Assessing efficiency and scale of managing tax expenditures to support investments and priority sectors in G20 countries’ economies during external shocks

Introduction: with the growing role of the state in the economy, fiscal instruments are expanding, and more and more countries are utilizing tax expenditures management. Unlike direct expenses, tax expenses do not consume resources, but they do make the tax system more complicated. Comparisons of tax expenditure data across countries are difficult due to the limited comparability of tax systems. Objectives: testing the hypothesis about the stimulating effect of tax incentives related to the group of tax expenditures. The objects of the empirical study are countries identified according to the criterion of the tax expenditures depth in the volume of GDP and tax revenues; the period for the analysis is determined by the availability of data. In the present study, an external shock is defined as the crisis caused by restrictions during the COVID-19 pandemic. Methods: multivariate average method. Results: the methodological approach showed the relationship between tax expenditure management policies and fiscal policy, structural features of the economy, and strategic government priorities. The authors analyzed countries’ approaches to the use of tax expenditure mechanisms, identified a group of countries for analysis, and assessed the scale and efficiency of managing tax expenditures to support investments and priority sectors of G20 countries’ economies during the period of external shocks. Tax expenditures were analyzed in relation to the topic of environmental sustainability. Conclusions: using the multidimensional average method, tax expenditures application scale was determined; countries were rated by the integral indicator value. The position in the rating is determined by the breadth and depth of tax breaks. The efficiency of using tax breaks was assessed through the coefficient of increase in investment and the coefficient of increase in industrial production. The assessment results show whether economic indicators outpace the tax expenditures growth rate.