Speech by Masatsugu Asakawa, President, Asian Development Bank, at the G20 2022 Ministerial Symposium on Tax and Development, 14 July 2022, Bali, Indonesia 


Colleagues and guests, it is an honor to moderate today’s session. I am very grateful to Finance Minister Sri Mulyani Indrawati of Indonesia for organizing this important discussion.

We are joined by distinguished finance ministers who will reflect on future tax policy challenges and opportunities. We will focus on the growing need to strengthen domestic resource mobilization, or DRM, and international tax cooperation, or ITC.

This issue is critical to ensuring robust, sustainable, and inclusive development.

Before we hear from our speakers, I would like to offer some reflections on today’s topic, drawing on insights from Asia and the Pacific.

I. Reflections on the importance of domestic resource mobilization 

Let me begin by asking: why has DRM emerged as a major strategic priority for our developing member countries (DMCs)? I believe there are three main reasons.

First, developing countries need reliable domestic revenues to protect themselves against external shocks. The coronavirus disease (COVID-19) crisis brought to light our vulnerability to the health and socio-economic threats from pandemics.

More recently, the Russian invasion of Ukraine is causing tremendous suffering, loss of life, population displacements, and destruction. It has also disrupted global economic conditions and undermined food and energy security. Among the many challenges this poses for policymakers, they now face even more difficulties striking the delicate balance between supporting recovery and containing inflation.

Second, governments need to address structural challenges in public finance, made evident by the generally low and volatile tax yields in the Asia-Pacific region. The COVID pandemic has exacerbated these challenges. Our DMCs are facing unanticipated increases in public debt as well as shrinking tax revenues, which have worsened their fiscal balance.

Third, in the aftermath of the pandemic, governments will need to mobilize more revenue to achieve their long-term development priorities. This revenue must increasingly come from domestic resources, rather than reliance on external financing that creates unsustainable debt burdens.

Many governments face challenges to strengthening DRM in order to meet these three critical needs. They are also struggling to find the best timing and sequence to implement reforms, especially with the current volatility in the global economy.

II. Reflections on Pillar Two and tax incentives

Let me turn now to one crucial area where governments can work together to improve DRM: the implementation of rules and policies under Pillar Two.

As you know, developing economies rely heavily on corporate income tax revenue and often have effective tax rates, or ETR, well below the internationally agreed minimum of 15%. This is due to their practice of granting tax incentives to attract foreign direct investments, or FDI. This would mean that under the Global Anti-Base Erosion (GloBE) Rules, part of this additional income would be taxed elsewhere.

The coordinated introduction of Pillar Two could lessen the stress on governments to attract FDI through tax incentives. Under Pillar Two, multinational enterprises (MNEs) will pay corporate tax at least at the agreed minimum tax rate, even if profits are subject to a lower tax rate in the country where they are generated. Pillar Two could also enable developing countries where subsidiaries of MNEs are located to raise a fairer share of tax revenue through the Qualified Domestic Minimum Top-up Tax (QDMTT).

At the same time, Pillar Two will increase the relevance of non-tax factors that are valuable drivers of competitiveness. To attract FDI, developing economies will need to make structural improvements in areas such as infrastructure, education, health and robust institutions.

I encourage governments to act decisively on these approaches under Pillar Two.

III. Reflections on other emerging tax priorities

Let me turn now to three other areas where we can strengthen DRM.

First, with a large informal sector, developing countries economies can find more effective ways to tax economic activity – especially in developing Asia, where tax revenue is generally low and informality widespread.

Second, regions like developing Asia can draw valuable lessons from countries that have already adopted environmental tax and pricing instruments.

And third, corrective health taxes on alcohol, tobacco, and unhealthy foods can deter consumption that has adverse health and social outcomes.


Let me end by highlighting the Asia Pacific Tax Hub, which ADB launched last year to support the efforts of our developing member countries to improve domestic resource mobilization and enhance international tax cooperation.

Through the Tax Hub and other initiatives, ADB stands ready to work with you to help ensure strong domestic revenue streams. This will allow developing countries in our region and worldwide get back on a path to strong and lasting growth.

I very much appreciate your interest and cooperation in these efforts.

Thank you.