The International Monetary Fund (IMF) estimates that emerging markets and developing economies need US$3 trillion annually by 2030 to be able to finance their development objectives and climate transition, which is equivalent to 7% of Gross Domestic Product (GDP). ) combined of these countries in 2022.
According to a survey carried out by the institution, many countries have the potential to increase their proportion of taxes to GDP by up to 9 percentage points “through better fiscal design and stronger public institutions”. Since the 1990s, the proportion has increased by about 3.5 percentage points to 5 percentage points. According to the Fund, this change would contribute to financial development and private sector initiatives.
The institution highlights that some countries have been successful in obtaining revenue, including Brazil, Albania, Argentina, Armenia, Colombia and Georgia. “Much of this increase occurred before the 2008 global financial crisis, suggesting, however, that progress has been difficult and fragile in the face of recent shocks”, he assesses.
The Fund also highlights some essential reforms to develop the fiscal capacity of governments, such as improving the design and administration of main national taxes, implementing reform plans, as well as rationalizing tax expenditures, in addition to applying a more neutral taxation of capital income. and improve the use of property taxes.
According to the institution, governments need evidence to “convince” the public of gains and show progress in implementing policies. “This requires adequate staffing to predict and analyze the impact of tax policies on the economy, greater professionalization of public servants working on tax design and implementation, better use of digital technologies to strengthen compliance, and transparency and certainty in the way policy and administration are translated into legislation.”
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