International guidance on capacity development for taxation broadly parallels the wider literature on capacity development (e.g. UN, 2013a). There are also a number of country case studies on capacity development for taxation (Holmes, Ndihokubwayo, & Ruvakubusa, 2013; Bennet, 2012; Danida & Bhutan Department of Revenue and Customs, 2011; UNDP, 2008).
A joint report by the IMF, OECD, UN and the World Bank recommends deepening international co-operation, improving the transparency and tax compliance of multinational enterprises, and strengthening efforts to measure progress (International Monetary Fund et al., 2011). Draft proposals for strengthening tax administration capacity from the Effective Institutions Platform (EIP, n.d.) include: basing efforts on comprehensive analysis; adapting to context; supporting national priorities, ownership and leadership; addressing international, national and sub-national levels; engaging with a broad range of stakeholders both inside and outside government; and supporting principles of accountability, transparency, and participation. The EIP highlights training, South-South cooperation, and natural resource taxation as being particularly relevant for developing countries.
Interest in South-South cooperation for capacity building in tax administration has been growing. A recent OECD report describes South-South cooperation as a ‘low-cost, high-value channel’ and recommends ‘strong support from the international community’, but notes potential limits to partners’ absorptive capacity (OECD, 2013, p. 15). The UN’s South-South Sharing of Successful Tax Practices for Development (S4TP) initiative aims to identify and disseminate successful Southern practices in tax policy and administration, identify opportunities for cooperation, and build awareness of the value of South-South exchange, particularly in working on illicit financial flows, tax training, transfer pricing, and taxation and climate change. The Capacity Development Programme on International Tax Cooperation is another UN programme, overseen by the Financing for Development Office, for strengthening the capacity of ministries of finance and national tax authorities in developing countries (UN, 2013b). It organises training and guidance material on international double taxation agreements, broadening the tax base and transfer pricing (UN, 2014). Many other bilateral and multilateral agencies and other organisations also provide capacity development assistance for tax reform: reports commissioned by GIZ and the UN have each identified more than 40 such agencies (Köhnen, Kundt, and Schuppert, 2010; Michielse & Thuronyi, 2010).
Key reading
Holmes, K., Ndihokubwayo, D., & Ruvakubusa, C. (2013). For State and Citizen: Reforming Revenue Administration in Burundi (Policy Voices Series). London: Africa Research Institute.
This case study was produced by current and former senior officials of the semi-autonomous tax collection institution of Burundi (Office Burundais des Recettes, OBR), which was set up in 2009. The paper describes how tax collection and administration was reformed in Burundi to reduce corruption, improve services, implement legislative reforms and widen the tax base. Recommendations for the OBR are: work more closely with local authorities to widen the tax base in the regions; collate and re-examine provisions for offering revenue exemptions; improve communications; support a comprehensive transparency and anti-corruption campaign, with government agencies; diversify its external funding to help in pursuing multiple objectives simultaneously; and deny access to public services and tenders to anyone who is not tax compliant.
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Bennet, R. (2012). A Change Agent in the Tax Office: Nigeria’s Federal Inland Revenue Service, 2004-2009 (Innovations for Successful Societies Policy Note ID184). Princeton University.
This case study examines the reform of the Nigerian Federal Inland Revenue Service in 2004. A new executive chairperson was appointed and tasked with reforming the agency and diversifying tax collection to reduce dependence on oil revenue. The case study describes how the chairperson overcame opposition from private consultants who benefited from the existing system, defeated institutional inertia, and reduced corruption. Steps toward capacity development included establishing control over staff recruitment independently from the Federal Civil Service Commission, improving training using a mix of domestic and international consultants, reorganising and integrating departments and offices, simplifying interactions with taxpayers, increasing automation, working with banks to process payments, upgrading computer equipment, and setting up a new internal unit to fight corruption.
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Danida & Bhutan Department of Revenue and Customs (2011). Bhutan: Building capacities to build revenues. In Woodhatch, T., Casazza, A., Lucas, B., & Werter, F. (Eds.), Capacity Results: Case stories on capacity development and sustainable results (pp.7-9). Learning Network on Capacity Development and IBON Foundation.
This short case study covers Bhutan’s attempts to broaden the tax base by introducing personal income tax and improving collection of other direct taxes. The Bhutan Department of Revenue and Customs achieved efficiencies through decentralisation to regional offices, training, upgrading IT systems, and public education on compliance. Intensive in-country training and professional development in revenue administration, and the introduction of a new IT system for tax and customs have improved tax administration. Capacity development efforts have been supported by strong and stable leadership within the Department, by Danish financial support which was aligned with the national-driven strategy, and by technical assistance to support the drafting of legislation and the introduction of new IT systems.
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UNDP. (2008). Revenue’s Role in the Quest for Inclusive Development, What Works and What Can Work Better? UNDP.
This publication includes a meeting report and case studies presented at a 2008 conference on ‘South-South Sharing of Successful Tax Practices’ by experts and administrators from different countries, international organisations and campaigning organisations. The meeting report highlights a number of focus areas for capacity building including: developing a database of recognised tax experts in particular fields; promoting practical case-study-driven training sessions; disseminating successful practices effective in developing skills and keeping expertise within tax administrations; promoting the need to fully understand the impact of tax incentives designed to attract investment; and promoting ongoing beneficial exchange of experiences, both what has worked and what has not. The meeting highlighted a need to improve developing country capacity on issues such as transfer pricing, comparative tax law, and countering cross border tax evasion. An international tax appeal tribunal was suggested in place of arbitration clauses in Tax Treaties.
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- For further information see S4TP. (2014). About S4TP. South-South Sharing of Successful Tax Practices for Development (S4TP).
- EIP. (n.d.). Strengthening the capacities of tax administration to raise domestic resource mobilization (DRM) in partner countries: Draft Proposal from Pillar IV. Boulogne-Billancourt: Effective Institutions Platform (EIP) See document online
- International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations & World Bank. (2011). Supporting the development of more effective tax systems: A report to the G-20 development working group by the IMF, OECD, UN and World Bank. See document online
- Köhnen, D., Kundt, T., & Schuppert, C. (2010). Mapping survey: Taxation and development. Bonn: Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ). See document online
- Michielse, G. & Thuronyi, V. (2010). Overview of cooperation on capacity building in taxation (Report E/C.18/2010/CRP.11). New York: United Nations. See document online
- UN. (2013a). United Nations guidance note for effective use and development of national capacity in post-conflict contexts. New York: United Nations. See document online
- UN. (2013b). United Nations capacity development programme on international tax cooperation: Progress report (Background note E/C.18/2013/CRP.14). New York: United Nations. See document online
- UN. (2014). United Nations capacity development programme on international tax cooperation: Progress report (Newsletter Number 2014/5). New York: United Nations. See document online
- OECD. (2013). Tax and development: Aid modalities for strengthening tax systems (DCD/DAC(2012)34). Paris: OECD. See document online