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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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Six case studies

This chapter presents the experience of six countries, all recipients of tax assistance provided through the modalities which the previous chapter addressed. The countries are: Ghana, Guatemala, Liberia, Mali, Mozambique, and Tanzania. The case studies offer ground-level views of the aid modalities used to strengthen the tax system and the interface between taxation and governance. Each case study considers tax reform highlights in the country as of early 2011 and concludes with a set of key findings. The main concern has been to understand how the modalities and linkages actually work, the nature of problems and issues encountered, and how to improve the modalities from the insights gained. For each country, the study team reviewed documents and conducted face-to-face and telephone interviews or exchanged emails with officials who had direct experience of dealing with tax programmes on both donor and government sides. In essence, the case studies are designed to inform analysis, not as comprehensive reviews in their own right.

English

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