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Cyclicality of Tax Expenditures: The Case of Israel

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  • Michel Strawczynski

    (Bank of Israel)

Abstract

Tax expenditures have been rarely investigated internationally because of lack of data. This paper analyzes the cyclicality of tax expenditures in Israel, a country that has gradually intensified the use of this tool, becoming quantitatively important in terms of GDP when compared to other OECD countries. Using quarterly data for the period 1986 to 2016, I find that the pattern of cyclicality of government decisions on tax expenditures changed after 1997, following a notorious reduction of government's deficit and debt: tax expenditures became pro-cyclical in expansions and counter-cyclical in recessions. The latter finding resembles the pattern documented in the literature for government spending in selected developing economies, who achieved in recent years counter-cyclical implementation of spending.

Suggested Citation

  • Michel Strawczynski, 2022. "Cyclicality of Tax Expenditures: The Case of Israel," Bank of Israel Working Papers 2022.04, Bank of Israel.
    • Handle: RePEc:boi:wpaper:2022.04
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    References listed on IDEAS

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    More about this item

    Keywords

    Tax Expenditures; Cyclical Policy;

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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