Taxation combined with economic growth

Of course, how and from whom tax is raised matters, not just how much. It is clear that a broad-based but low tax rate system is effective in resource terms. It is also clear that a fair and transparent system that operates with social consent is important for good governance. But we have to be realistic about the challenges.

Poor countries often lack the resources and capacity to build effective tax collection systems. Citizens may often be skeptical about the use of public funds. Tax havens, capital flight and international tax evasion deprive governments of revenues needed for hospitals, schools and roads, forcing honest taxpayers to pick up the tab.

Change will only come when taxation is driven by the people. The closer association of civil society in the revenue raising and expenditure process will increase self-reliance by mobilizing domestic resources across a broader base, thus increasing resources for growth, improving democratization of the state, and reducing corruption.

Who are the actions that will make the difference?

Below are some keystones for a better and well synchronized tax system with the economy environment.

First, should be developed a renewed focus on enhancing domestic revenues through broad-based taxation combined with higher aid flows, at least in the medium term. Second, the system needs a help empower a broader base of citizens through involvement in the process of revenue raising and expenditure. As a third step, should be supported revenue raising efforts. Forth, the assistance could be oriented to assist in retain and taxation of the profits attributable to citizens, and increasing transparency and the recognition of internationally agreed standards on exchange of information to counter tax evasion and other abuses. As an fifth step is linked with the expanding co-operation between international organisations active in the tax area. The final move is to work with the people and organisations who are transforming the landscape, recognizing that one size does not fit all and that many voices need to be heard.

All this moves should be implemented because is mainly the tax that provides a long-term financial platform for sustainable development.