OREANDA-NEWS. July 13, 2015 The World Bank and IMF are launching a new initiative to help developing countries strengthen their tax systems. Analysis suggests that many lower-income countries have the potential to increase their tax ratios by at least 2–4 percent of GDP, without compromising fairness or growth. Raising additional revenues will allow developing countries to fill financing gaps and to promote development.

The announcement comes ahead of the “Financing for Development” conference in Addis, Ethiopia next week, at which heads of state, CSOs, multilateral institutions and private sector representatives will discuss how to scale up finances to meet the Sustainable Development Goals (SDGs). 

“A strong revenue base is imperative if developing countries are to be able to finance the spending they need on public services, social support and infrastructure,” said IMF Managing Director Christine Lagarde. “But experience shows that with well-targeted external technical support and sufficient political will, it can be done.”

“We very much want to help developing countries raise more revenues through taxes because this can lead to more children receiving a good education and more families having access to quality health care,” said World Bank Group President Jim Yong Kim. “If everyone pays their fair share – developing countries can close their financing gaps and promote inclusive growth.”

Responding to country demands, the IMF/World Bank initiative has two pillars: deepening the dialogue with developing countries on international tax issues, aiming to help increase their voice in the international debate on tax rules and cooperation; and developing improved diagnostic tools to help member countries evaluate and strengthen their tax policies. This builds on the Bank’s current tax programs in over 48 developing countries and the Fund’s tax related technical assistance projects in over 120 countries.  

By further leveraging their collective expertise, the Bank and Fund aim to play a fuller role in helping all of their member countries achieve the ambitious goals that the world will be setting for itself later this year in New York.

Bringing the voice and interests of developing countries, particularly those too small to play a role at the G-20 level, more fully into the debate on international tax policy issues is a key priority for the Bank and the Fund. The initiative will deepen the institutions’ ongoing collaboration with developing countries to identify key international tax policy concerns and potential solutions, both at the country level and in the context of the continuing international dialogue.

The institutions also plan to strengthen their diagnostic tools, developing new methodologies where needed, to enable member countries to identify priority tax reforms and design the requisite support for their implementation. This effort would complement the launch of the Tax Administration Diagnostic Assessment Tool (TADAT) in November.

The Bank and the Fund will continue to work in close collaboration with other development partners, including the OECD, in expanding their work in the tax area.