Policymakers and tax administrators in developing countries face enormous challenges in their efforts to collect tax. These challenges include large informal sectors, a disincentivised populace who don’t always see the benefits of paying tax, and natural resource dependency. The economic structures are different in low- and middle-income countries and effectiveness of strategies that worked well in high-income countries might not always translate.
Yet taxation is so important for development. The inability to tax is both a symptom and cause of underdevelopment. Taxation provides the public goods and services needed by countries to lift their populations out of poverty. It is a tool for state building and a key indicator of state capacity. A well-functioning tax system is a powerful instrument for inclusive growth.
Launching Tax for Growth
IGC’s new thematic initiative, Tax for Growth will collaborate with tax administrators and policymakers to utilise the power of tax data to better capture tax revenue. We will work to find evidence on what works and what needs to change. Facilitating cross-country learnings through seminars and events, we will provide fora for exchanging challenges and solutions for domestic revenue mobilisation. As we grow our knowledge base, we will draw accessible and actionable insights for our partners. This explainer video gives an overview of how research and an initiative like Tax for Growth can assist governments in improving tax revenue collection.
On 26 April, we are hosting an online event with FCDO Chief Economist, Professor Adnan Khan, giving a keynote address followed by a panel discussion on why research and evidence generation on taxation matter for inclusive growth.
Building on tax research
A big part of Tax for Growth is that it is research-driven. In this video, Lead Academic Advisor for Tax for Growth, Anders Jensen, takes us through five lessons on what we have learnt from frontier taxation research in developing countries. Anders together with Perrier Bachas, further delves into one of Tax for Growth’s core themes, the use of data and research methods in generating evidence for policymaking in this policy paper. This paper is emblematic of Tax for Growth’s mission to collate the hard-won lessons from the generation of research for policymaker use.
In the lead up to the launch, we explore, ‘why do developing countries tax so little?’ In this video, I give some of the ‘big picture’ reasons why developing countries tax so little. In Bangladesh, which has one of the largest mismatches in the world between its growth story and its tax to GDP ratio, Ashfaqul Chowdhury and Aminul Aman explore corruption as a reason and tool for low tax collection in Bangladesh. In another blog, Shahrukh Wani explores the different factors that drive Pakistan’s low tax collection. In Zambia, Boyang Gong and I probe whether debt dependency is hindering revenue mobilisation in the copper rich country.
Identifying the problems is only the first step and so we also explore possible solutions. Property taxes are one such solution. Oliver Harman maps the economic evidence on improving municipal finances through land and property tax. In a later blog, we will explore how technology can be used as a tool to promote efficiency in national revenue authorities in the case of Tanzania.
Learn more about our new Tax for Growth initiative here and register for the webinar on why do tax research and evidence matter for economic growth here. This article is part of the 'Taxing effectively' blog series - read other blog articles here.