We recommend the International Development Committee (IDC) calls for evidence on ‘Tax for Development’ and the role of the UK in supporting in both national and international spheres.
Taxes have long been recognised as a key pillar to financing development in low-income countries (LICs) providing a more sustainable form of income that reduces dependencies on aid and debt and contributes to more accountable and effective governance. For context about the scale of the work to be done, while the UK raises more than 35% of its GDP in taxes, the average for LICs raises just under 13%.
The UK has long been a strong global voice in supporting authorities in LICs to raise domestic revenues. This has included technical collaborations with HMRC, international fellowships in revenue authorities, funding research and capacity building. It has also been one of the largest donors to the Addis Tax Initiative, which had emerged from the third International Conference on Financing for Development in 2015. The UK’s position in the ongoing conversations will be consequential, and a central aspect of its contribution to global development agendas.
The Committee last engaged with this topic in 2012 and now is an opportune time to revisit the UK’s record in this area. In 2024, momentum built around key tax and revenue mobilisation questions such as global wealth taxes (under the auspices of Brazil and South Africa leadership in the G20), international tax cooperation with negotiations over a new UN Framework Convention and preparatory meetings for next year’s fourth ‘Financing for Development’ conference (the last one took place in 2015). This set to build and continue in 2025.
Pressure is also mounting on governments from their citizens protesting against tax increases, which in Kenya proved particular deadly and disruptive earlier this year.
An IDC inquiry would provide an opportunity both to take stock of UK activities and to revisit them in a rapidly changing global context; recognising the increased financing needs created by the pandemic recovery and climate emergency, the impact of sovereign debt crises and tax protests, and the opportunities created through the rise of digital technologies. IDC could provide both critical input on how current activities and strategic planning retain and potentially expand the UK’s global leadership on tax and development.
Two policy areas which would benefit from further strengthening and improvement are:
ICTD has over 15 years’ experience of research on tax and development and the practical implementation of this research in LICs and is partly funded by FCDO.