The COVID-19 pandemic has cost lives and disrupted economic activity worldwide. It has impacted government budgets globally by reducing tax receipts and increasing spending on programs to save lives and transfer income to those adversely affected by the pandemic.
CGD Policy Blogs
In a paper and blog we delve into political considerations that influence the implementation of tax reforms in 45 emerging market and low-income economies.
Sustaining Low-Income Countries’ Progress Towards the SDGs in a Post-COVID 19 World: What is Achievable?
Following on from the “Financing Low-Income Countries: Towards Realistic Aspirations and Concrete Actions in a Post-COVID World" conference in October, Mark Plant and Sudhir Shetty outline some of the key themes discussed at the conference.
The Addis Ababa Agenda for financing development pays special attention to domestic revenue mobilization to help finance the Sustainable Development Goals (SDGs) in developing countries. In the case of sub-Saharan African countries, much of the discussion has centered on improving their overall revenue performance, and while they have, there is still a long way to go.
The level and composition of taxes and expenditures vary considerably across low-income countries, which means their effects on countries’ growth, economic stability, redistribution, and welfare also differ.
Many developing countries are pursuing domestic revenue mobilization (DRM) initiatives, which is critical for them to finance the spending necessary to enable sustainable development. The need for DRM has now taken on greater urgency given the fiscal implications of the COVID-19 crisis.
While there is debate in the management literature about the primacy of measurement in effecting change, there is no doubt that it is a necessary component of bringing about lasting change.
In a recently published paper we examine the experience of 45 developing countries (23 emerging and 22 low-income countries) over the 2000-2015 period and find that tax reforms have raised the income share of the poorest population groups within countries.
Even as the COVID-19 curve begins to flatten in the Northern Hemisphere, the developing world is just starting to feel its onslaught. Just as in the United States, where some of the most effective responses to the global pandemic are generated locally, the success of developing countries will also be determined by the actions of local leaders, citizens, and organizations—including fiscal responses.
Virtually all countries in the world have responded to the COVID-19 crisis by implementing fiscal and monetary measures, significantly larger in relation to national output than those employed during the 2008 financial crisis. The magnitude of fiscal measures to counter the shock varies across developing and advanced economies.