How to Establish a Tax Policy Unit

Author: Martin Grote

The design of a country’s tax system plays a critical role in its economic and social development, as recognized by the United Nations: its sustainable development agenda identifies strengthened domestic revenue mobilization as a key priority.

Volume/Issue: Volume 2017 Issue 002

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Public Finance , Taxation - General , FADHTN , HTN , tax policy unit , tax , administration , revenue , TPU leadership , TPU staff , TPU management , tax reform commission , collection activity , revenue administration representation , mid-sized TPU , treaty negotiations , tax expenditure report , Tax law , Tax policy units , Tax expenditures , Africa

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Summary

This paper explores that in developing economies, sufficient tax revenue is necessary to finance spending on health care, education, and infrastructure—all of which are prerequisites for economic growth and development. However, it is not simply the revenue ratio that matters; the quality of the revenue system is also essential for delivering fair and efficient outcomes. To design a revenue system that fosters sustainable economic and social development and enjoys broad public support, it is essential for tax reform proposals to be carefully assessed, quantitatively analyzed, and openly debated. This requires that decision makers and all stakeholders in the debate have access to the best available facts, data, and independent evidence-based analysis, including about the impact of tax reforms on revenue, the income distribution, and economic performance. The central institutional actor in the decision making process—the executive—is best supported in this process by what is generally called a tax policy unit (TPU). TPUs are tasked to guide and inform the tax policy debate, based on facts, independent data analysis, and multidisciplinary efforts.