Tax Expenditure Effectiveness: Tax Expenditures Lab Flagship Report 2025

Tax expenditures (TEs), understood as deviations from a benchmark tax system that reduce the tax burden for specific groups, sectors or activities, are widely used policy instruments, yet their effectiveness is often uncertain. This report examines the determinants of TE performance and reviews the available empirical evidence.

The opening chapters provide an overview of tax expenditure (TE) reporting and use, drawing on the Global Tax Expenditures Database (GTED) and the Global Tax Expenditures Transparency Index (GTETI). They then assess global evidence on the effectiveness of TEs, examine the growing fiscal importance of value-added tax (VAT)—where reduced rates and exemptions generate substantial revenue forgone—and zoom in on Ireland’s experience in strengthening TE governance. The chapters also discuss the critical role of high-quality data as a cornerstone of sound TE design, monitoring, and evaluation

The report also includes a deep dive into institutional arrangements for administering investment tax incentives, followed by two chapters examining corporate tax incentives aimed at climate and R&D related innovation objectives, whose impact depends critically on their design and implementation.

Read the full report here.