Click here for search results

Tax for Development: Moving Beyond the 'Love-Hate' Relationship with Taxes

  • Revenue authorities worldwide are trying to make taxation simpler, more transparent and more efficient.
  • Tax officials say progress has been made, but that much remains to be done.
  • While extranational entities can advise, it is likely that only countries themselves can own and lead meaningful tax reforms.

WASHINGTON, DC, April 15, 2011 - Championed by governments but disliked by many constituencies, taxes make for complex and heated debates. But if there's agreement on anything at all, it is that tax systems across the world really need to be improved and serve development purposes.

"Governments need revenue so that they can make investments in priority programs for their countries," says Linda Van Gelder, World Bank Director for the Public Sector Governance Group, which oversees the work on public finance management. "For tax systems to have a development impact, taxes have to be efficient, easy to understand by taxpayers, and also transparent."

tax image
(Photo by Flickr user .mat)

The way public resources are used – or misused - is at the core of much of the public's dislike of taxation, along with tax evasion and a labyrinth of red tape taxpayers have to navigate to pay their taxes. So across the globe, tax entities are undergoing a series of reforms to make the system easier to understand, more transparent, and more efficient.

In order to take stock of where we are and how countries are moving forward, top tax men and women got together in a Tax for Development seminar in the lead-up to the World Bank-IMF Spring Meetings in April. The experiences of Colombia and South Africa were discussed, as well as Norway's Tax for Development initiative, and the role that the multilaterals can play.

For tax systems to have a development impact, taxes have to be efficient, easy to understand by taxpayers, and also transparent.

-- Linda Van Gelder, World Bank Director for Public Sector Governance

For Ingrid Fiskaa, Norway's State Secretary for International Development, who launched a Tax for Development program last month, civil society has to be involved in the reforms. "We need to include civil society and the media for accountability purposes, but also to discuss where the (public) resources need to be spent," she said at the seminar.

According to Juan Ricardo Ortega Lopez, the Commissioner of the DIAN, Colombia's Customs and Tax Administration, progress has been made but much remains to be done. (View Ortega Lopez's presentation to the panel.) For Oupa Magashula, Head of the South African Revenue Service, "It's important that in our countries key political elites pay their taxes and are seen as paying them" to build credibility in the system. "Countries also need credible law enforcement." (View Magushala's presentation to the panel.)

For Richard Bird, Professor Emeritus from the University of Toronto, ownership and leadership matter when countries go through a tax reform. That's why "countries themselves, and not outsiders, have to find the necessary consensus and social contract" for the transformation. He noted that the role of multilateral institutions and "outsider" advisors should focus on closing the gaps on knowledge, finding the best practices, and providing training and capacity building.