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IMF/World Bank Spring Meetings re-affirm the centrality of taxation in domestic revenue mobilisation to finance sustainable development

The 2016 IMF/World Bank spring meetings offered a glimmer of hope for international taxation in general and tax justice in particular. It was clear from the discussions that there is a global consensus that the international tax system is broken just as the Panama Papers revealed recently. Various discussants referred to Panama Papers and the falling international commodity prices as clear signs of the need to strengthen the tax systems in order to mobilise sufficient domestic revenue to finance key public expenditure on health.

A key highlight of the civil society forum events was the session on “The role of the World bank and IMF in Responsible and Progressive Taxation….”which was co-hosted by Tax Justice Network- Africa, Oxfam, IBIS, Christian Aid, Action Aid, Eurodad, and Latindadd. The session garnered a lot of interest as participants from diverse backgrounds such as civil society, government, international organisations (IMF, World Bank, etc.), academia, think tanks, and the private sector participated in the event. The general consensus at the end of the session was that regressive tax systems aggravate inequality and poverty whilst multinational corporations were urged to practice responsible taxation which will see them paying their fair share of tax to contribute to domestic revenue mobilisation to finance basic amenities such as health, education and other social amenities in developing countries.

The recommendations put forward included that the IMF and the World Bank among other international organisations should put more effort in advising countries to design tax systems which are progressive and to prioritise expenditure on basic amenities in order to address inequality and poverty. More importantly, IMF and World Bank was urged to prescribe policy advice which suited specific developing countries’ situations. Whilst their expenditure side policy stance to address inequality and poverty has worked well in developed countries it has not worked for developing countries- hence the policies are not a one shoe fits all scenario. Developing countries lack effective public administration among other challenges to be able to sustainably and effectively address inequality and poverty using the expenditure side policy stance alone. Developing countries still need a mix of the revenue and expenditure policy stance for them to be able to effectively and sustainably address inequality and poverty. This also raises the important point of synergy between organisations working on the revenue side and those working on the expenditure side.

Looking ahead, it is important to seriously notice that tax is a reliable and sustainable source of domestic revenue mobilisation as global and African growth trends reflect the debt challenges as well as the declining commodity prices reflect how these sources of finance are unreliable and unsustainable. Furthermore the IMF’s global economy growth forecasts and the potential debt threat facing many Sub-Saharan African countries is a clear pointer to the fact that tax is a leading domestic revenue mobilisation option for the future which implies that the tax justice discourse is very key in advocating for progressive tax system and a strong international tax system which strengthens developing countries’ tax bases.

Therefore, some conscious debates on advocating for the important role that taxation could play in financing sustainable development and the transformation of the African continent and developing countries in general should be taken seriously going forward. It is important, however to note that the IMF/World Bank Spring meetings re-affirmed the Third financing for Development Conference Outcome Document view that taxation is a reliable and sustainable source of domestic revenue mobilisation.

The call by civil society and other like-minded stakeholders to mend the broken international tax system is in line with the Tax Justice Network – Africa coordinated #StopTheBleeding Campaign and Africa. It is also encouraging that during the 2016 IMF/World bank Spring Meetings the IMF Managing Director Christine Lagarde, during the seminar “Strengthening the International Tax System: Future of International Taxation”, announcement on the UN and the OECD that was released on 19 April 2016, the concept note for “the platform for collaboration on tax”. This is an important response to requests for a global dialogue on tax matters and strengthened cooperation between the four institutions.

This blogpost is by Cephas Makunike, the Policy Lead in charge of the Tax and Investment Programme at TJN-A.

25/05/2016

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About TJNA

The Tax Justice Network-Africa (TJN-A) is a Pan-African initiative and a member of the Global Alliance for Tax Justice. Launched in January 2007 during the World Social Forum (WSF) held in Nairobi, TJN-A promotes socially- just, accountable and progressive taxation systems in Africa. It advocates for tax policies with pro-poor outcomes and tax systems that curb public resource leakages and enhance domestic resource mobilisation.

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