Ms. Genevieve Verdier, Brett Rayner, Ms. Priscilla S Muthoora, Charles Vellutini, Ling Zhu, Vincent de Paul Koukpaizan, Alireza Marahel, Mahmoud Harb, Imen Benmohamed, Mr. Shafik Hebous, Andrew Okello, Nathalie Reyes, Thomas Benninger, and Bernard Sanya
Domestic revenue mobilization has been a longstanding challenge for countries in the Middle East and Central Asia. Insufficient revenue has often constrained priority social and infrastructure spending, reducing countries’ ability to reach the Sustainable Development Goals, improve growth prospects, and address climate related challenges. Moreover, revenue shortfalls have often been compensated by large and sustained debt accumulation, raising vulnerabilities in some countries, and limiting fiscal space to address future shocks. The COVID-19 pandemic and the war in Ukraine have compounded challenges to sustainable public finances, underscoring the need for revenue mobilization efforts. The recent global crises have also exacerbated existing societal inequalities and highlighted the importance of raising revenues in an efficient and equitable manner. This paper examines the scope for additional tax revenue mobilization and discusses policies to gradually raise tax revenue while supporting resilient growth and inclusion in the Middle East and Central Asia. The paper’s main findings are that excluding hydrocarbon revenues, the region’s average tax intake lags those of other regions; the region’s fragile and conflict-affected states (FCS) face particular challenges in mobilizing tax revenue; In general, there is considerable scope to raise additional tax revenue; countries have made efforts to raise tax collection, but challenges remain; tax policy design, notably low tax rates and pervasive tax exemptions, is an important factor driving tax revenue shortfalls; weak tax compliance, reflecting both structural features and challenges in revenue administration, also plays a role; and personal income tax systems in the region vary in their progressivity—the extent to which the average tax rate increases with income—and in their ability to redistribute income. These findings provide insights for policy action to raise revenue while supporting resilient growth and inclusion. The paper’s analysis points to these priorities for the region to improve both efficiency and equity of tax systems: improving tax policy design to broaden the tax base and increase progressivity and redistributive capacity; strengthening revenue administration to improve compliance; and implementing structural reforms to incentivize tax compliance, formalization, and economic diversification.
1. Our authorities appreciate the constructive dialogue with staff during the recent Extended Credit Facility program negotiations. They broadly concur with staff’s appraisal and key policy recommendations.
2. The economy of Sierra Leone continues to recover from the macroeconomic repercussions of the Ebola Virus Disease (EVD) epidemic and the simultaneous downturn in commodity prices experienced between 2014 and 2015. This growth momentum has however, been constrained by weak mineral production that affected fiscal and export revenues
International Monetary Fund. Asia and Pacific Dept
to be the evolution of the global health pandemic. The authorities are striving with the vaccination drive to cover the unvaccinated population.
Augmenting revenues and buffers
5. Despite the revenue mobilization challenge, Bangladesh performed well in fiscal management by keeping public debt at a moderate level. Our authorities are seized by the tax revenuechallenges and striving to reach the tax-GDP ratio of 14 percent by FY25 . The main objective under the domestic resource mobilization strategy is to improve tax compliance without increasing tax
reforms needed to modernize the public financial management system, will also address the medium-term revenuechallenge posed by the NPRS.
It is within the context of this recently launched initiative that the Cambodian authorities and their development partners will have to tackle, in a systematic and coordinated manner, a number of challenges in order to modernize the public financial management system and make it an effective instrument of macroeconomic and social policy. The remainder of this section focuses on these key challenges.
Mr. Nicolas Arregui, Ms. Ruo Chen, Mr. Christian H Ebeke, Jan-Martin Frie, Mr. Daniel Garcia-Macia, Ms. Dora M Iakova, Andreas Jobst, Louise Rabier, Mr. James Roaf, Ms. Anna Shabunina, and Mr. Sebastian Weber
Coal Mining Sector by 2030
Figure 17. Transport Sector Emissions and Drivers
Figure 18. Car Efficiency and Electrifications Potential
Figure 19. New Car Efficiency
Figure 20. Fuel Taxation and Efficient Prices
Figure 21. Real Growth in Fuel Duties, December 2018 versus January 2011
Figure 22. Acquisition Taxes
Figure 23. Zero- and Low-Emission Car Adoption
Figure 24. Transport Modes
Figure 25. Distributional and RevenueChallenges
Figure 26. Aviation Emissions and Drivers
Figure 27. EU+UK: Final Energy Consumption by Households, 2017
revenue systems, which may prove difficult to administer in the short run. Though several of the reforming economies registered an improved fiscal position in 1990, this may have been a transitory phenomenon, primarily resulting from reductions in real wages that accompanied price liberalization, leading to improved profit performance of public enterprises and reduced subsidies. Thus the revenuechallenge remains to be met.
Our message, then, is mixed. On the one hand, prospects for economic growth in Eastern Europe are brighter than simple “financing