Definition
Revenue Foregone (Tax Expenditure)
Revenue foregone, or tax expenditure, is the estimated revenue the government gives up by granting exemptions, deductions and concessional rates.
Every deduction, exemption or concessional rate in the tax code is, in effect, a subsidy delivered through the tax system. The Budget documents publish an estimate of revenue foregone — also called tax expenditure — to show how much these breaks cost the exchequer.
Reducing tax expenditure is one rationale behind the new, lower-rate income tax regime that removes most exemptions, and behind the move to a simpler corporate tax structure. Transparency about revenue foregone helps Parliament weigh whether particular concessions are worth their cost.
Related terms
- Tax BuoyancyTax buoyancy measures how responsive tax revenue is to changes in economic growth, showing whether collections rise faster or slower than GDP.
- Faceless AssessmentFaceless assessment is a system in which income-tax scrutiny and assessment are conducted electronically without physical interface between the taxpayer and a specific officer.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.