The study discusses the concept of and practices relating to tax expenditure. It states that tax expenditures are concessions that fall outside of or are departures from the normal tax structure designed to favor a particular industry, activity or class or persons. They include permanent exclusions from income, deductions, deferrals of tax liabilities, credits against tax or special rates, exemptions, allowances, tax reliefs, tax shelters, tax aids, etc. They constitute government spending via the tax system and may result to substantial revenue foregone. It notes that by experience, tax expenditures invite a lesser level of scrutiny compared to direct government expenditures such as grants, loans or other forms of government assistance. It suggests that given the negative aspects associated with tax expenditures, it may be better if policymakers subject them to a closer examination and review to prevent their use for fiscal opportunism and to strengthen government’s revenue collection drive.
