Foreign Investment Advisory Service - Taxation Growth and Governance Program

Taxation Growth and Governance Program

A Joint DFID/FIAS Program

The Business Taxation program is designed to stimulate increased productive investment and employment by the private sector, so as to enhance its contribution to shared economic growth for poverty reduction; and to promote better political governance through improvements in business tax policy and tax administration that strengthen accountability (the "fiscal social contract")

The immediate goal is to develop a Tax Advisory Services knowledge base and its pilot implementation, aimed at promoting effective, fair and inclusive tax systems that foster investment, economic growth and political stability in developing countries. The program’s focus is on reducing the tax compliance burden for business and to apply lessons learned in client countries, providing evidence-based policy guidance to support the implementation of effective investment climate reforms that encourage private sector investment and enhance productivity and competitiveness.

Building on the diagnostic work jointly carried out by FIAS/DFID, this program will devise practical reform solutions ("a menu of good practice") and support implementation of reform measures in countries throughout the developing world. Given country/regional/developmental differences the concept of a single "best practice" is still elusive for tax experts; however, there are basic principles and components found in efficient tax systems which can be identified and packaged for our clients.

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This program adopts a three-component approach consisting of:

Component A. Research and Program Development

The product development component will focus on developing the evidence base and operational guidance in areas that are regarded as particularly critical to improve tax policies and regulations in developing countries. These areas relate to large business taxation, SMEs (including the informal sector) and institutional factors relating to political incentives and administrative mechanisms. Knowledge products will be developed based on international best practice on tax policy, tax administration and tax system implementation issues relevant to developing countries. The focus will be on those instruments and approaches where tax reform can have impact in terms of lowering the cost of doing business.

Component B. Knowledge Transfer, Regional Training & Communication Strategy

Component B seeks to implement a knowledge transfer and communication strategy to engage key stakeholders (particularly in rollout pilot countries) and build capacity of local policy-makers and government officials in the tools, techniques and methodology needed to design and implement sustainable tax programs. It seeks to build local capacities on business-friendly, pro-growth tax regimes and includes short term advisory services building on the conclusions of the product development component.