The presentation reflects the significant role of the public sector in financing for the new Sustainable Development Goals (SDGs). There is an introduction to the 17 goals and the proposed ways to generate the trillions required for this procedure, one of which is the engagement of the public sector. Through the idea of domestic resource mobilization (DRM) for the generation of resources, countries should focus on achieving high tax-GDP ratios and the creation of fiscal space. This will lead to government revenue and opportunities for more effective public spending for meeting the SDG goals.

2. The New Development Goals:
Sustainable Development Goals 2016-2030
No Poverty No Hunger
Good Health and
Well-Being
Quality Education
Clean Water and
Sanitation
Gender Equality
Affordable and
Clean Energy
Decent Work and
Economic Growth
Industry,
Innovation and
Infrastructure
Reduced
Inequalities
Sustainable cities
and Communities
Climate Action
Responsible
Consumption and
Production
Life on LandLife Below Water
Peace, Justice and
strong Institutions
Partnerships for
the Goals
Source: Sustainabledevelopment.un.org (2015).

3. Financing for these goals?
1. ODA (Official
Development
Assistance) = external
public financing from
donors to low/middle
income countries
2. Private sector 3. Public Sector

4. But countries need to go “from Billions to
Trillions” to finance the SDGs…
HOW will the developed and developing world do this?
WHERE will poor countries find trillions?
The world needs a new structure to unlock its resources
Domestic Resource Mobilization

5. Domestic Resource Mobilization = countries generating and
spending their own resources for sustainable development
Reduces vulnerability and dependency on external aid
Cost effective → estimated $20 return for every $1 invested in DRM
programs
DRM has more potential than ODA → a more than 5 times increase in
domestic resources in the 54 Sub-Saharan African countries VS a 3
time increase in ODA from 2000 to 2011.

6. Domestic
Resource
Mobilization
Public Sector
So…

7. Higher Tax-GDP ratios for higher public spending
• An overall increase in tax-GDP
ratios since the 90s for most
countries with ½ of all developing
countries having rations above
15% → outstanding room for
improvement in the other ½
• According to the UN, developing
countries will have to increase
their tax revenue to 20% of their
DGP
Source: Ploumen, L., 2015 and Development Committee, 2015

8. Reaching this ratio requires resource
mobilization in terms of:
1. Better tax administration strategies & exchange of information (EOI)
2. Higher levels of VAT
3. Effective fiscal decentralization
4. Reduce/revise energy subsidies
5. Eliminate illicit financial flows
6. Attract private investments
7. Reduced dependency and enhance faith in the government

9. 1. Better tax administration strategies &
exchange of information (EOI)
• Adoption of modern technology for faster and simpler tax payment
and collection
• Complete registration of all taxpayers in the system
• Efficient filing and auditing in businesses for faster tax payments
• Accurate determination of tax liabilities and strict penalties
Information access to augment the enforcement capacity of national
tax administrations, i.e. taxing residents’ holdings of assets abroad

10. Application?
El Salvador increased its tax-GDP ratio from 11% to 14% through tax
administration changes, e.g. increased tax collections
Nigeria is estimated to earn approximately $1 billion per year from
more efficient auditing and business registration.
The IMF with other organizations have created the Tax Administration
Diagnostic Assessment Tool (TADAT) to evaluate and strengthen
administration practices enabled Zambia to acknowledge its
reform needs and priorities.
Source: Usaid.gov, 2015

11. 2.Higher levels of VAT
Significant scope for improvement since most of the developing world
is still new to the idea of VAT…
The spread of VAT
Source: Fiscal Affairs Departments, 2011

12. VAT conditions
VAT is one of the least harmful methods to raise revenue in terms of
the influence on citizens’ economic activity if compared to other ways,
e.g. income tax, and considers equity issues.
Criteria
• Simple and stable procedure over time
• Strict penalties for effective enforcement
• Good administrative review system

13. • Bangladeshi VAT has reached 15% after only 18 years in force → one
of its major contributions to revenue with potentials to have higher
rates.
• Nigeria has a target of doubling their 5% VAT since it is relatively very
low for the billions they want to achieve for the SDGs.
Source: Smith et at., 2011
Applications?

14. 3. Effective fiscal decentralization
The mobilization of resources/responsibilities from the federal to the
local governments of a country to encourage incentives for local
creation of resources.
Study shows the efficiency benefits:
• Local governments have more information about their people’s needs
→efficient resource allocation through spending
• People will choose the best local government → competition for
better utilization of resources
Source: Ebel and Yilmaz, 2002

15. Application?
Nigeria acknowledges the importance of decentralization since more
than half its total resources are utilized by the federal government with
the rest of the local governments sharing the rest.
However political conflict should be removed → recent history has
shown decentralization failing to achieve its benefits due to loss of
stability when the governments have conflicts.
Source: Syamsul, 2003

16. 4.Reduce/revise energy subsidies
• Often these subsidies benefit more the middle class rather than the
poor people.
• Globally, it is estimated that subsidies cost US$ 1.9 trillion with energy
subsidies alone at US$ 300 billion.
Application?
Indonesia reduced its fuel and energy subsidies from 2.4% to 0.8% of
its GDP and used these resources to improve infrastructure.

