Trevor Manuel, then South Africa’s Finance Minister, famously said that “the correct spelling of ‘aid’ is T-A-X.” Tax revenue provides developing countries with essential and sustainable funding to invest in development, relieve poverty and deliver public services. It offers an antidote to aid dependence. Closely linked is the need to limit the large amounts of money illicitly flowing out of developing countries. An estimated $1 trillion, almost one-third of Africa’s GDP, leaves developing countries annually, though the true size of hidden transfers is almost impossible to ascertain. These flows involve both cash from criminal activities such as human trafficking, drugs, smuggling, and corruption, and legitimately-earned money seeking to evade taxes. Illicit financial flows deprive governments of tax revenues to fund health care, education, and other vital public services – either leaving the neediest without help, or forcing law-abiding taxpayers to cover the shortfall. Worse, once legitimised, illicit money is often used to fund further illegal activities, including civil wars and terrorism.
Strengthening domestic resource mobilisation is not just a question of raising revenue: it is also about designing a tax system that promotes inclusiveness, encourages good governance, matches society’s views on appropriate income and wealth inequalities and promotes social justice. The key issue is how developing countries can best be supported to take advantage of the more transparent international environment to strengthen their tax systems and to stop the outflow of illicit money.
- Countries commit to automatic exchange of information in tax matters
- Tax and Development
- Illicit Flows from Developing Countries: Measuring OECD Responses
- Tax for development: why better public services matter
- What drives tax morale?
by Christian Daude, Hamlet Gutiérrez and Angel Melguizo, Working Paper No. 315, OECD Development Centre
- Fragile States 2014: Domestic Revenue Mobilisation in Fragile States
- Tax and Development: Aid Modalities for Strengthening Tax Systems
- Building Tax Culture, Compliance and Citizenship: A Global Source Book on Taxpayer Education
- OECD work on tax
- OECD work on development
- Winnie Byanyima, Executive Director, Oxfam International
- Mauricio Cárdenas, Minister of Finance and Public Credit, Colombia
- John Christensen, Director, Tax Justice Network
- Paul Collier, Director, Centre for the Study of African Economies; Professor of Economics and Public Policy, Blavatnik School of Government, University of Oxford, United Kingdom
- Alan McLean, Deputy Chair, Taxation and Fiscal Policy Committee, BIAC