Students attend class at a school in northern Ghana. If countries can do a better job collecting equitable revenue, they could have more funds for education and simultaneously make tax systems fairer. Commitments to the Addis Tax Initiative should result in countries doing a better job of more equitably mobilizing domestic revenues for schools and other essential social spending priorities. Photo by George Osodi/Panos for Oxfam America.

If we are to end the injustice of poverty, how governments collect revenue matters

Nathan Coplin is Oxfam’s policy advisor for Accountable Development Finance in Washington, DC.

Why has Oxfam joined the Addis Tax Initiative?

Two words: fiscal justice.

Fiscal justice demands accountability from governments to citizens for how public resources are collected (tax and non-tax revenues), managed (governance) and used (spending). But this is not easy—especially for revenue systems, which can be intentionally opaque and technical. And making revenue systems more transparent and fairer often (but not always) conflict with powerful economic and political interests. Partly as a result, we are witnessing two concerning trends: (i) tax systems that feed inequality, including through the steady decline of corporate taxation and an increasing reliance on consumption-based taxation, shifting responsibility away from those most capable of paying taxes to some of those least able); and (ii) shrinking political power and civic space for actors who challenge unfair and opaque tax regimes.

Oxfam is committed to reversing these trends. We must because how governments collect revenue matters and is part of the journey we are on to end the injustice of poverty. The tax system impacts a poor household’s food budget, the economic opportunities for young women and the concentration of economic and political power. As the main hub for “Domestic Revenue Mobilization” (aka DRM), the Addis Tax Initiative (ATI) should be leading the conversation on potential solutions.

What is the Addis Tax Initiative (ATI)?
At its core, the Addis Tax Initiative is a political commitment to strengthen government efforts to increase revenues – “domestic revenue mobilization” (DRM). ATI emerged from the government negotiations in Addis Ababa in 2015 on how to finance to the Sustainable Development Goals (SDGs). Governments made 3 commitments: 1) donors will double support for DRM by 2020; 2) Countries will step up DRM to attain the SDGs; and 3) all countries commit to policy coherence for development. To date, 42 governments are on board. In addition, there are 14 supporting organizations–of which now includes Oxfam.

We decided to join as a “supporting organization” for three reasons:

1. Promises are hard to keep.

Oxfam believes all three ATI commitments are important, but there is an urgent need to bolster action on these commitments. As of now, donors are currently not on track to achieve commitment 1 (doubling support for DRM)—see our most recent report “Doubling Down on DRM”. However, there are indications that some donors are committing more resources to DRM (e.g. the most recent US President’s budget request included 75 million for DRM, compared to the $36.8 million it reported in 2015). But simply doubling aid will not deliver the development outcomes that billions of people need. What is most important is how we use these new resources and the current political momentum behind DRM. ATI Commitments 2 (DRM for SDGs) and 3 (policy coherence) are equally, if not more, important. But very little has been done to clarify actions for these commitments. Oxfam views its role as a “supporting organization” to hold ATI members accountable for all three commitments, as well as to help achieve them. This requires monitoring support for DRM, including research (e.g. on French aid for DRM in Mali) and analysis (e.g. “State of DRM”). Oxfam’s latest analysis “Doubling Down on DRM” is meant to supplement the ATI Monitoring Brief.

2. Revenue collection is not all about the money

DRM is not just about increasing revenue collection. As part of ATI commitments, governments agreed to “improve the fairness, transparency, efficiency and effectiveness of their tax systems.” Oxfam believes successful DRM must improve how governments raise revenue, so that revenues are raised transparently and fairly and don’t exacerbate inequality. Last year Oxfam and Development Finance International (DFI) launched the Commitment to Reducing Inequality (CRI) Index which examines, among other indicators, the tax regimes in more than 152 countries.

But to date, fairness has been largely left out of the equation. According to the most recent ATI dataset, only 2.8 percent of DRM projects (18 of 634) contain clear objectives on equity or fairness.  Worse yet, only 3 DRM projects (less than one-tenth of a percent of the 634 projects) account for gender equity. (See Oxfam report “Doubling Down on DRM”)

While project descriptions do not reveal all the goals of each project, it is clear that donors and governments need to do more to prioritize equity in DRM strategies. To make this a reality, ATI will need to build consensus on better ways to measure progress of DRM (moving beyond tax-to-GDP ratios). Agreeing on new indicators of success will be key, and Oxfam is prepared to help advance this dialogue.

3. The citizen-state compact needs greater investment

Citizen trust and strong civil society stakeholders are essential to accountability for how governments raise and allocate resources. But revenue policies are often unresponsive to citizens. And this is not just a developing country problem. Political capture of tax policy is a fundamental problem in the United States. This should not be how the citizen-state compact functions. (See Oxfam report Doubling Down on DRM”)

Donors and governments must also recognize that civil society adds tremendous value as researchers, educators and monitors of progress on DRM. Academic institutions and regional tax organization (RTOs) are also critical actors in this space. But all three are currently being underappreciated—making up just 4 percent of total support for DRM (2016).

Oxfam cannot stand in for global civil society as a whole—but as an ATI Supporting Organization, we will bring the voice and experience of our partners and 90 plus country offices to the table. We will urge ATI partners to increase their investment in the citizen-state compact. For its part, Oxfam is spending millions of dollars supporting partners working to make tax systems more fair through our Fiscal Accountability for Inequality Reduction (FAIR) program operating in more than 40 countries around the world.