What is tax expenditure?

Did you know that tax advantages have consequences? Specifically, these effects consist of expenses that the Public Administration must assume since it is it who offers the tax advantages. Hence the economic term tax expenses, the absence of income or negative income received by the Public Administration.

What are tax expenses for?

Tax expenditures is the way in which the Public Administration tries to redistribute resources between taxpayers and the different sectors of the economía. For this, the Administration applies reductions, exemptions or deductions with which it will stop receiving certain amounts of money, thus causing what are known as tax expenses, the costs of applying a specific type of taxation, more flexible.

What types of tax expenses are there?

Any tax advantage of the taxpayer entails a series of expenses for the administration (known as public spending), from the application of impuestos reduced until the delay of payment of certain fees, going through the Deductions that we commented previously. Among the most common tax expenses that the Public Administration must assume we find:


  • The tax exemptions: these are those cases in which even though the taxable action exists there is no obligation to pay it.
  • The reductions: consists of applying reductions in the tax base or the amount on which the percentage of the tax is set
  • Deductions: occurs when the amount to be entered into the Public administration. This amount to be paid is also known as the full installment and is obtained after applying the tax rate on the taxable base. A clear example of this case are the deductions that the Personal Income Tax has when acquiring real estate for regular use.
  • Reduced tax rates: in this case, the tax percentage corresponding to the lowest interval of the tax is applied.
  • The delay in the payment of taxes: sometimes, the taxpayer may have difficulties to face the payment of the fees at a certain time due to some type of unforeseen event. In these cases, you can request an extension to pay the Administration later or divide the payment in several times and pay it little by little.

Leave a Comment