OECD Forum 2014: Tax for Development
Monday 5 May
13:30 - 15:00
Blue Amphitheatre
Parallel session

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.

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