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Governance

Taxing ‘public bads’ and investing in ‘public goods’: Constructive tax policies can help prevent harm and help promote progress

Christopher Colford's picture
To tax, or not to tax? That is the question that preoccupied a thought-provoking panel at a recent World Bank Group conference on “Winning the Tax Wars” – along with such pragmatic policy questions as: What products and behaviors should be taxed, aiming to discourage their use? How heavily should taxes be imposed to penalize socially destructive behaviors? If far-sighted, behavior-nudging taxes are indeed adopted, where should the resulting public revenue be spent?

Before memories start to fade about a stellar springtime conference – at which several of the Bank Group’s Global Practices (including those focusing on Governance and on Health, Nutrition and Population) assembled some of the world's foremost authorities on tax policy – it’s well worthwhile to recall the rigorous reasoning that emerged from one of the year’s most synapse-snapping scholarly symposia at the Bank.

Subtitled “Protecting Developing Countries from Global Tax Base Erosion,” the conference focused mainly on the international tax-avoidance scourge of Base Erosion and Profit-Shifting (BEPS). Coming just one week after a major conference in London of global leaders – an anti-corruption effort convened by Prime Minister David Cameron of the United Kingdom – the two-day forum in the Preston Auditorium built on the fair-taxation momentum generated by the recent Panama Papers disclosures. Those leaks about international tax-evasion strategies dominated the global policy debate this spring, when they exposed the rampant financial conniving and misconduct by high-net-worth individuals and multinational corporations seeking to avoid or evade paying their fair share of taxes.
 
The Bank Group conference, however, explored tax-policy issues that ranged far beyond the headline-grabbing disclosures about the scheming of rogue law firms and accounting firms, like the now-infamous Panama-based Mossack Fonseca and other outposts of the tax-dodging financial-industrial complex. Conference-goers also heard intriguing analyses about how society can levy taxes on “public ‘bads’ ” to promote investment in “public ‘goods’ ” – as part of the broader quest for broad-scale tax fairness.
 
"Winning The Tax Wars" via revenue-raising strategies

How can we better help governments to help citizens? Seeking feedback on best practices in building tax capacity

Jim Brumby's picture

In April, the World Bank Group joined forces with the International Monetary Fund (IMF), the Organisation for Co-Operation and Development (OECD), and the United Nations (UN) to form the Platform for Collaboration on Tax with the aim of providing better coordination and support to developing countries on tax matters. Among the responsibilities of this new group are to formalize regular discussions among our organizations on standards for international tax issues, strengthen our capacity-building support, deliver joint guidance, and share information on our ongoing work.
 
To that end, we have produced a short guidance note that we expect to present to the G20 in July: “Report on Effective Capacity Building on Tax Matters in Developing Countries”. In preparing this note, our experts have compiled research, reached into their extensive experience on the ground, and incorporated comments from country-level practitioners at a number of meetings – in Tanzania, South Korea, and Washington, D.C. – that were designed to highlight the developing-country perspective. But we know there is more to learn, and before we finalize this note, we would like to hear from you, whether you are a representative from a civil society organization, a tax official, or a citizen who is interested in how your government sets and collects taxes.
 
Deadline: July 8
Where to send feedback: GlobalTaxPlatform@worldbank.org
Next steps: Keep your eye on this space. While we are setting a short deadline for this particular project, we hope to keep the conversation going, and will engage with you on many of the initiatives we have planned.

After a sudden summer cloudburst of controversy, welcome clarity on ‘neoliberalism’ and its excesses

Christopher Colford's picture

Hot off the presses, this month’s edition of the journal “Finance and Development” has been generating both heat and light – and is helping propel a welcome reconsideration of some central elements of the long-dominant but now-disputed Washington Consensus.

The always-thought-provoking journal from the International Monetary Fund, the World Bank’s Bretton Woods sibling, sparked some unusually intense debate recently by publishing a well-documented analysis that poses a succinct and straightforward question — “Neoliberalism: Oversold?

That line of inquiry is surely familiar to all those who have been following the debate — supported by meticulous data from such scholars as Thomas Piketty (“Capital in the 21st Century”), Chrystia Freeland (“Plutocrats”) and Branko Milanovic (“Global Inequality: A New Approach for the Age of Globalization”) — over the intensifying economic inequality that is now corroding many societies, in both the developed and developing worlds. Yet the very invocation of the inflammatory term “neoliberalism” seems to have triggered an intense, if brief, summer storm.

Granted, the word “neoliberalism” is somewhat ill-defined, and, as the article’s authors point out, it is “a label used more by critics than by the architects of the policies.” And, true, it’s unusual to see such a freighted question being asked by the IMF, which has often been seen as a main driver of the Washington Consensus. Yet, no doubt about it, putting “neoliberalism” in the headline makes for a mighty arresting article.

Myanmar: How IDA can help countries reduce poverty and build shared prosperity

Victoria Kwakwa's picture
© Meriem Gray/World Bank



This week, more than fifty donor governments and representatives of borrowing member countries are gathering in Nay Pyi Taw to discuss how the World Bank’s International Development Association (IDA) can continue to help the world’s poorest countries.

IDA financing helps the world’s 77 poorest countries address big development issues. With IDA’s help, hundreds of millions of people have escaped poverty. This has been done through the creation of jobs, access to clean water, schools, roads, nutrition, electricity and more. During the past five years, IDA funding helped immunize 205 million children globally, provided access to better water sources for 50 million and access to health services for 413 million people.

​6 things to know about the new World Bank Procurement Framework

Ravi Kumar's picture
Available in ArabicChinese. French and Spanish
School children in Lebanon. Photo © Dominic Chavez/World Bank

Students in public schools without textbooks at the start of the year. Health centers in villages without even the most basic medications. Oftentimes procurement is to blame.

