Post 2015: Global Action for an Inclusive and Sustainable Future

lmIcs and lIcs (oEcD, 2011b). Figure 7.5 shows
the difference in the scale of potential tax increases
between countries in different income groups. While
potential additional tax revenues as a share of GDp
are similar across the groups, the absolute potential
amounts differ substantially. the oEcD (2012b)
therefore argues that only the group of umIcs has
the potential to raise enough taxes to fund social
expenditure in order to reach the mDG targets on
poverty reduction, education and health. moreover,
several lIcs and lmIcs, among them côte d’Ivoire,
have already reached their tax potential and
collect more taxes than might be expected given
their structural characteristics (oEcD, 2011b).
Increasing the tax potential in countries where it is
low is thus a necessary but medium- to long-term
task because it requires broadening the tax base by
fostering the growth of productive sectors, which
can be politically challenging. political challenges
arise because growth of the productive sector
means finding ways to strengthen coordination
and collaboration between the state and private
investors (moore and Schmitz, 2008), whereas
reforms of the investment climate tend to reduce
the privileges of certain powerful actors within
the private sector and government and can thus
increase conflicts between them.
Limited tax capacity
capacity constraints also limit the potential
contribution of taxation to development
finance. many developing countries have
successfully increased the technical capacity of
tax administrations, for instance by adopting
information and communication technologies
(Icts), ensuring adequate staffing or developing
the capacity for tax expenditure and wider tax
policy analysis (ImF, 2011). Some governments have
stepped up their efforts to improve the technical
capacity of sub-national tax administrations
in order to address the mismatch between the
devolution of public financial responsibilities and
Figure 7.5 Total potential tax increases (in US$ billion) and average potential tax
increases as a share of GDP by income group (annual amounts)
% of GDP
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Low-income Low-middle-
income
Upper-middleincome
Total Potential Tax Increase (USD Billion) Average Potential Tax Increase
Source: OECD (2012b)
poSt-2015: Global actIon For an IncluSIvE anD SuStaInablE FuturE
70
60
50
40
30
20
10
0
USD Billions
UMICs are
generally
better able to
mobilise enough
resources through
taxation to fund
development
spending than
are the groups
of LMICs and
LICs.
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