Departmental Papers

Tax expenditures in sub-Saharan Africa (SSA) are less well understood than in other regions and in some cases represent a significant element of fiscal policy. Tax expenditures involve provisions within tax systems that reduce tax liability relative to a benchmark and can include tax exemptions, deductions, credits, or preferential rates, and can impact revenue collection, equity, and governance. This paper seeks to shed light on tax expenditures in sub-Saharan Africa (SSA), draw attention to the presence of significant data gaps, transparency, and governance issues in the region, and build on studies by other institutions and agencies. It reviews how the IMF has engaged on this issue in recent years and highlights the importance of tax expenditures to macro-fiscal stability in the current liquidity-constrained environment. It also offers some practical recommendations to policymakers and external stakeholders for advancing work in this area.