A desperate and largely unknown humanitarian crisis is deteriorating in the Lake Chad Basin region of West Africa, forcing millions of people to flee their homes and leaving millions more in need of humanitarian assistance. Oxfam is providing life-saving support but help is urgently needed to prevent the crisis turning into a catastrophe.
This is the first of a short series of Oxfam blogs on the role of international financial institutions, and the fight against poverty.
Government tax collection in low-income countries stagnated throughout the 1990s and 2000s, according to a new paper by the Center for Development Policy at the University of London.
A government tax take that amounts to less that 15 percent of GDP is widely considered to be low. By way of comparison, typical collection rates in rich countries are around 40 percent of GDP, says the CDP paper, “Is Stagnation of Domestic Revenue in Low-Income Countries Inevitable?”
But average revenue collection rates in Sub-Saharan African countries stood at only 13.3 percent of GDP during 1990 to 1994. They increased very slightly to 15.6 percent during 2000 to 2006.
This small increase of 2.3 percent is only slightly more than half of the very modest goal of a 4 percent increase in developing countries that the UN has said is needed to achieve the Millennium Development Goals by 2015.
And the researchers found that – and this is even more alarming – most of this slight increase came from sources such as value added taxes, which tend to burden the poor more heavily than the wealthy. Other types of taxes that they looked at which tend to be more progressive, such as those on imports or exports, or on corporate and personal income, didn’t increase as much.
The alarmingly low collection rates and lack of progressivity immediately make me wonder what’s been the impact of the advice and technical assistance the International Monetary Fund has been giving to developing countries on tax policy over the past two decades? The Fund is supposed to be a key, if not the primary, provider of advice to developing governments on tax policy.
A look at the Fund’s website fails to turns up any evaluation of its technical assistance and policy advice in the area of tax administration and tax policy. The Fund should be providing much more research and evaluation of what the impact of its own technical assistance, policy advice and conditionality have been on tax policy and tax administration in emerging and low income countries. And a central focus of the Fund’s analysis should be the progressivity of tax policy. This includes openly tackling issues such as tax takes on extractive industry projects, the political economy of earmarking and tax exemptions, and the performance of large taxpayer units.
Next blog of the series: The IMF on the Root Causes of the Global Economic Crisis