Washington, DC (BBN) – The World Bank (WB) and International Monetary Fund (IMF) are going to launch a new initiative to help developing countries strengthen their tax systems.
Quoting an analysis, the IMF said in a statement that many lower-income countries have the potential to increase their tax ratios by at least 2.0–4.0 per cent of GDP (gross domestic product), without compromising fairness or growth.
“Raising additional revenues will allow developing countries to fill financing gaps and to promote development,” the IMF noted.
The announcement came ahead of the “Financing for Development” conference, to be held in Addis, Ethiopia on July 13-16. Heads of state, civil society organizations, multilateral institutions and private sector representatives will participate in the conference to discuss on how to scale up finances to meet the Sustainable Development Goals (SDGs).
“A strong revenue base is imperative if developing countries are to be able to finance the spending they need on public services, social support and infrastructure,” IMF Managing Director Christine Lagarde said. “But experience shows that with well-targeted external technical support and sufficient political will, it can be done.”
“We very much want to help developing countries raise more revenues through taxes because this can lead to more children receiving a good education and more families having access to quality health care,” said World Bank Group President Jim Yong Kim. “If everyone pays their fair share – developing countries can close their financing gaps and promote inclusive growth.”
The initiative would have two pillars: deepening the dialogue with developing countries on international tax issues, aiming to help increase their weight and voice in the international debate on tax rules and cooperation; and developing improved diagnostic tools to help member countries evaluate and strengthen their tax policies.
The initiative would be based on the Bank’s current tax programmes in over 48 developing countries and the Fund’s technical assistance projects in over 120 countries.
The WB and IMF also planned to strengthen their diagnostic tools, developing new methodologies where needed, to enable member countries to identify priority tax reforms and design the requisite support for their implementation. This effort would complement the launch of the Tax Administration Diagnostic Assessment Tool (TADAT) in November.
The WB and the IMF will also continue to work in close collaboration with other development partners, including the OECD, in expanding technical advisory work in the tax area.
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