Ways in which development can be financed on a sustainable basis is a key debate today, culminating in a major political meeting in Addis Ababa this month, under the auspices of the UN. It’s a fair bet that taxation will claim its rightful place on the agenda, alongside the traditional topic of official development assistance
(ODA) and the new trend for private financing, particularly for investment and especially when the latter is “innovative”. In the lead-up to Addis Ababa, there has been some focus on tax-to-GDP ratios and the role that they can play in helping to measure a country’s revenue-raising effort. All countries are different and as a result, determining the right levels of tax in any country will necessarily involve a case by case assessment. That said, the increased focus on tax-to-GDP ratios has highlighted the need for better and more internationally comparable revenue statistics.
In recent months there has been a proliferation of initiatives and position papers calling for taxation that is more efficient, more attractive for investment, more transparent, more progressive, more straightforward, more stable, etc. How can this be achieved? How do public authorities or citizens grapple with the dense thicket of their tax systems? The prerequisite for designing and administering sound tax policy, whether it be in OECD countries, among developing countries or anywhere else, is a reliable, sustainable and readily available analytical tool for understanding tax data and making comparisons.
Governments, researchers and citizens all need access to reliable, detailed and up-to-date revenue data that are based on a common language. Does property tax cover movable goods, such as cars? Are VAT revenues calculated before or after refunds? Are the revenues of self-employed professionals classed as business income or personal income? Are we looking at the same years (fiscal, calendar)? Are levels of government the same in federal states and countries with hyper-centralised models? There can be significant differences in how countries define these issues, which if left unharmonised result in flawed comparisons and analysis. Having detailed data collected and consistently classified using transparent, internationally agreed methods strengthens the capacity of policymakers and others to make informed decisions about the optimal design of tax policy.
The Revenue Statistics project aims to meet these needs. The OECD, along with its regional partners, proposes to collect and publish the public revenue data of countries all over the world in a comparable format, offering 40 years of experience and a specific methodology for defining and classifying tax revenues. How this classification helps to realise more revenues, or to discover new sources of revenue or to shift policy to favour more efficient, more growth-friendly and fairer sources of taxation, is in the hands of the policymakers.
Having a common language for revenue statistics is common sense. After all, countries with similar revenue levels are often confronted with the same issues when it comes to tax policy. Countries with shared borders often want to integrate their economies, or at least coordinate their tax policies to prevent a race to the bottom. Decision-makers want to measure the impact of previous reforms or estimate the possible effects of a policy that seems to have worked somewhere else. Revenue Statistics in Latin America is a case in point. Published over four years using data produced jointly by the Inter-American Centre of Tax Administrations (CIAT), the Economic Commission for Latin America and the Caribbean (ECLAC), the OECD and the OECD Development Centre as part of the OECD’s LAC Fiscal Initiative, Revenue Statistics in Latin America demonstrates how important consistent, high quality and internationally comparable revenue data are for informing discussions among key tax policymakers as they grapple with the challenges of supporting growth and domestic resource mobilisation.
For more on Revenue Statistics, visit: www.oecd.org/tax/tax-policy/revenue-statisticspublications.
OECD (2013), Fragile States: Resource Flows and Trends, OECD Publishing
Owens, Jeffrey and Richard Carey (2009), “Tax for development” in OECD Observer
No 276-277 December 2009-January 2010, available at www.oecdobserver.org
©OECD Observer July 2015