Oil and gas discoveries in developing countries are often associated with short-sighted economic policies and, in response, calls to insulate resource management from populist impulses.
The ability of digital payments to deliver better outcomes for governments, businesses, and individuals—including driving financial inclusion—has been one of the success stories of the digital age.
Every year, governments worldwide sign contracts worth trillions of dollars. They buy textbooks and fighter planes, hire consultants, commission firms to run railways and build bridges, take out loans and give guarantees, grant mining concessions, and issue licenses to use the public airwaves. Each time, legal documents specify who will pay how much to whom for what.
“Events since the election have only reinforced that pessimism. We have heard lots of rhetoric on democracy, national reconciliation, and economic reform. We can point to a few token gestures of change. But below the surface, very little, if any, meaningful structural change has occurred.”
“The Missing Profits of Nations,” by Thomas Tørsløv, Ludvig Wier, and Gabriel Zucman is a recent high-profile study seeking to assess profit shifting by multinational corporations. Headlines such as “40 percent of multinational profits are shifted” are at risk of being misinterpreted as indicating potential revenue gains that are higher than their findings suggest.
Should Developing Countries Sign the OECD Multilateral Instrument to Address Treaty-Related Base Erosion and Profit Shifting Measures?
The Multilateral Instrument (MLI) is a groundbreaking mechanism to update the network of thousands of bilateral tax treaties that make up the international tax system. This paper argues that developing countries should sign up to the MLI, but that they can afford to take a wait-and-see approach to selecting and finalizing options, while reviewing the options selected by other countries and building capacity for implementation. Developing countries should also be cautious about entering into new tax treaties to be sure that provisions are in their favour.
What Mining Can Learn from Oil: A Study of Special Transfer Pricing Practices in the Oil Sector, and their Potential Application to Hard Rock Minerals
Governments of mining countries are vulnerable to investors manipulating transfer prices as a means of avoiding paying taxes. This paper looks at whether special practices in the oil sector that provide materially greater protection against transfer pricing risk could be applied to hard rock minerals. These are (1) administrative pricing, where government, rather than the taxpayer sets the price for crude oil; and (2) the no-profit rule, which prevents joint venture partners from charging a profit mark-up on the cost of providing goods and services to the group.
Illicit Financial Flows, Trade Misinvoicing, and Multinational Tax Avoidance: The Same or Different?
Illicit financial flows (IFFs) connected with corruption, crime, and tax evasion are an issue of increasing concern. However, there is not yet a clear consensus on how to define illicit financial flows, and even less on how to measure them.
In the Face of China’s Ambition, US Policy Must Be Defined by a Positive Agenda in the Developing World
In his appearance before the committee, Morris outlined findings from a newly-published CGD analysis exploring the debt implications of China’s Belt & Road Initiative—and offered his views on what it should mean for US global engagement.
Even while policy solutions to address de-risking are being implemented, new technologies have emerged to address de-risking by increasing the efficiency and effectiveness of AML/CFT compliance by financial institutions.
This paper looks at estimates of the potential gains from taxing across borders, alongside largely domestic measures such as property tax, personal income tax, VAT, and tobacco taxes. It finds that while action on cross-border taxation could yield additional tax take in the region of one percent of GDP, in many countries measures targeting the domestic tax base might deliver something in the region of nine percent. The main enabler is political commitment.
Domestic measures have greater potential for raising tax yields over time. Rough estimates indicate that there may be $9 of additional tax capacity from domestic policy measures for every $1 from international action. The main enabler is political commitment.
Recent advances in the scope and sophistication of identification systems could have far-reaching consequences for development. While there is no one-size-fits-all approach, there are common features that ID systems should share if they are to support development.
Identification Revolution: Can Digital ID Be Harnessed for Development? offers a balanced perspective, covering both the benefits and the risks of the identification revolution, and pinpointing opportunities to mitigate those risks.
Fuel Subsidy Reform in Developing Countries: Direct Benefit Transfer of LPG Cooking Gas Subsidy in India
India’s reform of household subsidies for the purchase of LPG cooking gas stands out for a several reasons. The paper provides a detailed picture of the reform through its various stages, including how the process was conceptualized, coordinated, and implemented. It analyzes how such a reform must be able to adapt to concerns as they arise and to new information, how digital technology was used and how it is possible to use a voluntary self-targeting “nudge” to defuse potential resistance to income-based targeting.
Increasing attention is being paid to the potential of blockchain technology to address long-standing challenges related to economic development. This paper provides a clear-eyed view of the technology’s potential in the context of development. It focuses on identifying the questions that development practitioners should be asking technologists, and challenges that innovators must address for the technology to meet its potential.
Measuring Rents from Public Employment: Regression Discontinuity Evidence from Kenya - Working Paper 457
Public employees in many developing economies earn much higher wages than similar private-sector workers. These wage premia may reflect an efficient return to effort or unobserved skills, or an inefficient rent causing labor misallocation. To distinguish these explanations, we exploit the Kenyan government’s algorithm for hiring eighteen-thousand new teachers in 2010 in a regression discontinuity design. Fuzzy regression discontinuity estimates yield a civil-service wage premium of over 100 percent (not attributable to observed or unobserved skills), but no effect on motivation, suggesting rent-sharing as the most plausible explanation for the wage premium.
Results Not Receipts explores how an important and justified focus on corruption is damaging the potential for aid to deliver results. Noting the costs of the standard anticorruption tools of fiduciary controls and centralized delivery, Results Not Receipts urges a different approach to tackling corruption in development: focus on outcomes.