Question 45

Does the Executive’s Budget Proposal or any supporting budget documentation present information on tax expenditures for at least the budget year? (The core information must include a statement of purpose or policy rationale for each tax expenditure, the intended beneficiaries, and an estimate of the revenue foregone.)
 * a. Yes, information beyond the core elements is presented for all tax expenditures.
 * b. Yes, the core information is presented for all tax expenditures.
 * c. Yes, information is presented, but it excludes some core elements or some tax expenditures.
 * d. No, information related to tax expenditures is not presented.
 * e. Not applicable/other (please comment).

Guidelines
Question 45 focuses on tax expenditures, asking whether “core” information related to these tax preferences is presented. These core components must include for both new and existing tax expenditures:
 * a statement of purpose or policy rationale;
 * a listing of the intended beneficiaries; and
 * an estimate of the revenue foregone.

Tax expenditures arise as a result of exceptions or other preferences in the tax code provided for specified entities, individuals, or activities. Tax expenditures often have the same impact on public policy and budgets as providing direct subsidies, benefits, or goods and services. For example, encouraging a company to engage in more research through a special tax break can have the same effect as subsidizing it directly through the expenditure side of the budget, as it still constitutes a cost in terms of foregone revenues. However, expenditure items that require annual authorization are likely to receive more scrutiny than tax breaks that are a permanent feature of the tax code.

Beyond the core information, some governments may also provide other information about tax expenditures, including for example: the intended beneficiaries by sector and income class (distributional impact); a statement of the estimating assumptions, including the definition of the benchmark against which the foregone revenue is measured; and a discussion of tax expenditures as part of a general discussion of expenditures for those program areas that receive both types of government support (in order to better inform policy choices). For more details on tax expenditures, see Guide to Transparency in Public Finances: Looking Beyond the Core Budget and Principle 1.1.4 of the IMF’s Fiscal Transparency Handbook (2018). To answer “a,” the Executive’s Budget Proposal or supporting documentation must present, for at least the budget year, all of the core information related to tax expenditures as well as some additional information beyond the core elements. To answer “b,” the Executive’s Budget Proposal or supporting documentation must present all of the core components noted above. Answer “b” is also accepted if one of the core elements is not presented but additional information beyond the core elements is presented. A “c” answer applies if some information related to tax expenditures is presented, but some of the core pieces of information are not included. Answer “d” applies if no information is presented on tax expenditures.

1) What do we mean by beneficiaries?
Here we apply the generosity principle and use a broader definition of beneficiaries, e.g. Sectorial /Income bracket breakdown opposite individual beneficiaries.

External References

 * IMF’s Fiscal Transparency Handbook (2018), Principle 2.1
 * Guide to Transparency in Public Finances: Looking Beyond the Core Budget