Trade Implications of Tax Expenditures

This policy brief was published by the Task Force “Trade, Investment and Growth” on the T20 Saudi Arabia website here.

International trade and taxation are inextricably linked and have been high-priority issues within the Group of Twenty (G20) agenda. However, the interconnections between international trade and tax expenditures—that is, benefits granted through preferential tax treatment—have been overlooked. This brief calls for a better design of tax expenditures, particularly those that have implications for international trade such as a) tax incentives for investment, b) tax incentives implemented within the digital economy, c) tax benefits for energy-intensive and trade-exposed sectors, and d) export-related tax incentives, which are among the main determinants of trade misinvoicing and illicit financial flows.