The report shows that developing countries are encouraged to aim for a tax-to-gross domestic product (GDP) ratio of at least 15%, a benchmark established under the United Nations’ Compromiso de Sevilla (Seville Commitment), to strengthen institutions, deepen financial markets, and support long-term economic growth.
Despite this, tax revenue in many developing countries remains persistently below 15%, with little improvement over the past decade. Currently, 71 developing countries have tax-to-GDP ratios under this threshold. Among these, 23 are fragile and conflict-affected states, 38 are resource-rich, and 40 fall within the low-income group.
Estimates indicate that low-income developing countries could mobilise an additional 5% of GDP through comprehensive tax reforms. However, achieving the 15% target will also require improvements in institutional capacity, particularly in fragile and conflict-affected states.
Effective revenue mobilisation relies on integrating tax policy, tax law, and revenue administration, a strategy commonly referred to in academic literature as the tax system approach. Guided by this framework, medium-term revenue strategies can chart a path to achieving tax-to-GDP ratios of at least 15%.
For many low-income countries, especially those affected by conflict, a pragmatic, sequenced approach may be more feasible. Reform options include: Tax design, aligning tax structure with economic realities, broadening the tax base, and reducing distortions; Revenue administration, Strengthening institutions, improving compliance, and leveraging digital technologies to enhance efficiency.
Implementing such reforms not only increases government revenue but also builds stronger institutions, promotes fiscal sustainability, and supports inclusive growth.
By combining careful planning, phased reforms, and capacity building, low-income and fragile countries can gradually move towards a more robust tax system that underpins economic development and stability.
–IMF/ChannelAfrica–
