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1. Does Aid to Domestic Revenue Mobilization Support Tax Fairness? A synthesis of Oxfam research

Author:
Marc J. Cohen, Nathan Coplin, and Marc James-Finel
Publication Date:
03-2023
Content Type:
Special Report
Institution:
Oxfam Publishing
Abstract:
Between 2017 and 2022, Oxfam examined aid to DRM from multiple donors provided to multiple low- and middle-income countries. This synthesis report seeks to draw lessons across these studies. The key issues examined include tradeoffs between efficiency and effectiveness in generating revenues on the one hand, and equity on the other; whether donors support direct or indirect taxation; the progressivity of instruments supported; whether aid to DRM explicitly links revenues to poverty reduction (health, education, social protection); whether aid supports country ownership; and whether aid explicitly seeks to advance gender equality.
Topic:
Finance, Tax Systems, Donors, and Revenue
Political Geography:
Global Focus

2. Does aid fragmentation affect tax revenue dynamics in developing countries? Observations with new tax data

Author:
Ali Compaoré and Abrams M. E. Tagem
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
There exists a burgeoning empirical literature on the impact of aid fragmentation on development outcomes in aid-receiving countries, with it being widely recognized that aid fragmentation is deleterious. This paper adds to the existing literature by estimating the impact of aid fragmentation on tax revenue mobilization in developing countries. Drawing on the popular system generalized method of moments technique to counter endogeneity issues, this study focuses on a sample of 90 developing countries covering the period from 2000 to 2020. We show that aid fragmentation, measured by the Herfindahl index, has a significant negative impact on recipient countries’ tax revenue ratios, an impact that is not mitigated by the level of institutional quality. The paper also explores the impact of aid fragmentation on tax structure and finds convincing evidence that direct taxes, particularly corporate income taxes, are the most affected. Value-added tax is the only indirect tax affected by aid fragmentation.
Topic:
Development, Tax Systems, Institutions, and Revenue
Political Geography:
Global Focus