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.
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:
Asia Pacific Tax Hub will be dedicated to maximizing international and regional resources of knowledge, expertise, and finance on domestic resource mobilization and international tax cooperation through close collaboration among finance and tax authorities as well as our development partners such as the the International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), and the World Bank, and regional tax associations.
The Asia Pacific Tax Hub is promoting the Sustainable Development Goals (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. The Asia Pacific Tax Hub will also assist each developing member country to define different domestic resource mobilization and international tax cooperation 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 domestic resource mobilization and international tax cooperation.
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 developing member countries 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 developing member countries.
Building on the regional and country priorities identified through the strategic dialogues, the Asia Pacific Tax Hub will assist each developing member country 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 developing member countries. 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 developing member countries.
A world reshaped by the pandemic requires that developing member countries 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 developing member countries.
The region lacks a pan-regional tax community that serves as a platform on domestic resource mobilization (DRM) and international tax cooperation (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, 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.
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 developing member countries 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 pandemic, policy reforms will be critical to address the issue of domestic resource mobilization (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 Sustainable Development Goals 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.
To broaden the tax base and reduce income inequality, developing member countries 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 developing member countries. 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.
As an international financial institution with a mandate to foster economic growth, cooperation, and development, ADB recognizes the need to strengthen its assistance to developing member countries in stemming tax evasion and the erosion of their domestic tax bases. ADB fulfills this role primarily by promoting international tax cooperation and supporting its developing member countries’ efforts to: