№ 10/2022

Fìnansi Ukr. 2022 (10): 7–33https://doi.org/10.33763/finukr2022.10.007

TAX POLICY

SOKOLOVSKA Alla ¹, RAINOVA Larysa ²

¹SESE “The Academy of Financial Management”
OrcID ID : https://orcid.org/0000-0002-1022-8215
²SESE "The Academy of Financial Management"
OrcID ID : https://orcid.org/0000-0002-8275-3094

Best practices of tax expenditure reporting and the need for their implementation in Ukraine

Introduction. An important stage in the implementation of the concept of tax expenditures in the budget process is the preparation and publication of reports on tax expenditures, the quality of which largely determines the effectiveness of their use in the process of budget management.
Problem statement. In the absence of a single format of reports on tax expenditures, there are significant differences in their quality in different countries of the world, which indicate the need to improve them in most countries. Despite the fact that the specific tasks to be solved in the process of improving the reporting in each country are different, the requirements based on the generalization of the best practices of tax expenditures reporting in the OECD countries can be used as guidelines.
The purpose of the article is to assess reports on tax benefits, which are losses of budget revenues, in Ukraine in the context of best reporting practice standards and to identify directions for their improvement.
Methods. General scientific methods of cognition were used: comparative and structural-functional analysis; critical analysis, analogies and theoretical generalization.
Results. Based on the results of the analysis of reports on tax benefits in Ukraine, it was established that both in name and format (submission of reports only in the form of tables and the absence of textual, analytical part) and completeness (absence of information in the reports on many qualitative dimensions of tax expenditures – their type, policy objectives, beneficiaries, estimation method, etc. as well as retrospective and forecast estimates of their value) they do not meet the standards of best reporting practice, are not sufficiently informative, which narrows the possibilities of their use in the process of budget management and indicates the need for their gradual improvement.
Conclusions. Proposals for improving the reports on tax expenditures in Ukraine are substantiated: at the first stage, by preparing the textual part of the report, as well as filling its tabular part and Directories of tax benefits with quality information; at the second stage – by reflecting in the reports information on data sources and methods of estimating the cost of each tax expenditure, as well as expanding the time range of the data provided on the basis of including retrospective and forecast estimates of tax expenditures in the reports.

Keywords:tax expenditure report, standards of the best reporting practice, peculiarities of reporting in different countries, directions for improvement of reporting on tax expenditure

JEL: G18, H21, H25, H30

Sokolovska A. . Best practices of tax expenditure reporting and the need for their implementation in Ukraine / A. . Sokolovska, L. . RAINOVA // Фінанси України. - 2022. - № 10. - C. 7-33.

Article original in Ukrainian (pp. 7 - 33)

Download

Downloads :52

1. International Monetary Fund. (2001). Manual on fiscal transparency. Washington, D.C.: International Monetary Fund. Retrieved from www.imf.org/external/np/fad/trans/manual/manual.pdf.
2. Polackova Brixi, H., Valenduc, C. M. A., & Swift, Z. L. (Eds.). (2004). Tax Expenditures – Shedding Light on Government Spending through the Tax System. Lessons from Developed and Transition Economies. Washington DC: World Bank. Retrieved from documents1.worldbank.org/curated/en/280461468325775264/pdf/275830PAPER0Tax0expenditures.pdf.
3. OECD. (2004). Best Practice Guidelines – Off Budget and Tax Expenditures (25th Annual Meeting of Senior Budget Officials. Madrid, Spain 9-10 June 2004). Retrieved from www.resourcegovernance.org/sites/default/files/OECD%20Off-Budget%20&%20Tax%20Expenditures%20Guidelines.pdf.
4. OECD. (2010). Choosing a Broad Base – Low Rate Approach to Taxation. OECD Tax Policy Studies, 19. doi.org/10.1787/9789264091320-en
5. OECD. (2010). Tax Expenditures in OECD Countries. Paris: OECD Publishing. doi.org/10.1787/9789264076907-en
6. Inter-American Center of Tax Administrations (CIAT). (2011). Handbook of best practices on tax expenditure measurements. An Iberoamerican experience. Retrieved from biblioteca.ciat.org/opac/book/4857.
7. Villela, L., Lemgruber, A., & Jorratt, M. (2010). Tax Expenditure Budgets Concepts and Challenges for Implementation. IDB Working Paper Series, IDB-WP-131. Retrieved from www.econstor.eu/bitstream/10419/115368/1/IDB-WP-131en.pdf.
8. The Forum for America's Ideas. (2017). Tax Expenditure Budgets and Reports: Best Practices (National Conference of State Legislatures). Retrieved from www.ncsl.org/documents/statefed/NCSL_Tax_Expenditures_Best_Practices.pdf.
9. OECD. (2021). Tax Expenditures Report by the tax experts commission. Colombia. Retrieved from www.oecd.org/tax/tax-policy/country-reviews-advice/tax-expenditures-report-by-the-tax-experts-commission-colombia-2021.pdf.
10. Heady, C., & Mansour, M. (2019). Tax Expenditure Reporting and Its Use in Fiscal Management: A Guide for Developing Economies. How-To Note, 2019/002. Retrieved from www.imf.org/en/Publications/Fiscal-Affairs-Department-How-To-Notes/Issues/2019/03/27/Tax-Expenditure-Reporting-and-Its-Use-in-Fiscal-Management-A-Guide-for-Developing-Economies-46676.
11. Kassim, L., & Mansour, M. Tax expenditures reporting in developing countries: An evaluation. Revue d’économie du développement, 26 (2), 113–167. doi.org/10.3917/edd.322.0113
12. Redonda, A., & Neubig, T. (2018). Assessing Tax Expenditure Reporting in G20 and OECD Economies. Discussion Note, 3. Retrieved from www.cepweb.org/wp-content/uploads/2018/11/Redonda-and-Neubig-2018.-Assessing-Tax-Expenditure-Reporting.pdf.
13. Sokolovska, A. (2022). Implementation of the concept of tax expenditures in Ukraine: problems and ways to solve them. Finance of Ukraine, 7, 32–56 [in Ukrainian]. doi.org/10.33763/finukr2022.07.032
14. U.S. Department of the Treasury. (n. d.). Tax Expenditures. Reporting. FY 1996 – FY 2023. Retrieved from home.treasury.gov/policy-issues/tax-policy/tax-expenditures.
15. Department of Finance Canada. (2021). Report on Federal Tax Expenditures – Concepts, Estimates and Evaluations. Retrieved from www.canada.ca/en/department-finance/services/publications/federal-tax-expenditures/2021.html.
16. EU Council. (2011, November 8). Directive 2011/85/EU on requirements for budgetary frameworks of the Member States. Retrieved from eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX%3A32011L0085.
17. Redonda, A., von Haldenwang, C., & Aliu, F. (2021). The Global Tax Expenditures Database (GTED). Companion paper. Bonn: Deutsches Institut für Entwicklungspolitik (DIE). DOI: 10.23661/r6.2021.
18. Sokolovska, A. (2022). The benchmark for vat and VAT expenditures in Ukraine: methodological and pragmatic aspects. Economy and Forecasting, 1, 78–106 [in Ukrainian]. doi.org/10.15407/eip2022.01.078