Trade implications of tax expenditures

Abstract

International trade and taxation are inextricably linked and have been high-

priority issues within the Group of Twenty (G20) agenda. However, the interconnections be-tween international trade and tax expenditures—that is,benefits granted through preferential tax treatment—have been overlooked. This brief calls for a better design of tax

expenditures, particularly those that have implications for international trade such as a) tax incentives for investment, b) tax incentives implemented within the digital economy, c) tax benefits for energy-intensive and trade-exposed sectors, and d) export-related tax incentives, which are among the main determinants of trade misinvoicing and illicit financial flows