Tax expenditure analysis
The TE concept allows analysts to apply different analytical lenses to different parts of the tax system. Analysts looking at government spending have historically used different tools from those used by tax analysts (Brooks, 2009). For instance, tax analysts often support a broad based tax system that is broad based, while recommendations for government spending often support spending that is carefully targeted at a limited group.
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The inclusion of government spending in tax legislation and lack of information on the related fiscal cost has meant that equivalent government spending is assessed using different criteria.
The OECD notes that tax expenditures have a role to play (OECD, 2008) and that there may be legitimate reasons why the tax system may, or may not, be a suitable channel for government spending. However, a full discussion of the pros and cons of using TEs as a spending mechanism lies beyond the scope of this report. A decision to report on TEs merely informs the public of the cost of policy without judging the merits of the policies reported.
