Supporting fair tax systems

Domestic Revenue Mobilisation (DRM), is key for governments to fund their own development goals, finance gender-responsive public services such as health and education and to reduce economic, social and gender inequalities.

Donor countries and institutions can contribute to strengthening DRM in developing countries though development cooperation aid and the European Union (EU) is the largest provider of aid to DRM amongst the donors. The European Union (EU) is a political and economic union of 27 member states that are located primarily in Europe.

This paper examines how the EU’s aid to DRM is disbursed looking at what ActionAid and Oxfam consider essential for a good quality DRM project: country and regional ownership of DRM, fairness, inclusiveness and local empowerment. Essentially: more revenue collected in a more progressive way, under a robust and inclusive process locally. For this paper, ActionAid and Oxfam analysed the European Commission (EC)’s DRM allocations for 2016 and 2017 as reported in the Addis Tax Initiative (ATI) DRM database.2 The data includes, for each project, the amount of the disbursement, the developing country in question, which organisation implemented the project, and a few sentences describing the project and its objectives. Although the ATI DRM database draws on OECD DAC reporting, and as such is generally released with a couple of years’ delay,3 the database provides useful information about the European Commission’s DRM allocations.

Overall, the analysis shows that the EU is excelling in some areas compared to other DRM donors, like the quantity and country-ownership of DRM, but there is clear room for improvement in the following fields:

transparency of information, regional ownership, fairness of taxation, gender equality, inclusiveness and local empowerment, the practice of EU delegations, and the role of the EU and Member States in the multilateral institutions. Policy Coherence for Development (PCD) and a more equal participation of developing countries in tax reforms are also needed for DRM to really work.

Finally, the experiences of ActionAid and Oxfam in projects in the Global South, provided at the end, offer tangible examples on how CSOs measure inequalities and enhance fairness, inclusiveness and local empowerment on the ground. With this paper ActionAid and Oxfam intend to contribute to the future shaping of EU DRM programming and to support the European Commission’s commitment to more “efficiency, effectiveness, fairness and transparency of DRM”.

We also believe that the EU, as a member of the ATI, the global multi-stakeholders partnership on DRM, is in a position to raise the bar of DRM support amongst donor countries and institutions. While at the same time, champion stronger country-ownership, a fairness component, CSOs involvement and local empowerment in DRM projects.