ADB to build Asian hub for tax, disaster issues

THE Asian Development Bank (ADB) will establish a regional hub to support tax policy and boost tax efforts to finance the Sustainable Development Goals (SDGS) and the region’s post-pandemic recovery.

In his speech on Thursday during a webinar organized by the ADB, ADB President Masatsugu Asakawa said the regional hub will focus on promoting disaster risk mitigation and promote international tax cooperation.

Boosting local resources for the SDGS is important since these development needs cannot be financed by debts alone, according to Indonesian Minister of Finance Sri Mulyani Indrawati.

“This hub will serve as an open platform where countries and development partners can collaborate closely to share experiences and practical knowledge and coordinate on development support,” Asakawa said at the second stage of the ADB Annual Meeting.

“I believe promoting stronger collaboration and coordination between a country’s tax policy and revenue administration bodies is needed to improve the transparency and predictability of tax systems,” he added.

The regional hub has the following aims: encourage exchange of information; knowledge sharing across partners, international financial institutions, bilateral revenue organizations and developing economies; and, collaboration and development coordination across development partners.

It will be an open and inclusive platform, with a focus on South–south policy dialogue. The regional hub will seek to bring together practitioners from tax policy bodies as well as tax administration bodies of developing economies to achieve meaningful progress in tax reform.

In establishing the hub, the ADB said it will also mainstream disaster risk mitigation and international tax cooperation in its operations. Examples of this mainstreaming are technical assistance and policy-based lending to help governments enhance their capacity for disaster risk mitigation and adoption of international tax standards.

“It is vital that we move forward together on these issues with a sense of urgency. Through our efforts on disaster risk mitigation and international tax cooperation, we can lay the foundation for a robust, resilient, and sustainable recovery from the challenges of the Covid-19 pandemic—and we will achieve the SDGS,” Asakawa said.

The ADB official explained that prior to the pandemic, tax-to-gdp ratio was already low in developing member-countries (DMCS) of the ADB at an average of 17.6 percent while Southeast Asian nations only averaged 15 percent.

In the Philippines, data from the Organisation for Economic Co-operation and Development (OECD), showed the the country’s tax-to-gdp ratio was at 18.2 percent as of 2018, the highest in recent years. The lowest tax-to-gdp ratio recorded in the country was at 14.8 percent in 2010.

Asakawa noted that tax yields across developing Asia are volatile and have large variability across time. These yields are also threatened this year given the lockdowns imposed to control the spread of Covid-19.

“Due to decreasing tax revenues and increasing expenditures as a result of the pandemic, many of our developing members have little room to increase their external debt further,” he said.

“These figures remind us of the importance of broadening the tax base and enhancing tax compliance. At the same time, we must also address the issue of disaster risk mitigation from a wider perspective,” he added.