Opening remarks by Bruno Carrasco, Director General, Sustainable Development and Climate Change Department, ADB, at the Platform for Collaboration on Tax (PCT)-ADB Joint Virtual Workshop: Medium-Term Revenue Strategies to Support Recovery and Development in Asia, 26 May 2021
Good morning, good afternoon, or good evening to everyone. A very warm welcome distinguished participants, colleagues, ladies, and gentlemen!
On behalf of the Asian Development Bank, it is my pleasure to welcome you to this workshop on Medium-Term Revenue Strategies to Support Recovery and Development in Asia.
First of all, we greatly appreciate all of you, for your valuable time to participate in this two-day event.
We recognize and appreciate the Platform for Collaboration on Tax (or PCT) for co-organizing this workshop. Particularly, to Ms. Ceren Ozer, Ms. Hande Ayan and Ms. Ashima Neb from the PCT secretariat, and Ms. Margaret Cotton from the IMF, who generouslyworked with our team to make this event possible. I am also delighted to share the virtual stage this morning with Marcelo.
I am extremely delighted to learn that there are over 150 participants from more than 10 member countries in this workshop. I am very pleased to note that we also have with us exceptional experts on MTRS joining in this workshop. I am therefore convinced that this workshop will be a great opportunity for everyone to acquire more knowledge on MTRS, and on other related matters. Let us make this two-day event an exciting and productive one, with many learnings and takeaways.
In today’ remarks, I would like to reflect on three key messages.
II. First message: The importance of enhancing domestic resource mobilization (DRM) with a sense of urgency
First, I would like to highlight the importance of domestic resource mobilization (or DRM) during the COVID-19 pandemic. Even before the pandemic, many developing Asia countries recorded relatively weak revenue performance and at times struggling to raise tax-to-GDP ratios over the 15% threshold, often regarded as the minimum required for sustainable development. In many instances, the tax yields observed have been rather volatile from one year to the next and unpredictable.
The C-19 pandemic and the ensuing policy response have placed even greater pressure on revenue collection, including from declining economic activity and the effect of tax relief and deferral – a part of a battery of necessary stimulus measures. We have also observed structural shifts in the economies as many sectors such as transport, leisure and hospitality have been adversely affected while others such as those linked to the digital economy have grown and prospered. A share of economic activity is also likely to have submerged underground in part to avoid tax payments. These factors have important implications for revenue collection.
We therefore believe that now is that time to review and begin to plan initiatives to enhance DRM. As ADB President Asakawa emphasized in a recent speech, there are other important motives to raise revenue collection including to address debt sustainability and meet the increased demand on public spending for COVID-19 relief and recovery, the sustainable development goals, as well as climate change challenges.
This brings me to my second message about the importance of the MTRS.
III. Second message: The importance of MTRS
Great efforts to strengthen DRM will require enhanced domestic tax policy and tax administration reforms. To achieve this ambitious agenda, countries will have to formulate country-specific and differentiated goals, both on tax policy and tax administration. To this end, MTRS will serve as a critical tax system reform roadmap sustained by a medium-term government commitment to reforms.
Moreover, governments will need to look beyond revenue to ensure alignment with the public spending side to meet the increased public expenditure requirements. Wherein MTRS also plays a key role, since it will require decisive spending required to support economic and social development.
Currently, MTRS’s have been or are being developed in some 10 of ADB’s countries of operations. We believe that given the state of revenue collection and development challenges facing many of our developing member countries, this work is likely to expand.
IV. Third message: ADB Asia Pacific Tax Hub
This brings me to my third and final message about the Asia Pacific Tax Hub.
ADB officially launched the Asia Pacific Tax Hub during it’s 54th Annual Meeting on 3 May 2021. The tax hub will provide an open and inclusive platform for policy dialogue, knowledge sharing, and development coordination among ADB, its member countries, development partners and the broader development community.
The MTRS - together with the automation of tax administrations and the strengthening of international tax cooperation - are the building blocks set out under the tax hub to support country efforts to strengthen revenue mobilization.
In closing, I would like to express with certainty that this workshop is very timely to create a key milestone towards enhancing revenue collection and in addition to the success of the tax hub. ADB would be very pleased to support its member countries and work closely with its partners to address this important agenda.
Thank you very much for your participation, and I wish all of you a very productive workshop.