With the call for action issued last month in Dakar, the commitment was clear: Francophone countries in Africa will seek to improve the well-being of their citizens by accelerating the transformation of public financial management systems. They will take this initiative through strong partnership between governments and the accountancy profession with the support of the development partners.
The call was made by 200 high-level delegates from 20 countries: decision-makers and practitioners from both the public sector and professional accounting organizations, and representatives from multilateral development organizations and civil society.
“The effective implementation of these reforms will improve the use of public resources to enhance delivery of services, transparency, accountability, and citizens’ trust in our governments,” said the Honorable Ansoumane Condé, Minister for Budget of the Republic of Guinea, after reading the call on October 29.
But taxes are fundamental to governing a country.
Without taxes there would be no law and order, no security, no pensions and no social safety net.
Collecting a sufficient amount of tax revenue to finance public services without distorting the economy or discouraging people from working is a challenge everywhere. In Romania, the challenge is especially difficult as the culture of voluntary compliance has yet to take hold: Romania ranks among the lowest countries in the EU in terms of the tax gap and the amount of revenue raised as a percentage of GDP.
The economy is growing quickly, which has an unfortunate side effect: more opportunities for tax evasion.
In today’s world, international aid is fickle, financial flows unstable, and many donor countries are facing domestic economic crises themselves, driving them to apply resources inward. In this environment, developing countries need inner strength. They need inner stability. And they deserve the right to chart their own futures.
This is within their grasp, and last week the launch of an unassuming-but-powerful tool marked an important step forward in this quiet independence movement. It’s called the TADAT, or Tax Administration Diagnostic Assessment Tool. At first glance, this tool may look inscrutable, technical, and disconnected from development. But listen.
Recently, I participated in an ODI-organized conference on ‘Driving change in challenging contexts’. The ongoing refugee crisis in Europe as well as the adoption of the SDGs is bringing efforts to revive and accelerate development in challenging contexts to the forefront of political attention.
Progress in such contexts is inevitably difficult. But actual practices are also still far from the possibility frontier of what could be done. Four issues stand out:
Efficiency. Competitiveness. Innovation. Integrity.
Do these words come to mind when you think of State-Owned Enterprises (SOEs)?
From June 2-3, 2015 in Santiago, Chile, over 100 representatives of governments, SOEs, and academia from 13 countries came together to discuss how to advance these ideals, at the fourth Annual Meeting of the Latin American Network on Corporate Governance of State-Owned Enterprises, co-organized by the World Bank, the Organisation for Economic Co-operation and Development (OECD), and the Latin American Development Bank (CAF).
SOEs are commercial enterprises owned by governments, in full or in part. , national expenditures, employment, and government revenues.
I spent the past 11 years working and living in Afghanistan. I didn’t intend to stay that long in one country office, but I got swept up in the Afghanistan Reconstruction Trust Fund, which under the World Bank, was financing 50% of government expenditures earlier on. Its budget operations grew from $600 million in 2004 to more than $5 billion in 2014.
For anyone working on public financial management, there were a lot of challenges to tackle and no good time to leave. Moreover,
Melissa Thomas, author of Govern like us, speaking at the World Bank recently raised a very interesting question: is our expectation that poor countries with limited resources can deliver high-quality governance unrealistic?
Can these countries provide the public goods and services that citizens demand and need, to be able to forge a strong social contract?
She compares the levels of revenue per capita in rich and poor countries and finds that in the poorest countries, levels of revenue per capita are so low that it would be years, or even decades, until they have enough to provide a decent level of public goods and services.
It is in that context that I thought of Sri Mulyani’s appeal during the Spring Meetings when she spoke of the need to clamp down on tax evasion and avoidance and boost the domestic resource mobilization (DRM) capacities of developing countries as a means of finding resources for financing development going forward.
If you were a football (soccer) player, who would you be? Representatives of Ministries of Finance from 20 African countries were confronted with this question at a CABRI-sponsored conference in Johannesburg last April.
Two decades ago, when I interned at the French Embassy’s economic mission in Moscow, I was asked to look into bankruptcy laws and their implementation. The Embassy wanted to advise French companies on how to get business done in the new Russia—we are talking mid-1990s—when there were no reliable guidebooks on how to navigate the transition to a market economy.
So I was asked to read recently approved, Western-inspired bankruptcy laws, given a phone book and asked to find two dozen companies around Moscow. I was to meet with their CEOs and find out how insolvency and bankruptcy procedures actually worked in practice.
I came away with one key finding: In fact, the distortions brought about by hyperinflation, bartering and the transition from Soviet to Western accounting meant the liquidity and solvency ratios that underpinned the institution of bankruptcy had essentially become meaningless.
Reforms of public financial management (PFM) systems – pursued by many countries and supported by development partners -- have attracted quite a bit of debate and analysis in recent years. Significant variation in progress achieved and lack of broad-based and sustained improvements in metrics of PFM performance, as reflected in CPIA ratings and PEFA scores, suggest to many observers that outcomes have not matched reform efforts and expectations.
This has led to a search for better solutions in two directions. First, grounding reform efforts in stronger problem analysis, and based on this, developing a better fit of reform approaches to specific country circumstances. Second, seeking a better understanding of non-technical aspects and, in particular, the role of political economy drivers in influencing which PFM reforms are pursued where and with what degree of success. ‘Doing things differently’ along these lines sounds promising – but reformers and development partners may well question whether we know enough to pursue such alternative approaches on a wider scale.