Getting to 2030: The Role of Tax Revenue Mobilization
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Presentation based on IEG's Evaluation of World Bank Group support to tax policy and administration reform over 2005-2015 provided through: Development Policy Operations Technical assistance projects IFC Advisory services on business taxation
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Getting to 2030: The Role of Tax Revenue Mobilization
- 1. evaluations that matter 1 GETTING TO 2030: THE ROLE OF TAX REVENUE MOBILIZATION #Tax4Dev
- 2. evaluations that matter Tax Revenue Mobilization: Lessons from World Bank Support to Tax Reform Claude Leroy-Themeze June 8th, 2017
- 3. Why, What, How 3 WHY WHAT HOW Why: Because mobilizing domestic resource by reforming taxation is essential to finance development and compensate for declining development assistance What: Reviewed WBG support to tax policy and administration reform over 2005-2015 provided through: • Development Policy Operations • Technical assistance projects • IFC Advisory services on business taxation How: A systematic review of existing evaluative evidence
- 4. Some success in tax administration reform 4 Some success achieved in increasing revenue through tax administration reform • Guatemala created a new tax administration after conflict : Tax revenue increased from 8.8 percent of GDP in 1998 to 9.8 in 2001 and 10.3 in 2006. • Mozambique improved efficiency of tax administration then strengthened tax legislation incl. fiscal regime for mining and oil sectors. • Paraguay improved its tax office capacity to audit large taxpayers
- 5. Little was done in tax policy reforms and with limited success 5 Tax policy measures aimed at broadening the tax base primarily by controlling tax exemptions • Peru: limited progress in eliminating tax exemptions • Jamaica: limited progress in improving uniformity of the tax code
- 6. A number of missed opportunities 6 Rarely addressed major structural weaknesses of country tax systems • even in series of DPO series (Colombia, Guatemala, Indonesia…) Little analytical or diagnostic work to inform design • This work may have been done by the IMF, especially when a parallel IMF program Seldom observed synergies between development policy operations and technical assistance projects • only observed in Guatemala, São Tomé & Príncipe, Pakistan
- 7. What matters: OPERATIONS 7 • Ensure and sustain government ownership • Sustain engagement to correct structural and systemic tax issues • Better monitor and evaluate the impact of tax reforms GOING FORWARD
- 8. What matters: STRATEGY 8 • Address other pervasive governance issues (e.g. corruption and weak judiciary system) • Better exploit synergies between policy operations and technical assistance projects (timing and content) • Cultivate in-house capacity to do diagnostic and advisory work • Increase efficiency and equity while increasing tax revenue GOING FORWARD
- 9. 9 GETTING TO 2030: THE ROLE OF TAX REVENUE MOBILIZATION #Tax4Dev
Editor's Notes
- Intro: thank you all for being here and thank you to Pablo and Jim for their opening remarks Tax Revenue Mobilization: Lessons from World Bank Support to Tax Reform Domestic resource mobilization is essential to sustainable financing of development; It is all our responsibility to make it works In the past, the WB has been successful in supporting tax administration reforms but less in tax policy in addition there has been a number of missed opportunities. The review points to several ways to improve performance. Before getting to that, I would like to tell you what the review is about.
- Reviews of implementation completion reports;
- TRM in order to enable fiscal consolidation or create or maintain fiscal space through tax administration reforms Guatemala: TARP in FY98 supported the creation of a new tax administration in post conflict context: tax-to-GDP ratio increased from 8.8 % in 1996 to 9.8 % in 2001 and 10.3 % in 2006.
- Jamaica: In all three DPOs, tax policy and administration improvement was a separate development objective. Tax administration has improved, but no progress has been made in tax policy reform and in improving uniformity of the tax code. The stated intention of the government to move away from industry-specific incentives to a more general system, and to gradually reduce their amount as part of the comprehensive tax reform, has not been met. Total discretionary tax exemptions and statutory waivers, a major cause of low tax revenue collection, exceeded revenue collected in 2011
- On structural weaknesses: Colombia: tax evasion estimated at [2-4] % of GDP; Tax exemption at 1.5 % of GDP Guatemala: recent SCD identifies DRM as a major constraint to development effectiveness: major deficiencies in tax administration, small tax base and lowest tax-to-GDP ratios in the world On synergies: Guatemala: the technical assistance project may have informed the design of the tax component in subsequent policy operations Sao Tome and Principe: potential synergies were not fully exploited with only one year overlap. Pakistan: potential synergies were mooted by the lack of government ownership
- -Government ownership-commitment: how do we do that? There are several options depending on the country circumstances and its capacity to conduct reforms detailed assessment of political situation and government ownership may help: eg Pakistan Sindh, active project Government support to tax reforms may fluctuate over the project life, especially for technical assistance projects; This must be factored in design, monitoring and supervision e.g Mauritania: Complex and ambitious project, had to be restructured and extended several times but close monitoring and supervision provided opportunity to adjust and in fine achieve good results. focus on measures that can be introduced under the executive authority e.g. Guatemala: explicit recognition that the country was not ready for a comprehensive tax reform thus focus on tax administration reforms under the control of the executive. Seize opportunity such as crisis to further tax reforms (e.g. stand lone operations in Costa Rica, Dominican Republic; in response to the 2008). Points to the need to customize to country circumstances and capacity to carry out reforms. LT sustained engagement: parallel with Public expenditure management M&E strengthening: would help identifying what works and what does not; what is replicable at which conditions and what to avoid; tax-to-GDP ratio is necessary but not sufficient to attribute results to the tax reforms.
- Strategy: both at country and corporate levels Complementary governance reforms: e.g. Guatemala corruption in customs undermining customs administration reforms Synergies: Policy operations to provide leadership on policy change and technical assistance projects to build institutional capacity to implement those changes but also TA projects to help design policy change. Beyond tax revenue mobilization: efficiency and equity as part of the WBG shared prosperity agenda/twin goals.
- To conclude let me recap the main message. Significant progress has been made in reforming tax administration, but less progress made at improving the efficiency and equity of country systems. Much can be done to increase revenue in a efficient and fair way so as to enhance the lives of people including the poorest. And now I am handing-over to Pablo who is going to run the panel for, I hope, a lively discussion.