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ADB supports projects in developing member countries that create economic and development impact, delivered through both public and private sector operations, advisory services, and knowledge support.
Asia Pacific Tax Hub
In a world reshaped by the COVID-19 pandemic, the Tax Hub will be instrumental in strengthening Domestic Resource Mobilization (DRM) and International Tax Cooperation (ITC) and in supporting developing member countries’ efforts to achieve the Sustainable Development Goals.
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- What is the issue?
- What we do
- ITC milestones
Asia Pacific Tax Hub: Overview
The Asia Pacific Tax Hub on domestic resource mobilization (DRM) and international tax cooperation (ITC) provides an open, inclusive, and pan-regional tax platform for:
- strategic policy dialogues, institutional and capacity development, and exchange of information and ideas through a dialogue among ADB's developing member countries (DMCs);
- knowledge sharing with partners, international finance institutions, bilateral revenue organizations, and DMCs in Asia and the Pacific;
- collaboration and development coordination among development partners.
The Asia Pacific Tax Hub will be dedicated to maximizing international and regional knowledge, expertise, and finance on DRM and ITC through close collaboration with finance and tax authorities, and development partners like the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), and the World Bank.
What is the issue?
The region lacks a pan-regional tax community that serves as a platform on DRM and ITC. Although there are several existing tax communities, they do not provide a platform for strategic policy dialogues and the coverage of economies are limited. Countries need to adopt strong policy and institutional reforms to raise tax yields to meet their Sustainable Development Goals (SDGs) and other structural challenges. In a globalized world, where cross border transactions are inevitable, they also need to do more to meet international tax standards and actively implement and enforce these rules.
Domestic Resource Mobilization
Tax yields in the region remain low (17.6% in 2018) compared to the OECD average (24.9% in 2018). The COVID-19 pandemic shows that DMCs will need to make significant investments in public services such as health care, and institute public governance reforms to address rising income inequality.
In a world reshaped by COVID-19, policy reforms will be critical to address the issue of DRM within a wider perspective. This should include (i) striking a balance between raising tax revenues and promoting investments, (ii) leveraging tax policy measures to recover the strong growth trajectory and get SDGs on track, (iii) promoting uniform and broad tax coverage to avoid distortions in the economy, and (iv) use of tax policy to reduce income inequality.
International Tax Cooperation
To broaden the tax base and reduce income inequality, DMCs must consider expanding the tax net to encourage trust among citizens. Decisive steps should be taken to address the aggressive tax planning of multinational enterprises that exploits gaps in different tax systems to artificially reduce taxable income coming from DMCs. This is known as Base Erosion and Profit Shifting (BEPS).
Another critical policy challenge is to tackle tax evasion conducted through exploitation of the interconnected global financial network and the opacity created by secrecy jurisdictions. However, a considerable number of developing member countries do not participate in initiatives aimed at promoting international tax cooperation (ITC), such as the Global Forum on Transparency and Exchange of Information for Tax Purposes and the Inclusive Framework on BEPS.
What we do
The Asia Pacific Tax Hub is promoting the SDGs and the ITC initiatives, such as the Global Forum on Transparency and Exchange of Information for Tax Purposes and the Inclusive Framework on BEPS. It will also assist each developing member country to define different DRM and ITC goals, including: (i) a medium-term revenue strategy, in coordination with the Platform for Collaboration on Tax; and (ii) a road map for digitalization of tax administrations, which facilitates the introduction of digital tools. The synergy created through collaboration and coordination with development partners will ensure strong value addition and effectiveness in the implementation of necessary reforms.
The Asia Pacific Tax Hub is promoting constant dialogue and capacity development within Asia and the Pacific on DRM and ITC.
The Asia Pacific Tax Hub aims at developing a regional vision on the international tax agenda, and will host a series of regional conferences that will bring together policy makers and practitioners from both tax policy and tax administration agencies of DMCs to discuss specific topics of importance for the region. These dialogues will also assist in developing clear action plans that reflect regional and country priorities that address the key challenges faced by individual DMCs.
Building on the regional and country priorities identified through the strategic dialogues, the Asia Pacific Tax Hub will assist each DMC formulate country-specific medium-term revenue strategies that would be key tools to develop strong political commitments. In turn, these can serve as foundations for development coordination.
Technical assistance to be provided under the umbrella of the Asia Pacific Tax Hub will be conceptualized, developed, and implemented through close collaborative efforts among development partners and DMCs. Joint knowledge products could also be produced, using a bespoke approach that is sensitive to the unique challenges posed by different operating environments. The synergy created in this approach will guarantee strong value added and effective implementation of the reforms.
The use of technologies will help tax administrations by promoting effective, timely, and corruption-free delivery of public services to support greater accountability. These relatively new approaches across the region will be incorporated into the country-specific medium-term revenue strategies and promoted by the collaborative efforts among DMCs.
A world reshaped by the pandemic requires that DMCs address the DRM and ITC from a wider perspective, which includes leveraging tax policy measures to recover their strong growth trajectory and improve development outcomes, enhancing the transparency and accessibility of tax-related information. Use of advanced technologies will also help tax administrations by promoting effective, timely, and corruption-free delivery of public services to support greater accountability. These relatively new approaches across the region will be incorporated into the country specific medium-term revenue strategies and promoted by the collaborative efforts among development partners and DMCs.
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Experts
Sandeep Bhattacharya
Senior Public Management Specialist (Tax)
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ADB's International Tax Cooperation Milestones
ADB recognizes the need to strengthen its assistance to DMCs in stemming tax evasion and the erosion of domestic tax bases. ADB fulfills this role primarily by promoting ITC and supporting DMC efforts to:
- broaden and protect their domestic tax base;
- enhance tax administration capacities;
- improve domestic tax compliance; and
- improve tools and procedures to stem both cross-border and domestic tax evasion and avoidance.