Is it Time to Rationalize Tax Expenditures?

As developing countries recover from the pandemic, they will need to bring their public finances to a more sustainable position by streamlining public spending and strengthening the revenue base. The need to mobilize additional resources has been exacerbated by the recent economic turmoil triggered by the war in Ukraine as disruptions from the war will hit low-income countries significantly harder than high-income ones.

One area that holds potential for additional revenues is rationalization of tax expenditures—the many tax breaks, exemptions, and incentives that governments provide to various actors. While tax expenditures can be an important tool for fiscal policy, they are costly and many of them are ineffective, opaque and politically motivated. Improving their governance could help provide additional resources for financing development. 

This event will discuss the steps to better manage tax expenditures and draw on the two recent studies on the topic by the International Budget Partnership (IBP) and the Organization for Economic Co-operation and Development (OECD).

If you have questions for our panelists, please submit them to [email protected], tweet @CGDev #CGDTalks, or submit your comments via YouTube.