18 July 2016: A side event at the 2016 High-level Political Forum on Sustainable Development (HLPF) marked the first anniversary of the Addis Tax Initiative (ATI), which was launched at the Third International Conference on Financing for Development (FfD), in Addis Ababa, Ethiopia, in 2015. Participants discussed recent developments in the ATI, as well as partner countries’ needs in the area of domestic resource mobilization.

The event, titled ‘Harnessing Domestic Resources: How partner countries can benefit from the Addis Tax Initiative,’ took place on 18 July 2016, in New York, US, organized by the Ministry of Foreign Affairs of the Netherlands, the European Commission (EC), the UK Department for International Development (DFID), Global Affairs Canada, the US Agency for International Development (USAID), and the International Tax Compact.

ATI brings together more than 40 countries and international organizations in a collective global effort to increase domestic resource mobilization and improve the transparency, fairness, effectiveness and efficiency of tax systems, to support countries in achieving the Sustainable Development Goals (SDGs). According to an ATI press release, during the Initiative’s first year, development partners committed to collectively double technical co-operation in the area of domestic resource mobilization by 2020; Georgia, Namibia, Paraguay, Rwanda, and Slovakia joined ATI, the Asian Development Bank (ADB) and the Center of Excellence in Finance joined as supporting organizations, and the G7 leaders and G20 Finance Ministers released declarations of support for ATI.

At the side event, Christopher Heffernan, Member of ATI Steering Committee, announced that the Committee has created a “light” reporting structure, using the newly created Organisation for Economic Co-operation and Development (OECD) reporting standard code for Domestic Revenue Mobilisation. He explained that partner countries will measure progress based on their own indicators and targets, and that preliminary data will be shared during the Second High-Level Meeting of the Global Partnership for Effective Development Co-operation (GPEDC), to be held in Nairobi, Kenya, in November 2016. He further noted that ATI: has helped match developing countries looking for assistance with development partners that can provide that assistance; plans to conduct a survey for assessing developing countries’ needs; and will publish its first report in early 2017.

Noting that addressing tax erosion in Africa could bring US$49 for each US$1 invested in tax reform, Karina Gould, Parliamentary Secretary to the Minister of International Development of Canada, stressed the need for: increasing fiscal revenues in fragile, low-income countries (LICs) and middle income countries (MICs); a multistakeholder, transparent process for evaluating and designing tax reforms; and political support to overcome barriers to change. Gwen Hines, DFID, noted that strengthening countries’ tax baselines is the shared responsibility of the international community, and stressed the need to focus on addressing corruption, base erosion and profit shifting (BEPS), and tax evasion.

German Rojas, Ambassador of Paraguay to the US, stressed the need for technical assistance and transfer of knowledge and experience, to improve income distribution in developing countries. Gaspar Frontini, EC, said the Commission is in the process of updating the European Consensus for Development, in which domestic resource mobilization will be one of the key issues. He enumerated ways in which development partners can support this mobilization: providing support both for revenue and expenditure management; leading by example and “putting their own house in order”; and partnering with multilateral organizations such as the UN, the International Monetary Fund (IMF), and the World Bank for joint initiatives in the area.

Lasha Khutsishvili, Georgia’s Ministry of Finance, said his country has more than doubled its tax-to-GDP ratio and expanded its public expenditure through a series of tax policy reforms. Among these reforms: the government eliminated 15 types of taxes, leaving only six; it reduced income tax by 15% and corporate tax by 20%; through a new corporate income tax reform, profit will be taxed upon its distribution, not its production, to stimulate the creation of companies and attract foreign direct investment (FDI); it simplified the tax accounting and tax administration systems; it eliminated many bureaucratic barriers through information and communication technology (ICT) tools, which also reduced the compliance cost for tax administration; and it simplified the customs procedure and updated the infrastructure of tax points. He added that Georgia aims to increase tax compliance up to 85% in the near future.

Márcio Verdi, Inter-American Center of Tax Administrations, said the Center provided 19 training programmes to developing countries and reached 2,000 online students in 2015, as currently universities provide no courses on improving tax collection systems. He noted a few risks that stem from knowledge gaps: many developing countries have signed to start automatic exchange of tax information when they have never exchanged information before; and that many developing countries lack bilateral agreements on tax evasion, but now seek multilateral agreements, which are even more complicated. Verdi said ATI is very important for starting an all-encompassing conversation on tax matters, noting that the current international trend is to push for BEPS, when many other problems needs to be tackled, including issues related to informal economies. [IISD RS Sources] [ATI Website] [ATI Press Release] [HLPF Website]