Tax in Developing Countries: Increasing Resources for Development

Written evidence submitted by African Tax Administration Forum (ATAF)

COMMENTS ON THE TECHNICAL ASSISTANCE DFID PROVIDES / HAS PROVIDED TO NATIONAL TAX AUTHORITIES:

1. Africa recognises that effective and efficient tax administration is the bedrock on which economic development and accountability between state and citizens must be built. In recent times, African countries have also emphasized in various fora the important linkages between the need for the effective raising of revenues from domestic resources, the reduction of dependence on dominant single sources of revenue, and the diminishing of dependency on donor assistance.

2. In this regard, and through their membership of the African Tax Administration Forum (ATAF), they recognise that building effective tax systems is a vital and central part of the development process. ATAF thus strives towards promoting and supporting the mobilisation of domestic resources through the provision of a continental platform to improve the performance of tax administration in Africa. Better tax administration will enhance economic growth, increase accountability of the state to its citizens, and more effectively mobilise domestic resources. And this is highly reliant on efficient and effective tax systems within revenue authorities. ATAF is thus an organisation that, by focusing on improving African structures for harnessing African tax resources, would also ensure that many of the essential foundations for successful state building will be put in place.

3. While the ultimate aim is for developing countries to be in a position to generate sufficient domestic resources to fully finance their own development, assistance from more developed countries will still be required until this goal is reached. It is thus important for developing countries to be supported, both technically and financially, in their efforts to develop their own systems and structures that will have a catalytic effect on their development.

4. The DFID has, since the ATAF Inaugural Conference in November 2009, been an important development partner of ATAF. While it has in the past, and continues to, provide technical and financial assistance to individual African tax administrations, DFID’s direct support to ATAF and its workplan has made a significant contribution on an even broader scale in that ATAF is in a position to identify and focus its interventions on the real and direct needs and priorities of its members. In this regard, the DFID has contributed to the ATAF pooled fund, which enables the organisation to deliver on its annual workplan.

5. With the support of DFID and other development partners, ATAF has, to date, focussed much of its attention on developing the skills and capacity within the tax administrations of its member countries through its annual Capacity Development Programme. While this has been an important aspect of our workplan thusfar, other matters requiring greater focus are the establishment of a permanent and sustainable Secretariat, and the establishment of the Technical Assistance Unit that would be able to respond to the needs of individual members. We are convinced that the DFID (and the UK through HM Revenue & Customs) would be able to play a significant role in developing African tax administrations through direct support and technical assistance to ATAF in these afore-mentioned areas.

COMMENTS ON THE ROLE OF THE UN TAX COMMITTEE AND/OR THE OECD:

1. The UN Taxation is central to implementing the development agendas of developing nations and, just as importantly, in achieving the Millennium Development Goals (MDGs) as initiated by the UN. The UN Committee of Experts on International Cooperation in Tax Matters has an important role to play in supporting the mobilisation of domestic resources. It is the only body within the UN system that focuses on those specific tools and systems of tax administration that would assist countries in developing home-grown solutions to diminishing their dependence on donor assistance.

2. The UN has the advantage of being at the forefront of international engagements. The UN Committee, therefore, should be used as a platform to further these debates at an international level while involving key role players from both developed and developing countries as well as international organisations. The importance of the UN Committee of Experts should be emphasised by increasing its resources and reach so that it can partake in collaborations with ATAF and other regional tax groupings on technical assistance programmes as well as capacity development initiatives.

3. The OECD’s Centre for Tax Policy and Administration (CTPA) has been a key development partner and important support of ATAF since its establishment. The CTPA provides regular assistance in the form of guidance and technical expertise for ATAF’s Capacity Development Programme as well as other important events on the ATAF calendar. There is a healthy degree of exchange of ideas between the two organisations.

4. ATAF does, however, feel that more should be done by the OECD to provide hands-on and direct technical assistance to developing countries to build the capacity and systems to implement those tax products that the organisation is so good at developing. Without this intervention, the OECD’s products (such as its Model Tax Convention and the Convention on Mutual Administrative Assistance in Tax Matters) will remain documents on paper that would be difficult to implement in developing countries without the necessary skills, resources and capacity.

February 2012