Tax Expenditure Reporting and Domestic Revenue Mobilization in Africa

Abstract

The use of tax expenditures (TEs) is an important fiscal practice that is often overlooked in public spending debates. The fiscal cost as well as the lack of effectiveness of TEs can be significant. This chapter describes the state of TE reporting across the world, focusing on Africa. It begins by explaining in detail what TEs are and what their role in government expenditure is. It proceeds by offering examples of the fiscal cost of these provisions, their (in)effectiveness, and the reasons why they are often hard to remove. The main portion of the chapter focuses on the lack and inconsistency of TE reporting. The chapter provides the first results of the “Global Tax Expenditures Database” (GTED), an ongoing project aiming to increase transparency and boost research in the TE field. The GTED reveals that over 64% of African countries do not provide any information on their TEs, while most of the countries that do report on TEs leave out important information such as the policy objectives and beneficiaries of those provisions. Lastly, using the available data, the chapter reports that, on average, TEs in African countries account for 2.8% of GDP and 17.8% of total tax revenue, and being as high as 7.8% (in Senegal) and 58.4% (in Mauritania), respectively.

Effective Tax Rates and Firm Size

“…This measures the forgone revenue due to corporate tax expenditures absent behavioral responses. parison data from an additional 66 countries, available in the Global Tax Expenditure Database, which collects information from official tax expenditure reports (Redonda, von Haldenwang and Aliu, 2022). 9 The average CIT tax expenditures in this extended sample of 79 countries are slightly lower than in our sample but still substantial at 0.63% of GDP.…”

Corporate Effective Tax Rates in Latin America and the Caribbean

“…Several LAC countries grant numerous tax incentives or preferential tax treatment to certain assets, firms, sectors, or regions (Andersen, Kett, and von Uexkull, 2017;Celani, Dresser, and Hanappi, 2022;Redonda, von Haldenwang, and Aliu, 2021). While this paper does not explicitly discuss these provisions, empirical evaluations tend to show that their effectiveness in attracting investment is limited (James, 2013;Klemm and Van Parys, 2010).…”

Investment Incentives: A Survey of Policies and Approaches for Sustainable Investment

“…157 According to World Bank data from 2015, only 21% of countries in sub-Saharan Africa estimate forgone revenue through tax expenditures on a regular basis. 158 Only 28 African countries reported their tax expenditures to the public once or more between 2000 and 2019, according to the Global Tax Expenditures Database. 159 When reporting is completed, there is still a problem with report quality, which includes the level of detail, the definitions used, the quality of estimation methods used, and the frequency of reporting.…”