The United Nations 2023 Financing for Sustainable Development Report finds that SDG financing needs are growing, but development financing is not keeping pace. This report calls on the international community to align financing with sustainable development through three sets of actions.
- First, scale up development cooperation and SDG investment: These can support the UN Secretary-General’s call for an SDG Stimulus.
- Second, strengthen the international financial architecture by bringing different reform processes together, strengthening effectiveness, ensuring full alignment with the SDGs and climate action.
- Third, accelerate national sustainable industrial transformations: Countries need to chart their own national paths to achieve the SDGs with a new generation of sustainable industrial policies, supported by integrated national financing frameworks.
Regarding domestic public resources, Chapter III underlines the role of tax expenditures, and in particular highlights the following points:
Tax system capacity reinforces the ability of the public sector to deliver public goods and services, strengthening the social contract and building trust.
– Tax revenues fell in the pandemic and have not recovered at a uniform pace. In Africa, 40% of countries had 2021 tax-to-GDP ratios below 2020 levels.
– On average less than 50% of personal and corporate income tax returns are filed on time in least developed countries, complicating fiscal management.
– Tax administrations should work to simplify registration and compliance to encourage timely filing and payment.
– Digitalization can increase the efficiency of tax administration and assist in detection of tax evasion.
Windfall profit taxes can be part of effective tax systems; realized resources can help to address equity challenges.
– The surge in fossil fuel prices in early 2022 generated substantial windfall profits in the energy sector.
– Given the imperative to tackle climate change, governments should allow high energy prices to incentivize a reduction in fossil fuel use while compensating poorer households.
– As windfall profit tax receipts may not be realized in locations facing the greatest burdens from energy prices, developed countries could consider sharing the gains through development assistance.
Tax systems have implicit gender biases
– Only a handful of countries are regularly assessing these biases.
– Studies of specific taxes, the tax mix, and tax administration can help to identify gender-specific barriers and gender-responsive approaches.
– Given gendered wealth gaps, capital income should be taxed at least at the same rate as labour income to avoid a tax system biased in favour of men.
Tax systems and public spending are powerful instruments to incentivize and support sustainable development, including inclusive sustainable industrial transformation.
– Tax instruments impact behaviour; countries should ensure the incentives align with sustainable development and national goals, such as industrial transformation.
– Tax expenditures (e.g., incentives) can be misdirected and inefficient—they should be reconsidered in light of new global minimum taxes, transparent, and regularly reviewed.
– Integrated national financing frameworks are a planning tool that can be used to enhance coherence across policy areas.
The international tax system and financial integrity policies should serve all countries.
– International tax and financial transparency instruments should benefit the least developed countries.
– Each country should decide on its approach to taxing digitalized business models based on their national context and the potential revenue and economic impact.
Sates should speedily adopt tools to prevent and combat illicit financial flows, such as verified registries of beneficial ownership information.
– Governments should aim to publish beneficial ownership information for public access.
– Progress in domestic resource mobilization requires investment in improved tax administration and consistent efforts to build citizen trust in the State.