A Pocket Guide on Tax Expenditures for Parliamentarians
Parliamentarians are key accountability stakeholders in tax and revenue matters as they ensure the transparency and effectiveness of tax expenditures (TEs). Their oversight role is vital to evaluate policies and contribute to evidence-based decision-making.
The Addis Tax Initiative is pleased to announce the launch of the ATI Pocket Guide on Tax Expenditures for Parliamentarians, a collaborative effort by the ATI, the Council on Economic Policies (CEP), and the German Institute for Development and Sustainability (IDOS).
The ATI Pocket Guide aims to support members of Parliament in their roles as accountability and transparency stakeholders in the political economy of tax expenditure (TE) governance.
Context
Have you ever wondered about the costs of TEs globally? The Global Tax Expenditure Database reveals an average revenue forgone at 3.8% of GDP and 23% of tax revenue. This underscores the importance of transparency in TE reporting, disclosing, for instance, TE costs, scrutiny levels, and effectiveness in achieving policy goals.
Parliamentarians play a pivotal role in the political economy of tax expenditure governance. The ATI Pocket Guide addresses key questions such as: How do parliaments create a sound and transparent framework for TEs? What is their role in ensuring the accountability and effectiveness of TEs? How can they actively contribute to the evaluation process?
Exploring the complexities of the TE policy cycle, the ATI Pocket Guide addresses questions related to setting up, operating, reporting, evaluating, and reforming TEs. By offering insights into these stages, the Guide empowers parliamentarians to make informed decisions and contribute to evidence-based policymaking. It equips members of Parliament with key knowledge and skills to establish rules for transparency and accountability around tax expenditures as well as to exercise their oversight role on TEs governance, holding the Executive accountable for effective use of tax expenditures.
Background
This publication stems from the collaborative work implemented in a series of regional workshops and follow-up technical meetings on tax expenditures (TEs) jointly organised by the ATI, CEP, and IDOS. Successful workshops and follow-up meetings have taken place in Lagos, Nairobi, Manila, Accra, and Dar es Salaam with the last event of the series to be held in Kathmandu in May 2024. To date, these meetings have brought together Members of Parliament, representatives of ministries of finance, and revenue authorities as well as international and regional tax experts to collectively identify strategies to improve tax expenditure estimation, reporting, and evaluation. Further, participants engaged in technical discussions and hands-on activities on operational dimensions of TEs as well as governance topics around them.
The ATI Pocket Guide is part of ATI’s work within the framework of the ATI Consultative Group 4. The group supports the implementation of Commitment 4 of the ATI Declaration 2025 to widen the space for and strengthen the capacity of accountability stakeholders in ATI partner countries to engage meaningfully in tax and revenue matters.
ATI’s engagement around tax expenditures builds on Commitment 3 of the ATI Declaration 2025 which states: “We will 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. We will improve inter-agency cooperation on tax expenditures and foster the coordination of granting tax concession activities”.
