By Tax Justice Network Africa (TJNA), the East African Tax and Governance Network (EATGN), and Africa Centre for People, Institutions and Society
What are tax expenditures?
When a government wishes to financially support a vulnerable sector or community, it does so in various ways.
For example, to address period poverty in Kenya by improving girls’ access to sanitary pads, the government could decide to provide free or subsidised sanitary pads to schools by allocating funds to the relevant ministries for their provision. This would be reported as a direct expenditure.
Alternatively, the government could exempt pads from value-added tax (VAT) to reduce their cost. In doing so, the government would be foregoing the tax that girls would have paid when purchasing sanitary pads. This is also an expenditure by the government, but more specifically, a tax expenditure.
Tax expenditures are the revenues foregone by a government through tax exemptions, incentives, deferrals, or allowances. Essentially, any deviation from what the actual tax rate should be, is a tax waiver.
