Les dépenses fiscales

Abstract

Tax expenditures are one of the instruments a government can use to implement specific tax policies. in many cases, subsidies and tax expenditures are close substitutes. However, tax expenditures are less transparent since they are not subject to the same level of scrutiny as subsidies are. The paper first presents the basic issues of tax expenditures: definition, discussion of the « benchmark tax system » from which tax expenditures derogates, reporting practice and recent figures and trends. We then turn to the economic analysis of tax expenditures. While there is a clear case for tax expenditures in the case of externalities and market imperfections, the pro and cons of departing neutrality should be clearly assessed when tax expenditures are used in other circumstances. The paper also documents the effects of tax expenditures on the distribution of the tax burden. Empirical evidence shows that the take-up of tax expenditures by households concentrates on the right-hand side of income distribution and lowers the progressivity of income tax. The final section discusses the economic implications of some tax expenditures: tax credits favouring long-term savings, exempted savings accounts and preferential tax regime for corporate income tax.