ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Enhancing Tax Revenues

A Global Priority

Drawing on global experiences and comparisons, this article argues for the need to increase cooperation between countries to plug tax loopholes and brin in systems which enhance the tax to GDP ratio without hurting investments. Increasing this ratio is the only way to improve development spending while avoiding fi scal diffi culties.

The ability to pursue developmental policies depends crucially on available fiscal space, which relies mostly on domestic revenues, especially taxes. However, tax revenues in most low and middle income developing countries are low. The average tax-GDP (gross domestic product) ratios in low-income and lower-middle income countries are around 15% and 19%, respectively.

Although non-tax revenues may add significantly to total revenues in some countries, these ratios are typically low compared to the Organisation for Economic Cooperation and Development (OECD) average of over 35%. Low- and lower-middle income countries should take steps to increase their revenues after considering various options for doing so.

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