Taxation has risen to the top of the development agenda. It is the first item on the action agenda in the draft Financing for Development (FFD) agreement and the first item on the financing action plan agreed at the recent Asia-Pacific FFD regional consultation. The Sustainable Development Goals, which will be formally adopted in September this year, are hugely ambitious and call for significantly increased domestic revenue capacities to finance an array of developmental investments and recurrent expenditures. The Development Committee of World Bank and IMF have called for a transformation of development finance 'from billions to trillions'.
Hence the onus is on domestic resource mobilisation in developing countries as the key to self-sufficiency and sustainable development. Private finance is enormously important for economic growth, but whilst governments can create an environment that encourages and shapes private investment, it is not theirs to direct. Public finance has a unique place in FFD because it can be spent at the discretion of government in pursuit of national development strategies, without requiring short-term financial returns.
This paper provides a survey of donor support to domestic resource mobilisation with the intention of informing the policy of the Australian Department of Foreign Affairs and Trade towards taxation in its partner countries. It will cover the role of taxation in development, and the theory and evidence that underpins the nature of tax reform. It summarises the state of taxation in Australia’s partner countries and examines the role of various international actors in the field of taxation, before taking a more in-depth look at the practicalities of international interventions in taxation and lessons from experience. The report concludes with some potential lessons for Australian policy towards taxation in its development partners.