms.

  • Following the first ATI Regional Workshop on Tax Expenditures in West Africa held in Nigeria (Lagos, 27-28 July, 2022), the workshop builds on the ATI Commitment 3 and the Global Tax Expenditures Database (GTED), which was launched by CEP and IDOS in June 2021. With its worldwide coverage, the GTED helps to increase transparency on tax expenditures and sheds light on their critical role in tax systems around the globe. As shown by the GTED, the number of countries reporting on tax expenditures has been growing steadily over the years. However, the scope and quality of reports still vary significantly. Moreover, only few countries in the world have started to systematically evaluate the tax expenditures to assess the benefits obtained against the fiscal costs incurred. This is particularly worrisome since tax expenditure evaluations a key input for the much needed evidence-based tax expenditure reforms.

    Further details can be found here.

  • Tuesday, 18 October 2022
    Governance, Estimation and Reporting of Tax Expenditures
    09.00-10.00Welcome Address & Introduction
    ATI, ATAF, KRA, IDOS & GTED team
    10.00-11.30Session 1 – A Governance Framework for Estimating, Reporting & Evaluating TEs
    11.30-12.00Coffee Break
    12.00-13.30Session 2 – Establishing a Benchmark
    13.30-15.00Lunch Break
    15.00-16.30Session 3 – Estimating Revenue Forgone
    16.30-17.00Coffee Break
    17.00-18.30Session 4 – Reporting on Tax Expenditures
    Wednesday, 19 October 2022
    Tax Expenditure Evaluation and Reform
    08.50-09.00Welcome to Day 2 & Setting the Stage
    09.00-10.30Session 5 – TEs in the Extractive Industries
    10.30-11.00Coffee Break
    11.00-12.30Session 6 – TEs in the International Tax System
    12.30-13.45Lunch Break
    13.45-15.00Session 7 – Ex-ante Assessment & Ex-post Evaluation of TEs
    15.00-16.15Breakout Session - Evaluation
    16.15-16.45Coffee Break
    16.45-18.15Session 8 –Driving TE Reforms
    18.15-19.00Closing Remarks