Public Availability of Information
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Making fiscal information available to the public is a defining characteristic of fiscal transparency.80 Principles and practices in this regard concern the provision of comprehensive information on fiscal activity and government objectives and the presentation of such information in a way that facilitates policy analysis and promotes accountability.
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A cornerstone for ensuring the timely and uniform availability of fiscal information is that it can be readily accessed free of charge on the Internet.
3.1 The public should be provided with comprehensive information on past, current, and projected fiscal activity and on major fiscal risks.
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The Code includes good practices relating to (1) the coverage of budget documentation; (2) past, present, and future performance information; (3) fiscal risks, quasi-fiscal activities, tax expenditures, and contingent liabilities; (4) identification of revenue sources; (5) debt and financial assets; (6) subnational government and public corporations; and (7) long-term reports.
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Basic requirements under this principle are to ensure that
* the budget documentation covers all budgetary and extrabudgetary activities of the central government, the fiscal position of subnational governments, and the finances of public corporations; and
* information published on the central government includes details of its debt, significant financial and natural resource assets, nondebt liabilities, and contingent liabilities.
3.1.1 The budget documentation, including the final accounts, and other published fiscal reports should cover all budgetary and extrabudgetary activities of the central government.
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It is a requirement of fiscal transparency that information about all fiscal activity undertaken by or for the central government be included within the budget documentation. Reports should encompass detailed statements for all budgetary and extrabudgetary activities, such as autonomous central government agencies, and the consolidated fiscal position of the central government.81 The level of detail used to describe any specific element of expenditure or revenue may vary according to the size and importance of the activity, but not the institutional arrangement under which it is managed.82
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Table 1 provides a typology for the set of fiscal reports that comprise the standard budget documentation and the other principal supporting material provided during the course of the fiscal year. Standard budget documentation is grouped into four main categories. The "annual budget presentation," which is centered on the detailed appropriations accounts for authorization by the legislature, provides the main vehicle for the government to set out the principal objectives and parameters of its fiscal and macroeconomic policies. These are fleshed out in the "budget supporting documents," which explain the background to the government's proposals, set out the major fiscal risks, and provide details of all the extrabudgetary activities that have fiscal implications. To assess progress through the year and identify the need for any midcourse corrections, "within-year budget reports" can be used to compare outturns with the original projections. As soon as possible after the end of the fiscal year, "final accounts" should be audited and submitted to the legislature with the auditors' report. In addition, governments are increasingly issuing other financial reports to provide additional information on the financial position and performance of government consistent with the budget presentation,83 together with reports on a GFSM 2001 basis.
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Classification issues are discussed in more detail under practice 3.2.2. The relationship between financial, fiscal, and GFSM 2001 reporting is covered in Box 14.
3.1.2 Information comparable to that in the annual budget should be provided for the outturns of at least the two preceding fiscal years, together with forecasts and sensitivity analysis for the main budget aggregates for at least two years following the budget.
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For a more complete picture of the current fiscal position, information on past fiscal performance should be presented in the annual budget presentation on the same classifications as the budget and reinforced elsewhere in the budget documentation.84
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Original and revised budget estimates for at least the two preceding years should be included with the annual budget, together with the actual outturn (or expected outturn, if the final outturn for the current year is not available). Forecasts for at least the two years beyond the budget year should also be included, using realistic assumptions about macroeconomic pros-Page 64pects and consistent with stated policy objectives over the medium term.85 Providing aggregate fiscal projections for 5-10 years ahead in the budget documentation is best practice.86 The information should include both main fiscal aggregates and more detailed information on subaggregates (item of expenditure, function, and, where available, program or output).
Table 1. Budget Documentation and Other Fiscal Reports
[SEE TABLE 1 IN THE ATTACHED PDF]
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The status of the outturn information should be disclosed (for example, provisional and unaudited, final and audited). This allows an assessment to be made of recent performance compared to budget and may draw attention to significant forecasting, policy, or macroeconomic risks and, more generally, to the realism of the budget. Any changes to the classification or presentation of items from year to year should be disclosed, together with the reasons for the changes (see practice 4.1.3).
3.1.3 Statements describing the nature and fiscal significance of central government tax expenditures, contingent liabilities, and quasi-fiscal activities should be part of the budget documentation, together with an assessment of all other major fiscal risks.
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Tax expenditures are revenues forgone as a result of selective provisions in the tax code. They may include exemptions from the tax base, allowances deducted from gross income, tax credits deducted from tax liability, tax rate reductions, and tax deferrals (such as accelerated depreciation). Tax expenditures are often used in place of explicit expenditure programs. They can also be targeted to specific types of spending or to specific categories of individuals, families, or firms according to their wealth, income, or spending patterns or other characteristics. In many tax systems, tax expenditures can be significant relative to the total tax revenue. An important difference compared with expenditure programs is that tax expenditures do not require formal annual approval by the legislature (though some may be subject to sunset clauses); they remain in effect as long as the tax law is unchanged, and are therefore not subject to the same regular degree of scrutiny as actual expenditure. A proliferation of tax expenditures can therefore result in a serious loss of transparency.
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A statement of the main central government tax expenditures should be required as part of the budget or related fiscal documentation, indicating the public policy purpose of each provision, its duration, and the intended beneficiaries. Except in particularly complex cases, major tax expenditures should be quantified.87 Ideally, the estimated results of previous tax expenditures compared with their policy purposes should also be presented so that their effectiveness can be assessed relative to expenditure provisions.
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Providing the estimated costs of all tax expenditures in the budget documentation is included in the OECD best practice guidelines, which alsoPage 65 call to the extent possible for the discussion of tax expenditures and general expenditure to be combined. Although there can be serious difficulties in cost estimation, reporting the approximate cost of tax expenditures and describing the basis of the estimates can significantly enhance transparency.88 A number of OECD countries regularly publish estimates of tax expenditures. Box 16 provides information on selected country practices.
Box 16. Tax Expenditure Reporting
Germany and the United States were the first countries to report tax expenditure information, in the late 1960s, and the practice has now extended to most OECD countries, many emerging markets, such as Brazil, and developing countries.
In Germany, tax expenditures are reported as part of a "subsidy report" to the federal...
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