New Reports on the Role of Tax in Mozambique and Zimbabwe
August 17th, 2011
August 17th, 2011
The link between development and taxation has come up in various fora, as development practitioners and activists discussed methods of mobilizing domestic resources to finance development, and attainment of the Millennium Development Goals (MDGs). Tax revenues are, on average, lower in developing countries than in rich countries; the average tax revenue in African countries was approximately 15% of GDP in 2008. Hence the argument is that if developing countries were able to collect sufficient tax revenues, they might be able to increase their independence and provide social protections, infrastructure, and basic services such as education and health care which are crucial for development.
The reports insist that the mobilization of domestic resources must be recognized as a key means of financing development, ending the current overemphasis on aid and external borrowing. For a long time mobilizing domestic revenue has been neglected, despite being a better option in the long-term. The reasons for this included the inherent pessimism about raising revenue, a prevalent ‘small-state’ ideology and a preference for foreign aid-led solutions. Taxation is a major tenet of any domestic resource mobilization tools at the disposal of developing countries. Taxation also plays an important role in shaping the distribution of benefits from higher income citizens to those most in need in a country.
The reports also examine the various complexities surrounding taxation as a development finance mechanism in the two countries, including the current tax framework, the amount and extent of tax evasion and more specifically tax incentives and governance in various sectors of the economy. The reports suggest practical policies for addressing these issues for civil society, media, and the governments in Mozambique and Zimbabwe.