£47m support for developing countries to improve tax systems

The government is to offer developing countries a £47m package of support aimed at improving tax systems in a move aimed at helping end their reliance on aid, the Department for International Development (DFID) has announced

OECD estimates suggest the average developing country generates tax revenues of around 14% of GDP, under half the 35% average for developed countries. DFID’s assistance is designed to help developing countries generate greater revenues to support increased spending on essential services such as health, education and infrastructure.

The support will also contribute to economic growth by helping tackle tax avoidance and evasion and creating a more level playing field for businesses, the government said.

Penny Mordaunt, international development secretary, said: ‘This new UK support will help countries collect more taxes and leave them less reliant on aid. It will turbo charge their development.

‘Governments in the developing world want to move beyond aid and we want to help them get there faster. We are supporting their efforts to implement a fairer, more transparent tax system which is vital in helping our aid money go further.’

As part of the package of support, £10.3m will go to the OECD. Additional funding will be provided for the tax inspectors without borders initiative (TIWB) run by the OECD and the United Nations development programme. TIWB assists developing countries to implement international tax standards by sending experts overseas, and has been assessed as returning an additional £100 in tax revenues for every £1 spent on operating costs.

The World Bank’s global tax programme will receive £7.4m to work with countries to build effective tax systems.

There is £3.7m to support the platform for collaboration on tax (PCT), a cooperative initiative launched in 2016 by the International Monetary Fund (IMF), the OECD, the United Nations and the World Bank Group.

The African Tax Administration Forum (ATAF) is being given £4.2m, and HMRC will provide up to two tax experts for four years to help ATAF’s members states build a sustainable and impactful organisation.

There is £2.25m for the intergovernmental forum for mining, minerals, metals and sustainable development (IGF) to tackle tax avoidance in the mining sector.

Around £1m goes to the IMF tax administration diagnostic assessment tool (TADAT), designed to provide an objective assessment of the health of key components of a country’s system of tax administration.

There is also some £13m of support to the IMF’s Africa regional technical assistance centres (AFRITACs) which support African countries to build capacity in tax administration, public financial management, economic and financial sector management, and national statistics. Around £2.6m of this funding will specifically support boosting tax revenue.

The Institute for Fiscal Studies will receive some £5m to deliver the development of tax policy analysis in four developing countries and a research fund to increase knowledge of tax collection in developing countries.

Report by Pat Sweet

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