Taxation on the Line

Another new course that JVI has scheduled to offer in the summer—August 31 to September 3—concerns the future of taxation. As in developed countries, tax systems in emerging countries need to be effective and efficient to ensure that they raise enough revenue to finance essential expenditures, do so in an equitable way while harnessing growth, respect international norms, and are in line with respective administrative capacities.

This is a particularly challenging task in the age of digitalization, globalization, and confronting a well-established practice of international tax avoidance and evasion. Vulnerability to base erosion and profit shifting is high in environments with underdeveloped or outdated tax laws, low enforcement and general capacity constraints. In the long run, structural factors such as shrinking income from trade taxes and the volatility of income from natural resources provide an impetus for a structural shift towards domestic revenue mobilization. At the same time, high informality and regional disparities as well as gaps in public infrastructure make it harder for emerging countries to adjust their respective tax systems.

The COVID-19 crisis acts as a catalyst to these structural constraints. Not only is there a need for an immediate response to the crisis focusing on public health and business survival. In the medium and longer term, countries will face the challenge of adapting tax policies to raise additional revenues to finance massively increased expenditures while preserving growth. Ensuring fairness of taxation in the context of rising inequality is key to uphold legitimacy as a core condition for compliance with tax laws.

There is therefore a need for both Ministries of Finance as well as Tax Administrations to develop a shared understanding of a modern tax system in their respective country, and to adopt a practice of dialogue and reflection regarding the development and implementation of new tax laws and policies.

Against this backdrop, JVI invites officials in the JVI region concerned with tax policies and tax administrations, from Tax Administrations and Ministries of Finance and Economy—but also coming from Prime Ministers’ Offices, Financial Intelligence Units, and Central Banks. The course will draw on the experience of course participants in reforming their tax systems, and will provide a platform for exchange on ways forward towards mobilizing domestic resources in an inclusive, sustainable and effective way.

We are currently planning this course as a face-to-face meeting. In case of continued travel restrictions, a shorter online version will be offered as a means to connecting and sharing experiences. We will post dates and details on the website.

Barbara Dutzler, Senior Economist, JVI