Tax capacity in developing countries and development finance institutions

The development of international tax regulation and tax avoidance are important topics in the contemporary development debate. On the morning of 1 September around 25 people including staff members from FINNFUND, representatives from civil society organizations, MPs and people from the Ministry of Foreign Affairs gathered to an event organized by FINNFUND entitled ’Tax capacity in developing countries and development finance institutions’. The purpose of this event was to discuss the development of international tax regulation, the tax capacity of developing countries and how development finance institutions and other non-governmental organization could support this work.

As part of the meeting UNU-WIDER’s Non-Resident Research Fellow Jukka Pirttilä delivered a presentation on the taxation of firms and development in developing countries. According to Pirttilä tax capacity in developing countries is improving but not rapidly enough. As developing countries are more dependent on corporate income tax revenue, combating tax avoidance is of crucial importance. However, this alone will not be enough to solve revenue problems in poor countries and foreign direct investments (FDI) will also be needed. Furthermore, technical assistance targeted to improve the tax capacity of revenue authorities holds great promise.

You can view the slides below or download them here.