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Tax expenditures: a theoretical review


  • Vjekoslav Bratic

    (Institute of Public Finance, Zagreb)


Tax expenditures are an instrument frequently used when a government wishes to achieve certain economic and social effects. But because of the increasing number and scope of tax expenditures, their proper use, quality of administration and record-keeping have become a major challenge for the tax authorities and the whole of the government. The article considers and explains very diverse forms of tax expenditure such as reliefs, tax deductions, tax allowances, tax exceptions and special rates of taxation and the ways in which they are defined and calculated. The key problems in the analysis are the absence of a single definition and of methodology for the calculations; these ultimately make it impossible to compare tax expenditures between or among countries.

Suggested Citation

  • Vjekoslav Bratic, 2006. "Tax expenditures: a theoretical review," Financial Theory and Practice, Institute of Public Finance, vol. 30(2), pages 113-127.
  • Handle: RePEc:ipf:finteo:v:30:y:2006:i:2:p:113-127

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    References listed on IDEAS

    1. Hana Polackova Brixi & Christian M.A. Valenduc & Zhicheng Li Swift, 2004. "Tax Expenditures--Shedding Light on Government Spending through the Tax System : Lessons from Developed and Transition Economies," World Bank Publications, The World Bank, number 15067.
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    Cited by:

    1. Levin, Jörgen & Sayeed, Yeasmin, 2014. "Welfare impact of broadening VAT by exempting local food markets: The case of Bangladesh," Working Papers 2014:7, Örebro University, School of Business.

    More about this item


    tax expenditures; reliefs; credits; exceptions;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy


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