Public finance and development: 5 things to read this month

26 July 2017

Welcome to the first regular resource round-up giving a flavour of the debates taking place in the worlds of public finance and international development. We highlight notable pieces of research, policy papers, blogs, useful resources and, of course, ODI work where relevant.

India’s tax reform is a really big deal

On 1 July, India’s goods and services tax came into force, seventeen years after being given the go ahead. It replaces a series of levies that were administered at both the federal and state level and is expected to transform the business landscape in the country. This article (paywall) from the FT gives a good summary of why it is such a big deal. In international development discourse, taxation tends to be framed as a means of financing the achievement of certain development goals. This of course matters, but India’s reforms are a useful reminder that tax systems have potentially far wider implications on development (as argued in this ODI briefing paper).  

Evaluating external support for institutional development

The World Bank’s Independent Evaluation Group (IEG) published an assessment of their support for taxation reform. Certain lessons sound familiar: the need for ‘government ownership’, ‘long-term sustained engagement’ and ‘a holistic and realistic approach to program design’. But the IEG also make some quite specific suggestions; there is a push to focus more on equity and the efficiency of tax systems (and not just on the amount of tax collected). They also suggest that the bank should do more analytical work on tax policy.

The IMF’s Fiscal Affairs Department has also been evaluating its technical assistance in building fiscal capacity in fragile states. Some recommendations feel quite ‘new’ and display a refreshing pragmatism. For instance, the paper suggests that in fragile states the benefits of using simple taxes like import duties may be greater than the potential distortionary costs. But in other areas, it does not feel like there is sufficient learning from past failures. It is unclear why, given past experiences, a call for governments ‘to lead and coordinate single, comprehensive medium-term reform plans with clear goals and milestones’ will be heeded now.

Supporting results not receipts

The Center for Global Development launched Charles Kenny’s ‘Results not Receipts’ this month. This is a stinging critique of development agencies trying to reduce corruption in aid projects through costly fiduciary and procurement controls, despite a lack of evidence that they actually work. He suggests agencies should instead focus on results, pointing to considerable evidence that significant development progress can take place despite ‘weak governance’.

Continuing with the links between results and receipts, ODI recently reviewed the theoretical and empirical links between public financial management and service delivery outcomes in the health sector. The evidence is patchy, but where links can be found, it seems to stem from reasonably basic stuff; the size of the original budget allocations and whether those were then delivered in the amounts expected.

Fiscal transparency  from quantity to quality of information

Recent years have seen an enormous upsurge in the information put in the public domain on budgets, aid flows and, increasingly, on government contracts. However, it is unclear whether that much of this information is actually being used to hold governments to account. Two recent blogs point to a shift in focus towards improving the quality of fiscal information. Paolo de Renzio summarises a global survey of civil society organisations and suggests there is appetite to analyse budgetary information, but that it is often very difficult to use. And Duncan Green says that the International Budget Partnership should keep doing what they’re doing, but make sure that technology is employed to make information easier to access.   

And finally, a useful resource for budget wonks

Schiavo-Campo’s Managing Government Expenditure has been a ‘go-to’ tool for ODI fellows trying to figure out what advice to give to governments on how to manage public expenditures. It had the distinct advantage over many other volumes on this topic of going beyond theoretical concepts and offering concrete, easy-to-understand ideas on how budgets actually work. So we’re very happy to see that twenty years on he’s produced an update.

The resources above stood out to me this month. I’d love to hear about any others you’ve found interesting and do get in touch if you have any ideas or suggestions for the future.