Tax benefits, considering their consequences for the economy and the budget system, are the most controversial element of any tax. Therefore, policy decisions on the introduction of new, continued use or abolition of existing tax benefits should be based on reliable information about their expected or actual effectiveness and efficiency. The purpose of this article is to define methodological approaches to assessing the use of tax benefits as a prerequisite for improving the soundness of tax policy and effectiveness of public administration of the financial system. The article, based on the analysis of Western literature sources, considers methodological approaches to assessing the use of tax benefits in the context of their effectiveness (achievement of goals and fulfillment of the conditions for granting, impact on the behavior of economic agents and results of their activity), efficiency (comparison of benefits and costs) and relative efficiency (comparison of the effectiveness of tax benefits and other policy instruments), as well as evaluation methods and tools. The practical application of these methodological approaches is considered on the example of investment and innovation incentives for corporate income tax and VAT incentives (reduced tax rate on labor-intensive services). The author notes that the assessment of consequences of the introduction of tax benefits can be provided using methods of comparative analysis of the behavior of the beneficiary company before and after the introduction of the tax incentive; survey of the company's managers on how the tax benefit affected certain aspects of their behavior (investment decisions, implementation of R&D, employment and remuneration policies, etc.); and econometric analysis. According to the results of the study, it was is concluded that ultimately the choice of an the approach to assessing the application of tax benefits, as well as methods and tools of analysis is determined by the available information base in open sources and access to non-public information. In addition, the reliability of the results of evaluation of the application of tax benefits substantially depends on compliance with the requirements and procedures during their implementation, in particular, the definition of objectives and, if necessary, the conditions of their granting, as well as the quality and the completeness of accounting of the provided benefits. The latter, as well as the availability of the necessary information and its disclosure is one of the main problems in assessing the application of tax benefits in countries with transition economy.