Tax expenditure and the treatment of tax incentives for investment

Diaz de Sarralde, Santiago / Mark Hallerberg / Lise Johnson / Ariel Melamud / Agustin Redonda / Ricardo Rozemberg / Jakob Schwab / Christian von Haldenwang
Externe Publikationen (2018)

published on T20 Argentina 2018

Volltext/Document

Governments use tax expenditures to boost investment, innovation and employment. However, these schemes are largely opaque, costly and often ineffective in reaching their stated goals. They also frequently trigger unwanted side effects. In order to improve the performance of these tools, we present three concrete policy proposals: First, governments should increase the transparency of tax expenditures, and G20 leaders should take the lead in this regard. Second, G20 governments should improve the design of tax incentives with the aim of minimizing the generation of windfall profits and negative spillover effects on third (in particular, poorer) countries. Third, governments should phase out tax expenditures that are environmentally harmful, including tax incentives for fossil fuels as well as those schemes that promote an unsustainable use of natural resources.