Transcript Presentation Oliver Morrissey

The 2014 CAPE Conference
Session 2: Domestic revenue mobilisation, international public
finance and the SDGs – all good things go together?
12 November 2014
Oliver Morrissey
CREDIT, School of Economics, University of Nottingham
Tax Performance
Mobilizing Domestic Revenue
• Tax performance (tax/GDP) is determined by structural factors
(variables capturing the tax base, to which tax rates are applied)
• Tax policy (reform) primarily concerned with tax rates and measures
to improve administration and collection efficiency.
• Changes in the tax base are largely determined by economic
performance and some bases are easier to tax (trade, consumption
spending) than others (corporations, MNEs, resource sector).
Constraints on DRM
• Resource tax revenues often less transparent and more
volatile
• Absence of growth in tax base even with increasing GDP
• Increasing difficulties in taxing the bases that are growing
(resource extraction, MNEs and very wealthy individuals)
• Formal sector employment/earnings (the income tax base)
and private spending (the consumption tax base) are not
growing at the same rate as GDP
• Hence difficult to increase the ratio of tax to GDP
Aid, Donors and Taxation
• Aid (grants) -- no robust effect on tax effort (Tax/GDP)
• But donors do influence policy options and choices:
• Advocating reforms that reduce tax rates (e.g. tariffs)
• Supporting reforms to improve the tax system (e.g. VAT,
SARAs, administration, PFM, MTEF)
• SSA: VAT has not increased total revenue, SARAs have
• Effective aid and economic reforms increases the tax base
The Corruption Challenge
Money attracts the corrupt
• Aid may be least affected because of monitoring
• Administrative reforms have improved monitoring of tax
and expenditure
• Natural Resources may be most affected
• FDI/MNEs can be part of the problem
External Finance
External Finance can be particularly suited for:
• Areas where there are regional spillovers (e.g. health,
environment)
• Reforms that incur potentially high initial costs or revenue
losses
• Clearly targeted project interventions