REVENUE foregone through numerous tax concessions is hot issue in any country.
Also called tax expenditures, they ought to be offered or extended after a
transparent and rational study.
One such welcome initiative has come from
the United States Government Accountability Office (GAO). It has listed certain
factors that formed the basis for evaluation of 64 tax sops. The factors are: 1)
revenue effects; 2) good tax policy criteria – a) equity, b) economic efficiency
& c) simplicity, transparency and administrability ; 3) relationship to
other policy tools and 4) measurement challenges.
In a Testimony before
the Subcommittee on Select Revenue Measures, Committee on Ways and Means, House
of Representatives, GAO says: “Revenues foregone through tax expenditures either
reduce funding available for other federal activities or require higher tax
rates to raise a given amount of revenue. Like decisions about spending,
deciding whether to extend an expiring tax expenditure involves considering
whether the benefit of the intended outcome is worth the effect on other
programs or tax rates. Revenue the government would have collected absent a tax
expenditure could have been used for other federal priorities, deficit
reduction, or tax rate reductions.”
The testimony captioned ‘Tax Policy -
Factors for Evaluating Expiring Tax Provisions’ points out that The long-term
fiscal challenge facing the United States makes it all the more important to
ensure all major federal spending and tax programs and policies—including tax
expenditures—are efficient and relevant. Although the expiring tax expenditures
being discussed today represent only a portion of all tax expenditures, on the
whole, tax expenditures represent a substantial federal commitment. Aggregate
revenue losses were an estimated $1 trillion in fiscal year 2011.
It
adds: “For the past three decades, annual revenue losses from all tax
expenditures have been similar to the amount of discretionary spending each
year. As such, evaluating tax expenditures, including the expiring provisions
being considered today, can help policymakers assess how to alleviate the
rapidly building fiscal pressures facing our national government.”
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