17. 5. Eliminate illicit financial flows
This includes tax evasion, criminal activity and public corruption.
The tax gab must be calculated and analyzed to find which sectors and
what types of these actions are occurring.
Application?
The USAID program managed to reduce the taxpayers with “gifts” from
39.3% in 2005 to a shocking 8.4% in 2008 in Georgia, after a series of
zero-tolerance policies in corruption and tax reforms increased
Georgia’s tax revenue by 12% of its GDP
Source: Runde and Savoy, 2014

18. 6. Attract private investments
Efficient tax revenue strategies reflects minimal costs on the private
sector.
Also, less complex structures such as stable tax legislations reduces
businesses costs of annually revising their costs.
Application?
Somalia has announced “Best practice for tax administration is also
best practice for businesses” → more stability means more predictable
environments and costs for firms.
Source: The Economist, 2015

19. 7.Reduced dependency and faith in the
government
Countries with strong tax systems are less dependent on external aid,
they are in control of their own decisions and can provide for their own
people.
Application?
High-Level Meeting, 2014: Mexico City announced that lack of
transparency → reduce citizens’ willingness to follow tax rules and it
suppresses the confidence in the system.
Source: Runde and Savoy, 2014

20. Other targets besides high tax-GDP ratio
sustainable development by the public
sector?

21. Creating fiscal space through efficiency
Converting all available resources the country has generated into long-term
development.
Efficiency involves removing low priority or faulty-designed spending for
more available resources.
More systematic controls and measures of the effectiveness of the current
strategies and policies.
Application?
Costa Rica has loses of 0.5% of its GDP on dropout rate costs in education
→ suggestions to turn this cost into resources by reforming regulations on
hiring, firing and student per classroom.

22. Challenges?

23. Capacity = there is only a finite level of goods and services a country
can produce over a period of time.
Capture = only the narrow interests of the people in power capture
the resources of the country without citizen engagement.
Corruption = dishonest dealings by those in power, exploiting the
country’s resources for their own benefits.
Tax avoidance activities = the legal minimization of tax liability
through several techniques.

24. Sub-national governments rely heavily on transfers from the central
government to begin with → lack of flexibility for decisions.
Poorly motivated staff = improved tools are useless when the people
who use them are inefficient.
Uniqueness = each country will respond differently to each measure
so the ideal combination has to be identified.

25. Sources
Development Committee. (2015). FROM BILLIONS TO TRILLIONS: TRANSFORMING DEVELOPMENT FINANCE POST-2015 FINANCING FOR DEVELOPMENT:
MULTILATERAL DEVELOPMENT FINANCE. [pdf]. Available at: http://siteresources.worldbank.org/DEVCOMMINT/Documentation/23659446/DC2015-
0002%28E%29FinancingforDevelopment.pdf. Last accessed 9th Dec 2015.
Ebel, R. D., Yilmaz, S. (2002). Concepts of Fiscal Decentralization and Worldwide Overview. [pdf]. Available at: http://www-
wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2004/11/02/000090341_20041102092746/Rendered/PDF/303460Concept0of0Fiscal0Ebel1Yilmaz.
pdf. Last accessed 9th Dec 2015.
Financing for Development Course Notes
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countries-need-to-toughen-up-taxes-sdgs. Last accessed 9th Dec 2015.Fiscal Affairs Department. (2011). Revenue Mobilization in Developing Countries. [pdf] Available
at: https://www.imf.org/external/np/pp/eng/2011/030811.pdf. Last accessed 9th Dec 2015.
Runde, D, Savoy, C. M. (2014). Paying for Development: Domestic Resource Mobilization. Available: http://csis.org/publication/paying-development-domestic-resource-
mobilization. Last accessed 9th Dec 2015.
Smith, A. M., Islam A., Moniruzzaman, M. (2011). Concumption Taxes in Developing Countries- The Case of the Bangladesh VAT. [pdf] Available at:
http://www.victoria.ac.nz/sacl/centres-and-institutes/cagtr/working-papers/WP82.pdf. Last accessed 9th Dec 2015.
Syamsul, T. M. (2003). Fiscal Decentralization and Economic Development: A Cross-Country Empirical Study. [pdf] Available at: http://www.gsid.nagoya-
u.ac.jp/bpub/research/public/forum/24/13.pdf. Last accessed 9th Dec 2015.
Sustainabledevelopment.un.org. (2015). Sustainable Development Goals. Available: https://sustainabledevelopment.un.org/?menu=1300. Last accessed 9th Dec 2015.
Usaid.gov. (2015). DOMESTIC RESOURCE MOBILIZATION. Available: https://www.usaid.gov/what-we-do/economic-growth-and-trade/domestic-resource-mobilization.
Last accessed 9th Dec 2015. The Economist. (2015). Tax them and they will grow. Available: http://www.economist.com/news/finance-and-economics/21657433-
poor-countries-need-get-better-raising-tax-and-multinational-firms-need. Last accessed 9th Dec 2015.