GOVNET has been working on the governance aspects of domestic resource mobilisation, specifically taxation, since 2006. Beyond being the lifeblood for delivering public services, taxation has broader governance implications, which may be of particular importance in developing countries. In particular, bargaining with citizens over tax has the potential to increase the effectiveness and accountability of governments. Since 2007, GOVNET has explored the links between tax and accountability, aid and governance. GOVNET seeks to facilitate exchange and dialogue among donors and experts, adds the governance perspective to existing technical expertise and provides guidance for an increased engagement of donors in the field of taxation.
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Supporting domestic resource mobilisation
Experience to date suggests that donors can help deliver governance benefits from taxation. Nevertheless donors still neglect the revenue side of public financial management: over 95% of the aid spent in this area is allocated to projects and programmes concentrating on the expenditure side of the public financial management equation. Moreover, many projects tend to take a solely technical approach and therefore do not capitalise on the governance potential inherent to taxation.
The GOVNET publication Governance, Taxation and Accountability: Issues and Practices (2008), has had a significant impact on the international focus on domestic resource mobilisation, particularly in aid-dependent countries.
Co-ordinating international tax and development experts
During the 2010 Global Forum on Development (27 January), tax and development experts set up the OECD Informal Task Force on Tax and Development. This task force involves business, NGOs, civil society, developing countries and OECD countries. It works to:
- optimise the internationally available resources to help develop tax systems in developing countries
- help developing countries build their capacity to ensure they can tax multinational enterprises fairly through effective transfer pricing regimes
- help developing countries agree and implement tax information exchange agreements
- examine the case for and against reporting relevant financial data by multinational enterprises on a country-by-country basis
This work is directly linked to the call by the G20 to ensure developing countries benefit from the new era of tax transparency.
On OECD-level, joint work between the DAC and Committee on Fiscal Affairs, Tax and Development supports the work of the Informal Task Force on Tax and Development.
GOVNET is also working with the the OECD’s Center for Tax Policy to support the development of the African Taxation Administration Forum – an African initiative designed to promote improvements in tax policy and administration in the continent.
Publications and further reading