Shedding Light on Hidden Government Spending: Tax Expenditures
By Tom Neubig and Agustin Redonda1
Tax expenditures (TEs) are used by governments around the world to promote public policy objectives. Examples include tax deductions on mortgage interest to encourage home ownership and preferential tax treatment of pension savings.
TEs are offered in many shapes across the entire tax system. They provide subsidies through reduced tax rates, tax exemptions, exclusions, deductions and tax credits. They are applied to income taxes, value added and sales taxes, payroll taxes, property taxes as well as estate taxes. And they target policy goals in areas as diverse as energy, housing, research and development, retirement, health as well as specific business sectors.
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