The centre for tax analysis in developing countries

Overseas Development Institue Institue for Fiscal Studies

Our objectives and motivation

TaxDev aims to contribute to more effective tax policymaking in low- and middle-income countries through partnerships with governments and researchers to build new data resources and tools, and conduct skills training, applied policy analysis, and high-quality research. 

Taxation is the main source of revenue for governments, and funds vital public services, social protection policies and investments in infrastructure. Tax policy also has significant impacts on individuals and businesses, affecting their incomes, incentives and behaviour. Policymakers need to assess the effects of their tax and transfer systems and use relevant evidence in order to design policies which align with their objectives and foster economic development, poverty reduction and inclusive growth. Rigorous research and analysis are vital.

Our work

TaxDev's work has two main components:

1. Country partnerships

We collaborate with tax policy teams in finance ministries and revenue authorities in Ethiopia, Ghana, Uganda and Rwanda to co-produce analyses of the key tax and transfer policy and administration issues that they face. The partnerships focus on increasing data resources, building technical skills though applied analysis, and encouraging the use of evidence in the policymaking process. In addition to assessing the revenue effects of polices, we work with partners to undertake analysis of the growth and distributional effects, and crucially to assess how specific policies impact upon low-income households. 

As well as informing decisions in particular policy areas, our co-production methodology aims to foster increased analytical capacity within government and support the development of sustainable models, tools and methods which can be used by partners over the long-term. 

2. Research

Underpinning our policy-oriented work with partners, TaxDev’s research explores the impacts of tax policy and administration on revenue raising capabilities, households, businesses and the economy more widely; and examines how tax policy design responds to changing economic and administrative constraints.

Building on existing research, new empirical and theoretical findings, and insights from the policy work in our partner countries, we aim to generate high-quality evidence which will support governments to design tax systems which raise the revenues required to meet their spending needs, while balancing the trade-offs related to growth, investment and redistribution.

We work with policymakers and researchers across a range of countries in Africa, Asia and South America and pay particular attention to the features of low- and middle-income countries – such as large informal and non-market sectors and more limited administrative capacity - that imply that the impact of, and rationale for, particular policies might differ from high-income countries.

Our history

TaxDev was established by the Institute for Fiscal Studies (IFS) in 2016 in response to the relative paucity of evidence in relation to tax policy in low- and middle-income countries. The Centre builds on earlier work conducted at IFS to develop microsimulation models to analyse the distributional and potential behavioural effects of reforms to taxes in Mexico and El Salvador, and pensions in Chile. Previous work also considered the lessons of the Mirrlees Review for middle-income countries, and examined the design of corporate income taxes in developing countries.

In 2018 IFS and the Overseas Development Institute (ODI) entered into a partnership to jointly extend and expand the work of the Centre.

TaxDev is funded by UKAID - originally through the Department for International Development (DFID), and now through the Foreign, Commonwealth & Development Office (FCDO).

Looking forward

The importance of tax and social protection systems has been further highlighted as governments have responded to coronavirus, and these systems will help to shape countries' immediate economic responses, potential medium-term fiscal stimulus, and longer-term fiscal consolidation efforts. The pandemic has also underscored both new and existing challenges for governments in low- and middle-income countries as they continue to work towards achieving the 2030 Sustainable Development Goals. Further information about TaxDev's work on the pandemic is available on the Coronavirus page.

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