Abstract
To progress toward universal health coverage and promote inclusive social and economic development, it will be necessary to strengthen domestic resource mobilization for health. In this paper, we examine options for increasing domestic government revenue in low- and middle-income countries. We analyze the relationship between level of economic development and levels of government revenue and expenditure, and show that a country's level of economic development does not predetermine its spending levels. Government revenue can be increased through improved tax compliance and efficiency in revenue collection, maximizing revenue from mineral and other natural resources, and increasing tax rates where appropriate. The emphasis should be on increasing revenue through the most progressive means possible; the purpose of raising government spending on health would be defeated if that spending were funded by increasing the relative tax burden of those who are meant to benefit. Increasing government revenue through taxation or other sources is first and foremost a fiscal policy choice or political decision and should be supported through concerted global action.
Highlights
There is growing recognition of the importance of creating fiscal space for increasing domestic government funding of health care and other social services such as education, social welfare, sanitation and housing
Tax avoidance is not illegal insofar as companies comply with tax laws but ensure that profits are reflected to the greatest extent possible in countries with the lowest tax rates, many would regard it as immoral, when governments of low- and middle-income countries (LMICs) are being deprived of desperately needed tax revenue to meet the social service needs of their population
The information presented in this paper demonstrates that a country’s level of economic development does not predetermine the level of government revenue as a percentage of gross domestic product (GDP), nor does it dictate the tax rates that a country should levy
Summary
There is growing recognition of the importance of creating fiscal space for increasing domestic government funding of health care and other social services such as education, social welfare, sanitation and housing. Tax avoidance is not illegal insofar as companies comply with tax laws but ensure that profits are reflected to the greatest extent possible in countries with the lowest tax rates, many would regard it as immoral, when governments of LMICs are being deprived of desperately needed tax revenue to meet the social service needs of their population. The former and recently reappointed South African minister of finance has described ‘aggressive tax avoidance’ as a ‘serious cancer eating into the fiscal base of many countries’ (Quoted in: ActionAid, 2010). With the declining oil prices, a number of countries such as Indonesia, India, Iran and Malaysia have seized the opportunity to reform fossil-fuel subsidies (World Bank, 2015); Indonesia for instance reallocated the fiscal resources released by the subsidy reform toward social assistance programmes to mitigate the adverse impact on the poor and reduce public opposition (Asian Development Bank, 2015; Gupta et al, 2015)
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