This article was published in Welternährung, the journal of the German NGO Welthungerhilfe. It is available in English and German.
More than a year ago US President Donald Trump effectively dissolved the national development agency USAID by executive order on his first day in office. Since then, other Western countries have also implemented significant cuts to their development budgets, albeit less drastically than the US. This includes Germany, whose budget for development cooperation (DC) has been shrinking since 2024. The budget of the Federal Ministry for Economic Cooperation and Development (BMZ) does not cover the entirety of DC, but it does reflect the general trend. It stands at just over 10 billion euros for the current year, 2026 – in 2024, it was still 11.1 billion euros.
The global cuts to DC come at a time when many countries are already under pressure. In many places, climate change, the Covid-19 pandemic and Russia’s war against Ukraine have led to a massive rise in public debt while tax revenues have often fallen. For many programmes, particularly in healthcare, food security and refugee support, the current cuts are a disaster.
Nevertheless, there certainly are voices – even outside the right-wing populist camp – that see the cuts as an opportunity. It has long been argued that development cooperation cements global dependencies and stifles self-sufficiency. The so-called ‘crowding-out’ effect – where the mobilisation of a country’s own national resources is displaced by external inflows – has been demonstrated on multiple occasions in academic publications; however, there are also research findings that point in the opposite direction or observe no significant effects. The political message that recipients of development aid should become more self-reliant is receiving considerable attention in many regions of the world. Against this backdrop, increasing domestic revenue has been a desirable goal for most countries not just since last year.
Who actually pays taxes (and who doesn’t)?
It has long been known that tax collection correlates with the general level of prosperity in countries (often measured as per capita income): on average, wealthier countries skim off a larger share of the country’s economic output and redistribute it. At first glance, this is merely a statistical correlation, which obscures significant differences between countries. One decisive factor is who or what is actually taxed. The Organisation for Economic Co-operation and Development (OECD) provides data that allows for a comparative view of the composition of tax revenues in OECD member countries and three global regions (Africa, Latin America & the Caribbean, and Asia-Pacific).