An efficient procurement system isn't just a good idea, it's a necessary tool for all governments (local and national) to function properly and deliver public services.

Keeping pace with global trends, on July 1 the World Bank will roll out the new Procurement Framework for countries that procure goods and services under Bank-finance projects. The new framework will be implemented for all investment projects with a Project Concept Note on or after July 1, 2016.  Led by the Global Governance Practice (GGP) with support from Operations Policy and Country Services (OPCS), the framework is designed to increase flexibility, efficiency, and transparency of procurement process, to better meet the needs of client countries.

So, what will the World Bank's new Procurement Framework do?

We know very little about what makes innovation policy work: Four areas for more learning

Xavier Cirera's picture


Photo Credit: Innovation Growth Lab.

Whether in Silicon Valley or Kenya’s furniture sector, innovation is a critical driver of job creation and economic growth. It could be a mobile app to connect farmers and buyers of agricultural products. Or perhaps an efficient and affordable solar roof tile. Innovation comes in many forms, from products and services to business models.

Yet despite the growing investment in policies to support innovation, we know surprisingly little about what makes these policies effective. To advance understanding of what works in innovation policy, Nesta, in collaboration with the Kauffman Foundation and the World Bank Group, organized the recent Innovation Growth Lab (IGL) Global Conference in London. The mission of IGL is to promote evidence-based innovation and entrepreneurship policies by funding randomized controlled trials (RCTs) and testing new policy approaches.
 
The conference was successful in discussing both research and policy challenges — a welcome change from typical innovation conferences, which often focus on either academia or policy.

Four ways regional bodies can help deliver justice commitments made through the SDGs

Temitayo O. Peters's picture

The Sustainable Development Goals (SDGs) differ from the Millennium Development Goals (MDGs) in many ways. Unlike the MDGs, the SDGs universally apply to all countries and they are holistic and integrated. Moreover, their delivery is to be achieved by governments, civil society, and the private sector all working together to achieve their success.
 
The SDGs also recognize the central role of justice in achieving development, with Goal 16 specifically guaranteeing “equal access to justice for all.” Governments, in partnership with other stakeholders, must make necessary national reforms to provide access to justice to the billions who currently live outside of the protection of the law. They must commit to financing the implementation of these reforms and be held accountable for their success.
 
Regional and sub regional bodies are uniquely placed to assist governments with implementing and monitoring justice commitments made through the SDGs. Learnings from the MDGs show that countries that integrated the MDGs into existing regional strategies were far more successful in meeting the MDGs’ objectives than countries that did not have the support of an existing regional strategy.

Chasing shadows: Tax strategies to tackle the shadow economy

Rajul Awasthi's picture
Digital work by Steve Johnson

Tax administrations in developing countries are increasingly concerned about the persistent problem of loss of tax revenues to the shadow economy, and they often deploy a range of strategies to plug tax leaks and augment revenues. The erosion of the tax base prevents governments from collecting the revenue it needs to provide essential services, such as healthcare, road construction, and education. Nonetheless, it’s a sticky problem: how do you convince business owners to pay taxes?
 
Some possible answers, bolstered by evidence, include: simplify tax payment and provide incentives to formalize businesses. The World Bank’s Governance Global Practice will hold a conference between June 27-29 in St Petersburg, Russia, to bring together participants from almost 25 countries of the Europe and Central Asia region to discuss these issues under the aegis of the Tax Administrators eXchange of Global Innovative Practices, a peer-learning network of tax administrators. The event will be hosted by experts from the Public Sector Performance division of the practice.

Using country procurement systems in China and Vietnam to improve efficiency, transparency and competition

Ba Liu Nguyen's picture
Chongqing, China. Photo: Li Wenyong / World Bank

Procurement is an essential aspect of World Bank operations and international development projects worldwide. The World Bank’s policy on procurement encourages the use of country systems in procurement implementation process while ensuring the consistency with the Bank’s regulations . 

Making procurement information publicly available promotes openness and transparency and creates a level playing field for bidders. This, in turn, fosters competition and potentially decreases corruption risks. 

With this in mind, World Bank teams in East Asia and the Pacific successfully collaborated with government procurement agencies to increase and improve the publication of procurement information and to pilot e-procurement portals for Bank-funded operations. 

The following story shares our experiences and successes in both China and Vietnam. 

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

Foreign aid is a shambles in almost every way
The Economist
NOT long ago Malawi was a donor darling. Being dirt poor and ravaged by AIDS, it was needy; with just 17m inhabitants, a dollop of aid might visibly improve it. Better still, it was more-or-less democratic and its leader, Joyce Banda, was welcome at Westminster and the White House. In 2012 Western countries showered $1.17 billion on it, and foreign aid accounted for 28% of gross national income. The following year corrupt officials, businessmen and politicians pinched at least $30m from the Malawian treasury in just six months. A bureaucrat investigating the thefts was shot three times (he survived, somehow). Germany said it would help pay for an investigation; later, burglars raided the home of a German official and stole documents relating to the scandal. Malawi is no longer a donor darling.

The capabilities of finance ministries
ODI
All countries have a finance ministry. If one organizational feature defines what makes a state a state, it is a central unit that handles income and expenditure – or aspires to. This remains remarkably consistent irrespective of the huge variations in the purpose and institutional shape of government. Finance ministries are also at the centre of many current policy discussions, whether on how to respond to the 2008 financial crisis, how best to fund global development goals, or how an emerging economy should go about establishing a welfare state. Virtually every policy decision that involves the raising and spending of public money involves a finance ministry at some stage. Yet despite their almost self-evident importance, very few studies focused on finance ministries as objects of study.


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