Selected Issues Papers

With around 180 active tax expenditures and an estimated revenue foregone equivalent to about 6 percent of GDP in 2021, the third highest in Latin America, Uruguay offers a diverse array of tax breaks. This paper investigates the composition and trends of tax expenditures in Uruguay, benchmarking the results from a cross-country perspective. Since many of these incentives have endured for decades, previous literature suggest a detailed reevaluation of their costs and benefits would be beneficial. Macroeconomic simulations suggest that a relatively modest tax reform reducing tax expenditures could create additional space for productive public expenditure and enhance long-term growth.