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Tax and Development

Aid Modalities for Strengthening Tax Systems

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Tax revenues provide governments with funds to invest in development, relieve poverty, deliver public services and build the physical and social infrastructure for long-term growth. Moreover, there are mutually beneficial links between taxation and good governance. Tax and Development: Aid Modalities for Strengthening Tax Systems highlights how taxation can have a positive effect on the quality of governance and a government’s relationship with citizens and, in turn, how good governance can have a positive effect on compliance and revenue mobilisation.

How can international assistance providers, including OECD members, international and regional organisations, support the development of tax systems in developing countries? Tax and Development: Aid Modalities for Strengthening Tax Systems provides practical guidance for policy makers and practitioners based on the results of an extensive literature review, a survey of aid agency officials and six country case studies (Ghana, Guatemala, Liberia, Mali, Mozambique, and Tanzania). It examines the aid instruments that donors use to assist developing countries including general and sector budget support, basket financing, stand-alone bilateral aid and funding South-South organisations. The strengths and weaknesses of each modality for supporting tax systems are identified, and some 50 recommendations to support the development of effective, efficient and growth-oriented tax systems in developing countries are provided.

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Introduction

This introductory chapter first sets the scene for the discussion of aid modalities that donors may use to support tax systems. It states the context, motives, and objectives behind this book and, importantly, considers some definitions of “aid modality”. It seeks to explain why a study of development assistance for tax systems is topical – prompted by a surge of interest in domestic revenue raising that has brought taxation out of the shadows of development assistance and made it a mainstream priority target. The chapter then goes on to describe the research methodology underpinning the study, which draws on the literature, a survey, and the experience of selected countries. It then outlines the study’s scope, structure, and objectives.

English

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