On 29 January 2021, to mark the annual Tax and Development Day, the OECD hosted a series of briefings in relation to tax and development, looking at OECD work in the area.

BEPS and the extractive industries

For decades many resource-rich developing countries have faced obstacles in obtaining the correct share of taxation from extractive projects. The conference looked at the impact of the technical assistance work performed by the African Tax Administration Forum (ATAF), the Intergovernmental Forum on Mining, Metals and Sustainable Development (IGF) together with the OECD on helping developing countries to implement improved methods of tackling tax avoidance in the mining sector. An example is work done with the Zambian Revenue Agency to increase access to information when examining transfer pricing.

Harmonised Revenue Statistics

The use of harmonised revenue statistics can support domestic resource mobilisation by providing input into tax policy reforms and programs for domestic resource mobilisation. The Global Revenue Statistics initiative produces harmonised statistics on public revenues in 110 countries throughout the world.

Value Added Tax

Value added tax (VAT) generally raises between 25% and 40% of tax revenue in developing countries. Despite its importance to them the developing countries experience difficulty in protecting the integrity of their VAT systems. The increases in e-commerce activity, especially during the pandemic, are threatening VAT revenues and the OECD is therefore developing VAT e-commerce solutions. Developing countries also need to collect VAT on e-commerce sales, which are often untaxed because VAT systems have not been adapted to meet the challenges of the digital economy. In this respect the delivery of regional VAT Digital Toolkits is important.

Health financing

A discussion was held on the work done to strengthen the design of taxes to finance health systems. These may be either health taxes or general tax reforms. Understanding the role of the informal economy is important in financing health and ensuring access to compulsory health insurance schemes.

Digitalisation to support tax administrations

The discussions looked at support and guidance for tax administrations in developing countries in developing digitalisation of the tax administration, to increase efficiency and taxpayer service. This builds on work already done by the OECD’s Forum on Tax Administration.

Tax exemptions for aid funded goods and services

The discussions considered reasons why exemptions for aid funded goods and services may be an issue for developing countries. The Addis Ababa Action Agenda commits countries to consider not requesting tax exemptions on goods and services delivered as government-to-government aid. The tax concessions obtained by donors on their aid-funded projects are not helpful to efforts by developing countries to increase domestic resource mobilisation. These tax concessions restrict the tax base, introduce complexity into tax administration and may provide an opportunity for corruption.

Increased transparency assists countries in implementing their commitments under the Addis Ababa Agenda and the OECD can play a part in supporting transparency. The UN has recently developed guidelines to support countries when they are preparing to negotiate agreements relating to the tax treatment of government-to-government aid.