Fiscal and Tax Policy Administration
Tax systems represent the connective tissue between States and their citizens and the vehicles to achieve economic and social justice. Ensuring fair tax systems provides an opportunity to enhance social cohesion as well as reduces inequalities. An efficient tax system can spearhead structural transformation and investment in the country and fosters economic growth. Tax policies should be placed at the forefront of the crucial debate on the redistribution and mobilization of resources for financing development as improved tax collection can help strengthen domestic enabling environments and build essential public services. It can also be used to unlock additional finance through blended or pooled financing and risk mitigation, notably for infrastructure and other investments that support private sector development. Nevertheless, uncertain tax systems can stimulate aggressive tax planning and profit shifting. For example, some corporations shift their profits from uncertain and high tax locations to lower ones exploiting the gaps in the tax systems.
The United Nations through its Regional Commissions alongside other international organizations have been advancing comprehensive reform strategies to administer tax policy, tax legislation, and tax administration. The Addis Ababa Action Agenda highlights for example the efforts of the Global Forum on Transparency and Exchange of Information for Tax Purposes and the Organization for Economic Cooperation and Development (OECD) on preventing base erosion and profit shifting and other formats of collaboration through regional and inter-regional organizations.
In the Arab region, and mainly following the wave of political change in 2011, the fiscal outlook transformed into a short-term strategy. Reducing the dependency of Arab countries to external financing and addressing high levels of public debts while promoting the mobilization of domestic resources poses both a financing and a sustainable development priority. Arab economies, face an array of common challenges, be they related to raising fiscal resources, creating the fiscal space necessary to adopt new social contracts: sectors that are hard to tax and have a weak administrative capacity and compliance habits; weak revenue administration and low taxpayer morale; eroding trade revenues due to indistinct trade liberalization strategies among others. Arab countries rely on a mixture of revenue sources, mainly taxes on goods and services and corporate income tax. However, tax incentives are often provided with a high degree of discretion and without considering the domestic resource mobilization opportunity costs, thus undermining the fairness and integrity of tax systems. Ensuring that countries receive the support they need to adopt efficient tax systems and enhance revenue collection remains a key priority.
In this context, ESCWA supports its member States in building and modernizing their tax systems (policy and enforcement) and institutions through targeted technical assistance and capacity-building interventions that aim to enhance revenue administration and address resource leakages associated with the proliferation of illicit financial flows. ESCWA continues to propel the results of its normative analysis to counter the licit and illicit flight of resources flowing out of the region through national and regional workshops to review tax regulations and treaties; provide targeted capacity building on avoiding base erosion and profit shifting practices; enhance the overall efficiency of taxation systems and fiscal regulations.