RESEARCH WHICH USED THE GRADE TOOL
Tax expenditures and progress to the Sustainable Development Goals
This study reports the impact of governments having additional revenue equivalent to tax expenditures on achieving the Sustainable Development Goals in 97 countries.
The study draws data on revenue foregone from the Global Tax Expenditure Database.
Research Background
Understanding the Context
This study aims to estimate the gains in terms of the SDGs of additional government revenue equivalent to tax expenditures, with the goal of enhancing progress on the 2030 Agenda for Sustainable Development.
Governments offer taxpayers preferential tax treatment to achieve various policy objectives. These objectives may include promoting economic growth, creating employment, encouraging technology transfer, fulfilling social welfare obligations, or incentivizing certain behaviors
Some experts consider tax expenditures unnecessary, inefficient, and ineffective and believe that they create complex tax structures that provide opportunities for tax abuse
However, tax expenditure may be associated with benefits, including job creation, increased competitiveness, revenue generation, and increased gross investment.
Research Aims
Goals and Objectives
This study aims to estimate the gains in terms of the SDGs of additional government revenue equivalent to tax expenditures, with the goal of enhancing progress on the 2030 Agenda for Sustainable Development.
By evaluating the opportunity costs of tax expenditures, in terms of foregone spending and its implications for SDG progress, this study provides a novel approach. It explores how additional fiscal resources would support critical areas, including public services and government effectiveness.
Research Methods
Innovative Approaches to analysing tax expenditures
The GTED was the first database to record tax expenditures, as reported publicly by governments worldwide. It includes 218 nations, 106 of which have published at least some data since 1990, 112 of which are classified as nonreporting, and 24,128 individual provisions covering 33 calendar years.
The GTED provides revenue-foregone estimates using different information categories, such as the type of tax, policy objective, beneficiaries, and type of tax expenditure.
To analyze the potential of an increase in government revenue equivalent to the revenue foregone as a result of tax expenditures, we use Government Revenue and Development Estimations (GRADE).
Research Results
Impact on Sustainable Development
The study finds that if governments had additional revenue equivalent to tax expenditures:
an additional 17 million children would attend school (13.62% currently out of school)
an additional 70 million people would use basic water (23% of those without access)
an additional 146 million would use basic sanitation (20% of those without access)
an additional 181,000 children would survive (13% of children who currently die)
an additional 12,000 mothers would survive (16% of mothers who currently die)
Critically, there would be improvements in governance indicators in all regions
Discussion
Significance of Research Findings
Foregone revenue from tax expenditures could increase access to public services for millions, which is the most effective tool for reducing inequality and driving progress toward sustainable development.
The massive opportunity costs reported here require all governments to report and justify their annual tax expenditure.