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A table showing tax revenue as a share of GDP in sub-Saharan Africa

Enhancing Domestic Resource Mobilization: What are the Real Obstacles?

At the Center for Global Development, we recently initiated a project to develop more effective and equitable strategies for domestic resource mobilization in low-income countries in sub-Saharan Africa (SSA). The impetus for the project is the Addis Ababa Action Agenda for financing development, which calls on developing countries to step up their efforts to collect more taxes domestically to achieve the Sustainable Development Goals (SDGs). 

Figure 1: Tax Expenditure as a % of GDP

Time to Pay More Attention to Tax Expenditures?

It is time that donors and technical assistance providers turn their attention to tax concessions provided by developing countries struggling to raise more taxes from domestic sources. The granting of tax concessions is not only mostly opaque and prone to corruption, but these concessions are further constricting the already narrow tax base of countries, thereby undermining the Addis Ababa Action Agenda to promote domestic resource mobilization. There is a risk that additional revenues collected through tax reforms may be lost through tax concessions.

Stock photo of various currencies

Merely Collecting More Taxes Is Not Enough to Achieve the SDGs

In development circles these days, there is considerable emphasis on developing countries collecting more taxes domestically to help achieve the SDGs. But with this attention to domestic resource mobilization, we shouldn’t lose sight of a critical point: collecting more taxes will only advance the SDGs if the revenues are spent efficiently.