On 19 February 2019 the UK’s Department for International Development (DFID) announced new assistance to give support to developing countries in generating greater tax revenue, tackling tax avoidance and creating a level playing field for business.
The funds are being donated in line with the Addis Tax Initiative which committed the donor countries to greater efforts on tax capacity building, together with a commitment from the partner countries to increase efforts to raise taxes. According to an OECD estimate developing counties generate on average tax revenues of around 14% of GDP which is much less than the 35% average tax to GDP ratio in developed countries.
The GBP 47 million package of support relates to the following projects:
Funding of GBP 10.3 million will help the OECD to assist developing countries in the implementation of measures on international tax evasion and avoidance, including some assistance to Tax Inspectors Without Borders.
A further GBP 7.4 million is going to the World Bank’s Global Tax Programme to help build effective tax systems.
The sum of GBP 3.7 million is allocated to support the Platform for Collaboration on Tax (PCT), a venture set up by the IMF, OECD, United Nations and World Bank Group. The PCT is enhancing the cooperation between those organizations on taxation issues.
Funds of GBP 4.2 million are allocated to the African Tax Administration Forum (ATAF). ATAF is promoting tax reform in Africa and represents African countries in international forums. Two tax experts will be provided by HMRC for four years to assist ATAF’s member states in further building up the organisation.
Funding of GBP 2.25 million is set aside for the Intergovernmental Forum for Mining, Minerals, Metals and Sustainable Development (IGF). The IGF aims to assist developing countries in combating tax avoidance in the mining sector. The assistance will help resource rich countries to implement international standards and increase government revenues from the mining sector.
Around GBP 1 million is being contributed to the IMF Tax Administration Diagnostic Assessment Tool (TADAT). This tool aims to provide an objective assessment of important features of each country’s system of tax administration.
A sum of around GBP 13 million is being allocated in support of the IMF’s Africa Regional Technical Assistance Centres (AFRITACs). The AFRITACs support countries of the region in tax capacity building and they also help to build capacity in public financial management, economic and financial sector management and national statistics.
Around GBP 5 million is being provided to the Institute for Fiscal Studies (IFS) to develop tax policy analysis in four developing countries in addition to a research fund to increase knowledge in relation to tax collection in developing countries.