Rafal Chomik and John Piggott
Tax expenditures occur when the tax treatment favors a certain activity. The forgone tax is thought to be analogous to spending and can thus attract commensurate attention. This concept was first articulated some 50 years ago by Stanley Surrey of the US Treasury Department (Surrey 1969), but exemptions to tax are as old as tax itself.1,2
As governments around the world look at ways to balance their budgets, tax expenditures will increasingly and justifiably come under scrutiny. This is particularly the case in countries with expanding funded pensions that seek to encourage self-provision for retirement or to main- tain neutrality between current and future consumption. Such arrangements can make the tax costs appear large and skewed toward the rich, while the benefits, which are far in the future, seem unsubstantiated.
Keywords: Tax expenditures, budgets, pensions, retirement, tax costs
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