Mission Impossible? Can Fragile States Increase Tax Revenues? by Bernardin Akitoby, Jiro Honda, and Keyra Primus published by IMF (9/2020).
“The views expressed are those of the author(s) and do not necessarily represent the views of the IMF and its Executive Board.
The COVID-19 shocks are proving to be especially challenging for fragile states. Pre-COVID, fiscal revenues were low in such countries and governments were struggling to raise them. Now, COVID-19 is hitting them hard and fiscal revenues are falling. Once the pandemic abates, restoring and further enhancing tax collection is even more important to secure debt sustainability, facilitate the post-COVID-19 recovery, and meet development financing needs in order to meet the Sustainable Development Goals. This is a formidable challenge. However, our new staff research finds that achieving sizable gains in tax collection in fragile environments is not “mission impossible.”
As our chart shows, four fragile states (Liberia, Malawi, Nepal, and Solomon Islands) achieved sizable increases in tax revenues over a decade—by between 7 and 20 percentage points of GDP. Most of these countries had introduced tax reforms when their tax revenues were far below the average for fragile states, but each went on to exceed the average, with Nepal and Solomon Islands doing so by a wide margin…”
