| |
Contributions from
the Column
Monitor
Peacekeeping: No reason to fear of civilian-military cooperation
BMZ budget increases
USA approves Indian three-in-one AIDS pill
D+C author under pressure in Togo
Genetic modifications: Uganda: in search of pest-resistent bananas
Liberia: timber embargo lifted
UN budget released
German government assesses crisis-prevention policy
Gender-related violence: Good governance includes protection for women
A single roof for GTZ and KfW
Poor countries lack tax revenues
8-9/2006
|
|
[ Financing development ]
Poor countries lack public revenues
needed to finance the MDGs
According to the UN Millennium Project, low-income countries need to invest $ 180 billion this year in order to reach the Millennium Development Goals – $ 43 billion more than they earmarked for the purpose in 2002. The UN experts believe that poor countries can increase their share of funding for the Millennium Goals from the present rate of 41% to 68% by 2015. A necessary condition for this to happen is that the countries concerned generate enough public revenues. That, however, is not to be taken for granted. A recent study by the Global Policy Forum Europe, terre des hommes (a relief agency for children) and DGB Bildungswerk (an educational institution of the German trade unions) explains what difficulties typically arise and how they might be tackled.
The study is based on World Bank figures, according to which public revenues in low-income countries averaged only 12% of GDP in 2003. In high-income countries the average was 25%, and in the EU nearly 36%. The study cites seven reasons for developing countries’ low revenues: ineffective tax systems, growth of the shadow economy, weak financial administration, international tax competition, transfers of corporate profits to low-tax countries, flight of capital and dismantling of tariffs.
In many developing countries, state finances come mainly from non-tax sources such as tariffs and development aid. Where taxes are levied, they are mostly indirect taxes, such as value-added taxes (VAT). According to the study, in the 1990s the introduction of VAT boomed in the developing world.
For example, in the 1980s, only four African countries collected VAT; by 2001, the number had surged to 27. This rise, the study says, is partly due to pressure from the World Bank and the International Monetary Fund, which urge developing countries to broaden their tax base and at the same time lower direct taxes (which are levied on corporations and personal incomes). The result is that the tax burden on the poor becomes heavier than that on people with high incomes.
Aside from reforming tax systems and financial administrations, the study sees an acute need for action at the international level. Only by cross-border cooperation is it said to be possible to close the loopholes many transnational companies take advantage of to avoid taxation. Trade and development requirements, on the other hand, should not force developing countries to make fiscally harmful cuts in tariffs and taxes, the document argues. (ell)
|
