FRIEDRICH-EBERT-STIFTUNG – HOW TO TAX A BILLIONAIRE – AN ADVOCACY TOOL AGAINST TAX PRIVILEGES FOR THE SUPER-RICH SOURCE 2: MINISTRY OF FINANCE OR SIMILAR Tax data is often the best data source because of the ex­tent of information collected and quality control conduct­ed by thousands of tax consultants and tax auditors. But data quality and availability becomes problematic espe­cially at the top end because of tax evasion and because few countries now levy taxes on wealth and because cap­ital income is often taxed only partly and taxes are some­times collected anonymously directly at the source. While global revenue statistics, statistics on inequality of income and wealth as well as the commitment to equity assess­ments already make use of tax statistics, ministries of fi­nance and similar bodies often produce additional inter­esting sources that can be used to evaluate tax systems, most prominently tax expenditure analyses. TAX EXPENDITURE ANALYSES Tax expenditures, which are commonly defined as the amount of tax revenue foregone through the ap­plication of special tax provisions or regimes, relative to a benchmark tax system, will be at the center of the policy debate on revenue mobilization for several reasons. First, good policy practice in base broaden­ing requires analysis of the structure of tax bases, and their optimal taxation given a set of policy objectives. Tax expenditures cost estimates are one important element of such analysis. Second, tax rates in DCs, particularly in Sub-Saharan Africa, remain relatively high compared with rates in high-income and transi­tion economies, while tax bases tend to be narrower. Therefore, revenue mobilization through increases in tax rates, while possible in certain areas of the tax system, is likely to have adverse efficiency implica­tions and may worsen tax inequities. Third, successful tax reform often depends on communicating simply and effectively the implications of policy choices to the public. Tax expenditures play a useful role in this exercise. (Kassim and Mansour, 2018) 9 Many governments publish regular reports on so-called tax expenditures. These reports contain cost estimates for tax rules that deviate from a benchmark. According to the newly created Global Tax Expenditure Database 10 , 102 out of 228 countries covered provide some data on tax expenditure. In these countries with their differing defini­tions, tax expenditures range from less than 1 per cent of GDP(Germany, India or Côte d'Ivoire) to more than 10 per cent of GDP(Russia, Netherlands, Finland, Czechia and Ireland). Among the 120 countries covered by the Open Budget Survey, 53 provide some information on tax ex­penditures, but only 14 cover all core information for all tax expenditures. 11 Overall, tax expenditure reports can be viewed as a valu­able starting point for identifying tax rules that can be con­sidered as unfair tax privileges, but reports are afflicted by several limitations. Because not all taxes are covered or be­cause the benchmark chosen is an already rigged tax sys­tem, some of the biggest tax privileges might be missing. In Brazil, for example, the two biggest privileges responsi­ble for nearly one-third of the costs estimated by the Bra­zilian National Association of Tax Auditors, namely the ex­emption of dividends and the wealth tax provided for in the Constitution, but not put down in legislation, are not addressed in the otherwise quite comprehensive govern­ment report(see example 1). Furthermore, the basis for the estimation of costs might itself be problematic, like in the case of the German inheritance tax exemption for large fortunes(see example 2). More detailed methodological considerations can be found in the IMF’s How to Note from 2019(IMF, 2019) and in a study on Tax Expenditure Report­ing and Domestic Revenue Mobilization in Africa(Redonda et al, 2021). Furthermore, Kassim and Mansour(2018) compare tax expenditure reporting in 26 developing or transition countries, and the OECD(2010) has compared ten OECD countries. 12 9 Argentina, Armenia, Dominican Republic, France, Italy, Russia, ­Republic of Korea, Spain, Sweden, US(beyond core information), Brazil, Germany, Mexico, Slovakia(core information). More infor­mation can be found at https://internationalbudget.org/open­budget-­survey/. 10 See Tax Expenditure Database, available at: https://gted.net/. 11 Argentina, Benin, Bulgaria, Burkina Faso, Chile, Colombia, Costa Rica, Côte d’Ivoire, Dominican Republic, Ecuador, Ghana, Guate­mala, India, Mali, Mauritania, Mauritius, Mexico, Morocco, Nicara­gua, Pakistan, Peru, Philippines, Poland, Senegal, South Africa and Uruguay. 12 Canada, Germany, Korea, Netherlands, Spain, UK, US and without comparable data: France, Japan, Sweden. 20