A new phase in global development has begun. Aid is retreating, and is unlikely to return to previous levels. Debt servicing costs have risen sharply, absorbing a growing share of public budgets and making additional borrowing difficult. At the same time, spending needs are increasing – from climate adaptation and infrastructure, to health, education, and social protection.
Taxation has long been the largest source of government revenue in lower-income countries, and a primary source of development finance. As external finance becomes increasingly constrained, its centrality is becoming even more pronounced. Governments are being pushed to rely more heavily on their own revenue systems.
This report reflects what the International Centre for Tax and Development (ICTD), based at IDS, has learned through its research collaborations with partners over the past 15 years setting out these lessons across four areas:
- Evidencing burdens in everyday life
- Improving how tax administrations work in practice
- Shaping global tax negotiations
- Strengthening research capacity for tax reform
The report also looks ahead at key questions that researchers and tax, development and research should seek to address, proposing that these are around:
- tax policy and economic growth
- debt and protest
- digital power and public trust
- nature, revenue and equity
- tax, authority and fragility
- tax multilateralism
Message from ICTD Executive Director, Giulia Mascagni:
“This is a critical moment for development finance. Tax systems have always been central to countries’ investment in their future, but the choices ahead are becoming more urgent and increasingly contested.
For ICTD, this report is both a reflection on what we have learned over the past 15 years, and a look ahead to the questions that will define the role of taxation in the next phase of development finance. Along that journey, ICTD research has helped shape policy debates, inform administrative reforms, and strengthen the use of evidence in tax systems. It has also shown that better reform is possible when rigorous research is grounded in sustained partnerships that keep it connected to the realities of tax policy and administration.
As pressures intensify, our task is to deepen that work: to help partners navigate fiscal, administrative, and political constraints, and use evidence to identify practical reforms that can raise revenue, advance equity, support growth, and strengthen public trust.”
