Harvard University hosted its annual Harvard Ministerial Leadership Forum last month welcoming finance and economic planning ministers from Africa, the Caribbean, and Latin America. Supported by more than a dozen long-serving former Ministers and Heads of Government, the incumbent Ministers focused on how to leverage sufficient resources to invest in stimulating sustainable economic growth at a time when a large proportion of available state revenues are consumed by servicing substantial foreign debts.
This year, ICTD’s Executive Director, Dr. Wilson Prichard, who is also Chair of the Local Government Revenue Initiative (LoGRI), was invited to lead a session on “Strategic Leadership to Strengthen Revenue Systems.”
Strategic Leadership for Strengthening Revenue Systems
In his presentation, Dr. Prichard argued that strengthening revenue systems is not merely a technical problem, but an adaptive problem which depends on understanding complex systems and navigating diverse constraints on reform. He then focused on four areas aspects of revenue systems.
Realistic revenue targets and continuous investment: Setting realistic targets is central to success. He presented data demonstrating significant untapped revenue potential across lower-income countries, but also that revenue increases tend to be incremental, rather than sudden, reflecting the need for continuous investments in strengthen tax systems and administration.
ICTD recently held an international event addressing this very question around realistic targets, drawing together both academic and policy experts, and building on a recent policy briefing setting out the main challenges around tax targets.
Priority areas for revenue mobilisation: Dr Prichard urged leaders to look at data to identify the areas of greatest revenue potential in their countries, while noting that in most lower-income countries taxes on personal income and property – especially from the wealthiest taxpayers – are the most underperforming areas of collection.
Diagnosing underperformance: He argued that the effective diagnosis of the causes of underperformance in revenue collection is a necessary first step in designing effect reform, so as to ensure that reform addresses those root causes of underperformance. He proposed a diagnostic approach that considers policy, administrative, and political constraints in order to capture a holistic set of reform challenges.
Developing reform strategies: The presentation culminated in a discussion on crafting actionable reform strategies that are both realistic and aligned with long-term goals. He suggested the importance of binding constraints analysis that identifies the most critical barriers to improved importance, while also considering the technical and political feasibility of different reform options.
Case Study: A Practical Approach to Revenue Challenges
The latter part of the session shifted focus to a dynamic case study, which served as a practical testbed for the ideas discussed in the session.
Co-led by Honourable Nhlanhla Nene, former Minister of Finance of South Africa, and Honourable Rosine Coulibaly, former Minister of Finance of Burkina Faso, the case study asked Ministers to collectively discuss potential strategies for strengthening the taxation of wealthy taxpayers. In doing so it asked them to weigh alternative areas of focus, alternative technical strategies that they might adopt and to develop strategies for navigating source of administrative and political resistance to reform.
Building from the prior presentation, the exercise aimed to encourage Ministers to diagnose the causes of existing system underperformance, and to devise strategies that would respond directly to those challenges. It similarly sought to encourage discussion of how to combine appropriate technical approaches to reform with effective strategies for managing political and administrative resistance. At the heart of the discussion was a focus on the importance of having long term strategies to build systems that are trusted by taxpayers, while investing in building strong and effective administrative structures.
Future Outlook and Forum Impact
The goal of the session – and the forum in general – was to provide a setting for Ministers to reflect on their key priorities, and to develop strategies for translating those priorities into action in their unique contexts. The session reiterated that effective reform requires a balance of ambitious goals and practical steps that collectively contribute to a sturdy, equitable tax system, while committing to providing ongoing support to Ministers beyond the Forum in developing their revenue strategies.
Find out more about the Harvard Ministerial Forum.
This news story was originally published here.