By Sanjeev Gupta
From the article:
According to a recent IMF analysis, low-income developing countries will need resources equal to 14.4 percent of their gross domestic product on average to meet the Sustainable Development Goals in five areas: education, electricity, health, roads, and water.
One way to bridge this gap is by strengthening the domestic tax capacity of LIDCs, which could mobilize roughly 40 percent of the needed resources, or 5 percent of GDP, with official development assistance and flows from the private sector and civil society providing the remaining. The International Monetary Fund analysis further indicates that fewer resources would be required if LIDCs were to grow at exceptionally high rates through 2030 and if this money was well spent.
However, generating additional revenue equal to 5 percent of GDP in LIDCs will be challenging, given past trends in revenue performance and the political opposition that tax reforms are likely to face in these countries. This makes it imperative for policymakers to improve the efficiency of existing spending, which could potentially generate as much incremental resources as domestic taxation.
Past trends and the Addis Tax Initiative
In recent years, LIDCs have overall been collecting more taxes domestically. Between 2002 and 2014, average tax ratios rose by 2.8 percent of GDP in sub-Saharan Africa and by 3.6 percent in the Western Hemisphere and emerging and developing Asia.
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