What is the meaning of the term ‘tax expenditure’ ?
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Tax expenditures are the special provisions of the tax code such as exclusion, deductions, deferral, and tax rates that benefits specific activities or group of tax payers. In other words, tax expenditure are concessions and exemption provided to the tax payers by the government. These concession are aimed to promote certain types of activities, such as research and development, public welfare, etc.
The tax expenditure budget consists of the estimated revenue losses that occur due to various exclusions, deductions, exemptions, non-refundable credits, deferrals, preferential rates, etc., in the tax code. These provisions reduce the liabilities incurred due to income tax or businesses that undertake certain types of activities.