Tax expenditures (TEs) are benefits that are granted to specific sectors, activities, or social groups through preferential tax treatments such as exemptions, deductions, credits, deferrals, and lower tax rates. Countries around the world often resort to different forms of TEs to pursue various policy objectives, including improving the progressivity of the tax system and encouraging investment. However, if not monitored transparently and regularly, TEs could be an impediment to the effective domestic revenue mobilisation (DRM) needed to achieve the Sustainable Development Goals (SDGs), particularly for developing countries. As the Global Tax Expenditure Database (GTED) shows, TEs to GDP ratio in Africa ranges from 0.5 to 8%. The GTED report also highlights that many developing countries still do not publish reports on TEs they grant, which makes it difficult to effectively assess their impact on DRM and development in general.
Recognising this transparency gap, under Commitment 3 of the ATI Declaration 2025, members of the Addis Tax Initiative (ATI) have pledged to “improve tax transparency by publishing tax expenditures regularly to facilitate cost-benefit assessments, ultimately helping to reduce wasteful tax expenditures, improving taxpayers’ trust, and creating a more level playing field for all types of businesses. They further agreed to “improve inter-agency cooperation on tax expenditures and foster the coordination of granting tax concession activities.” To fulfil this commitment, in November 2021, the ATI, in collaboration with German Institute of Development and Sustainability (IDOS) and the Council on Economic Policies (CEP), organised an online workshop which explored the link among TEs, DRM, and development. Building on this workshop, the ATI now organises a series of regional workshops on the topic, focusing on West Africa, East Africa, Asia, and Latin America.
Accordingly, the first regional workshop in the series will be held in Lagos, Nigeria on 27 and 28 July 2022. This regional workshop is organised by the ATI, CEP and IDOS, in collaboration the West African Tax Administration Forum (WATAF), the Economic Community of West African States (ECOWAS Commission), and the African Tax Administration Forum (ATAF). This event will build on the previous workshop and provide a platform for ATI member countries and other interested governments to exchange ideas with regional partners and international experts on estimating, reporting, and evaluating TEs.
For more information on the first ATI regional workshop on tax expenditures: here.