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In 2006, the GOVNET began work to examine the governance aspects of domestic resource mobilisation, specifically taxation. The usually-stated goals for taxation are to raise funds for social services and public goods, and to redistribute income. Tax systems are then designed to achieve these goals in the most efficient and effective way. However, there are also broader governance dividends that potentially accrue from taxation, 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. This is especially important in countries that are aid-dependent and where governments may be more accountable to donors than to their own citizens. Investing in tax systems should also be imperative for donors in terms of long term sustainability of development efforts.
Experience to date suggests that donors can help deliver these 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 potentials inherent to taxation.
The GOVNET launched a tax and accountability task team in 2007 to further explore the links between tax aid and governance. Through the Task Team, the GOVNET facilitates 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.
Recently developed products include Governance, Taxation and Accountability: Issues and Practice, which was approved by the DAC in January 2008. This publication brings DAC donors’ attention to the issues of domestic revenue mobilisation and governance. The GOVNET’s Task Team on Taxation and Accountability has presented the lessons from this Paper in various international events bringing together governance and taxation specialists form OECD and partner countries such as:
OECD Centre for Tax Policy and Administration: Meeting of the Advisory Group for Co-operation with non-OECD Economies in Chile, 31 March- 2 April.
South African Revenue Service (SARS) INTERNATIONAL CONFERENCE ON TAXATION, STATE BUILDING AND CAPACITY DEVELOPMENT IN AFRICA, South Africa, 27 – 28 May 2008.
For more information on links between taxation and accountability and experiences in this area, please click here.
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