The Concept of tax expenditure and its application in the European Union

Goverments have a variety of economic and social objectives. One insturment to achieve these objectives is public spending. It has often been argued since late 1960's that goverments can use tax concessions, as a substitute for direct public spending, to achieve the same objectives. Such tax concessions are referred to as tax expenditure. Chapter I of this study provides general information of tax expenditure analysing that includes history of tax expenditure concept, defination of tax expenditure, economic effects of tax expenditures, supply side economics and tax expenditures, cost of tax expenditures and tax expenditures in less developed countries. Chapter II provides a review of tax expenditure reporting in some European Union Members in a standart format is as follows: background and introduction of tax expenditure reporting, structure of tax expenditure report, difficulties in defination of tax expenditure, method of calculation and use of tax expenditure reports. Chapter III provides a review of tax expenditures and their cost in Turkish Tax System that includes some Tax Expenditures in Personal Income Tax, Corporate Tax and Value Added Tax.