International Practice of Tax Expense Identification

Abstract

While it is generally accepted in foreign jurisdictions to treat tax expenditures as foregone budget revenues, due to the application of certain provisions of the tax code, significant cross-country differences emerge in determining which of these can be recognized as deviations and which as the norm. There is no consensus on which approaches can be recognized as best practice. The topic of methods for determining tax expenditures remains relevant. The purpose of the study is to identify the principles and criteria of tax expense accounting. Theoretical basis of the study consists of legal acts and approaches to definition of normative tax structure. The research is conducted with the use of empirical methods, including synthesis and comparative analysis of cases. As a result of the study a classification of tax preferences was developed and two methods of tax expense identification, normative and conditional, were proposed. A certain correlation between the concepts of tax expenses and methods of their identification was revealed. The international practice of attributing preferences to tax expenses was reviewed, which helps to understand the differences in the identification methods suggested by the author. The conclusion on advantages and limitations of the use of the two methods of tax expense accounting is made.