Tax justice: domestic perspectives from five developing countries

Added 12 Dec 2013

Eurodad member ActionAid has recently published its new reportTax justice: the domestic perspective – a synthesis of studies of the tax systems in five developing countries. The report analyses the different tax systems in Kenya, Tanzania, Nigeria, Cambodia and Nepal and develops and proposes alternative strategies. 

The authors of the report analyse how these countries can raise more revenue through better, more equitable tax systems. The report also supports the development of tax advocacy, both nationally and internationally.

Tax revenues are vital for any national development strategy and are crucial to poverty reduction. However, on average, low-income countries raise only around 15% of GDP in tax revenue. In many developing countries, there is a lack of development of tax collection systems. Tax evasion and avoidance from the wealthiest people and multinational corporations is also a major problem.

Based on its findings, the report’s authors draw the following conclusions:

-          Trends in revenue mobilisation are generally positive. Direct taxes as a proportion of revenue are increasing, while indirect taxes are also increasing but to a lesser extent, while trade taxes are decreasing.

-          Direct taxes generally tend to be more progressive than indirect ones, and direct taxes are generally taking an increasing share of both revenue and GDP. However, there is a need for a detailed analysis of individual countries’ situations; the situation is complex and one size does not fit all.

-          It is important to ensure that Value Added Tax (VAT) is subject to gender analysis. Women tend to buy more family essentials, so VAT without exemptions is likely to be regressive between women and men. A good exemption system may reverse this.

-          Despite tax exemptions, evasion and avoidance from companies, corporate income tax tends to be progressive. Attention to this area could be productive, in terms of both increasing revenue and reducing inequality.

-          Improving tax administration could increase revenue collection. However, political support and developing a culture of taxation are crucial.

-          Each of the five countries will advocate for more progressive and transparent taxes, but the individual circumstances make the priority campaigns different in each case.

Read ActionAid’s full report here

tags: tax justice,