2949775202

96 Ryta Dziemianowicz. Adam Wyszkowski. Renata Budlewska

•    Integrity and simplicity of the tax system (tax expenditures may make the tax system morę difficult).

•    Income redistribution through taxes (taxpayers who produce relatively high income have the greatest benefits from tax expenditures, apart from those taxpayers who do not have a taxable income and do not gain any advantages from tax expenditures).

•    EfFectiveness of public spending (tax expenditures are freąuently introduced into the tax codę as a result of pressure from particular groups of interest, so in the result policymakers do not take into account real costs of these spending compared to direct expenditures).

•    Transparency and accountability of fiscal policy.

If it is assumed that tax expenditures and direct expenditures are equivalent forms of public spending, which means that both categories should be the subject of a common budget process. Moreover, they should be put under scrutiny and evaluation so as to decide which way of spending is morę effective, and, what is particularly relevant, which can contribute to the better achievement of specific social and economic objectives. In order to make a well-founded review of tax expenditures, they should be first identified and madę public.

Under the conditions of budgetary imbalances and limited ability to raise public revenues (e.g. by increasing taxes), monitoring of all public expenditures, including indirect spending realized outside the regular budget process, is particularly relevant. The budget as an annual plan of intended revenues and expenditures of the govemment should recognize all public expenditures regardless of their form. Only on this condition is it possible to ensure the identification, monitoring and control which facilitate the analysis of the State of public finances and the assessment of fiscal policy. Among the first steps taken in this regard are reports enclosed to the Budget Act or other budgetary documentation issued by particular govemments. The need of public disclosure and tax expenditures monitoring in the budgetary process was emphasized by the International Monetary Fund (IMF) in a report from 1998: “Codę of Good Practices on Fiscal Transparency”^{1 2 3 4} [IMF 2007]. The monitoring of public expenditure, including indirect spending, such as tax expenditures, will not only make it possible to better control them, but will also help compare spending programs and select the most effective ones. In this way it will be possible to answer the ąuestion whether direct expenditures are a morę effective way of achieving the goals of social and economic policies than spending through the system of special tax exemptions, allowances and deductions. Obviously, the opposite could be the case.

1

The Codę is a specific list of rules for a transparent fiscal policy. It reflects the practices applied by many countries, and aims to encourage public debate on fiscal policj' and public accountability of

2

the govemment in this area. The revised version of the Codę was published in 2007. The IMF is not the

3

only institution which draw attention to fiscal transparency. In 2001 the OECD published the document

4

“Best Practices for Budget Transparency’⁵ [OECD 2002], which States that transparency of fiscal policy

5

is a fundamental element in the management of public finances.