The wealthy can borrow money to finance their investment needs because bankers trust them. Those who are less well off, and who need loans the most, do not have this access and must call upon the solidarity of their family and community to finance their investments. The same logic can be used at the country level. High income countries borrow, while many poor African countries have a limited access to international capital markets. In recent years, only one fourth of sub-Saharan African countries were able to issue international bonds—and do not have any other alternative but to solicit international aid.
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.
The mishmash of overlapping and incoherent national tax policies and systems, which together comprise the global tax architecture, used to be a niche topic relegated to the fringes of global policy debates and the domain of a small number of technical experts. But the leak of the “Panama Papers” in April thrust these issues into the spotlight anew.
This added fuel to the fire that was started by the 2012 Amazon and Google cases and subsequent initial high-profile leaks that first brought international tax policy under public and legislative scrutiny. The technicalities of issues such as transfer pricing, offshore financial centers, aggressive tax planning and tax minimization, and illicit financial flows involving public officials have gained the attention of the media and taxpayers around the world.
For the first time in history, the number of people living in extreme poverty has fallen below 10%. The world has never been as ambitious about development as it is today. After adopting the Sustainable Development Goals and signing the Paris climate deal at the end of 2015, the global community is now looking into the best and most effective ways of reaching these milestones. In this five-part series I will discuss what the World Bank Group is doing and what we are planning to do in key areas that are critical for ending poverty by 2030: good governance, gender equality, conflict and fragility, creating jobs, and, finally, preventing and adapting to climate change.
Twenty years ago, the World Bank took up the fight against corruption as an integral part of reducing poverty, hunger, and disease. The decision was groundbreaking then and remains valid today. Corruption diverts resources from the poor to the rich, leads to a culture of bribes, and distorts public expenditures, deterring foreign investors and hampering economic growth.
- domestic resource mobilization
- Development Finance
- international development association
- Public Sector and Governance
- The World Region
- South Asia
- Middle East and North Africa
- Latin America & Caribbean
- Europe and Central Asia
- East Asia and Pacific
- Cote d'Ivoire
Finance ministers, auditors-general, and leaders of professional accounting organizations are meeting Tuesday in Nassau to discuss a topic that is often hidden from view, but is critical to quality of life in the Caribbean: Capacity and standards in public financial management.
How governments manage taxes, borrowing and spending is essential to economic growth, to poverty-reduction, and to ensuring that the region’s poorest can improve their lives. It is a core function of accountability in government. Improvements in this area could increase the health of small and medium-sized enterprises, create jobs, and bring in additional government revenues to spend on essential public services. Residents of Caribbean nations: this strategic dialogue will be about how the government manages your money.
MALAYSIA has travelled far on the road to economic growth and shared prosperity. Using its natural resources, the country not only eliminated absolute poverty from 49% in 1970 to less than 1% in 2014, but also lifted the incomes of households at the bottom 40% of the income bracket. The Gini Coefficient — a measure of income inequality in an economy — dropped from 55.7 to 42.1 over the same period, implying that gaps in incomes were narrowing. This road is now leading towards a developed country, with a vibrant and growing middle class where aspirational households have access to relevant education and training, higher income opportunities, more savings for retirement and a safety net to protect the vulnerable from shocks.
Underlying this journey to developed country status is a series of structural reforms that have formed the bulk of the national development plans, most recently the 11th Malaysia Plan. The quest moving forward is therefore to sustain and finance this process. The 11th Malaysia Plan is budgeted to cost RM246 million between now and 2020. Taxation choices will matter a great deal for Malaysia’s prospects in this journey, more so in an environment of low or volatile oil and commodity prices and a global and regional economic slowdown.
To gain a better understanding of how innovation in public-private partnerships (PPPs) builds on genuine learning, we reached out to PPP infrastructure experts around the world, posing the same question to each. Their honest answers redefine what works — and provide new insights into the PPP process. This is the question we posed: How can mistakes be absorbed into the learning process, and when can failure function as a step toward a PPP’s long-term success?
It is a truism that infrastructure projects, like much else in life, do not unfold exactly as planned. However, there is little room for failure because it would affect a large number of users for which the government would be accountable.
India happens to be the largest laboratory of PPP projects and offers a plethora of evidence. While most projects have succeeded, some have faced failure mainly because they were encumbered by lack of conceptual clarity in policy formulation as well as contractual framework.
Many assert that all future events cannot be predicted and a PPP contract must, therefore, be regarded as incomplete. They need to be reminded that if man could succeed in sending a satellite to space and operate it for several years without any ability to modify it, why can’t this be done while launching an infrastructure project?
A view from Central Europe and the Baltics
Saving for old age is important in countries where longevity is increasing. Countries in Central Europe and the Baltics emerged from the economic transition of the 1990s recognizing that they needed to encourage their workforce to retire later and save more in order to be comfortable in old age. To this end, they modified their pay as you go pension systems which collects taxes from workers to pay retirees (the "first pillar") to create an additional or "second pillar" of individual pension accounts funded by taxes. As these second pillar pension accounts were the private property of individual workers, they were expected to encourage saving. Over time as these savings grew, it would be possible to reduce the pensions paid by the government from the first pillar without reducing the standard of living for pensioners who would be able to rely on complementary pensions from their private saving in the second pillar. Typically, a share of payroll tax receipts was redirected to finance individual pension saving accounts. This resulted in revenue shortfalls in pay as you go you pension schemes, and most governments raised additional debt to meet their obligations which was in turn held by the companies who were managing the pension savings on behalf of employees. However, since the economies were growing rapidly, fiscal deficits were generally kept manageable, easing concerns about additional debt.
Some Observations from Nepal
I've been in Nepal since January helping out with the implementation of a household survey. Throughout February and March, we asked people in two districts – Jhapa, in the south-east of the country on the Indian border, and Tibetan-bordering Sindhupalchok to the north – about their livelihoods, the various taxes they pay, and their relationships with state governance. As part of this research, we've also been carrying out a number of more in-depth qualitative interviews.
When asked about the kinds of taxes that most affect their livelihoods on a day-to-day basis, one of the things that struck me about people's responses was the frequency with which electricity bills were mentioned. At first, I couldn't quite understand why this was coming up so much: that's not a tax, I thought, it's simply a payment made in exchange for a service. In my mind, I began to discount these responses, passing them off as information that missed the points we were trying to get at.
My assumptions were misplaced.