The role of fiscal policies for sustainability

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By Karen B. Brown, Theodore Rinehart Professor of Business Law, George Washington University Law School


This blog is part of a special series exploring subjects at the core of the Human-Centred Business Model (HCBM). The HCMB seeks to develop an innovative – human-centred – business model
based on a common, holistic and integrated set of economic, social, environmental and ethical rights-based principles. Read more about the HCBM here, and check out an event about it here
The HCBM project originated in 2015 within the World Bank’s Global Forum on Law, Justice and Development and is now based at the OECD’s Development Centre.

development-financeSustainable enterprises seek to marry models for good business practices with principles of economic, social and environmental sustainability, many of which are founded on the United Nations Sustainable Development Goals (SDGs). These objectives aim to advance human rights, fair wages, healthier and safer working conditions, gender equality, child welfare, environmental protections, and ethical behavior designed to impede corruption, money laundering and tax evasion. The failure to achieve these objectives imposes considerable costs on governments: diminished productivity and quality of life for their constituents, inefficiency in the operation of markets, and reduced economic growth. An important step towards achieving sustainability goals may come through a government’s use of incentives in the fiscal regime.

Governments traditionally use their tax codes to make “tax expenditures” designed to achieve objectives that advance important policy goals or principles. For example, a government may provide a departure from normal tax rules by reducing the capital gains tax and deferring the time for when gains must be reported if a taxpayer invests in certain qualified opportunity zones that are designated low-income communities. In other words, the government is willing to forego the capital gains tax revenue it would otherwise collect in exchange for investment intended to stimulate economic growth in areas where underserved constituents reside. Other examples abound of using tax expenditures to achieve legitimate governmental ends. Consider the following three ways — substantive tax provisions, tax rate reductions and “bright listing ”– that use incentives to encourage the integration of human-centred goals into business practices: Continue reading

How can developing countries learn to tax?

By Antonio Savoia, Global Development Institute, University of Manchester; Roberto Ricciuti, University of Verona and CESifo; and Kunal Sen, UNU-WIDER and Global Development Institute, University of Manchester

Development-Finance-shutterstock_524218915The capability to raise revenues from taxes – often called fiscal capacity – is a crucial aspect for the functioning of every state, particularly in developing countries. Two reasons account for this. First, greater fiscal capacity is fundamentally important for state formation, as it is usually associated with the creation of a civilian bureaucracy that can itself provide an enabling environment for the consolidation of statehood. Second, greater fiscal capacity implies greater access to resources needed to provide public goods. Developing countries are only able to raise a small share of taxes over GDP compared to advanced economies. They need higher revenues to invest in a number of economic and social areas that are crucial for their growth, such as healthcare, education and infrastructure. This is also relevant to pursue the Sustainable Development Goals (SDGs) by 2030, an ambitious enterprise requiring far greater resources. Indeed, SDG 17 explicitly refers to the mobilisation of government revenues (Target 17.1).

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Security, violence and fiscal policies in Latin America

By Eduardo Salido Cornejo, Public Affairs and Policy Manager Latam, Telefonica    

Police-Latin-America-ViolenceViolence is a central theme in Latin American popular music. Films and paintings portray well-known tragedies affecting Latin American societies. Art imitates life according to the 2017 Latinobarómetro since Argentinians, Mexicans and Panamanians declare public safety their number one problem. It is second on the list of citizen concerns in Colombia and Venezuela, just behind supply issues in Venezuela and the peace process in Colombia. Violence, crime and insecurity are the region’s main issues ahead of unemployment, economic problems or inequality.

According to data from the Brazilian think tank Igarapé Institute, 33% of all homicides in the world take place in the region, which is home to just 8% of the world’s population. Of the 20 countries with the highest homicide rates, 17 are in Latin America, where 43 out of the world’s 50 most violent cities are located. For every 100 000 inhabitants in Latin America, 21 are murdered, while the world average is seven. In the last decade, the homicide rate in Latin America increased 3.7%, while the population grew 1.1%.1

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The SDGs, Domestic Resource Mobilisation and the Poor

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By Nora Lustig, Samuel Z. Stone Professor of Latin American Economics, Director of the Commitment to Equity Institute at Tulane University, nonresident senior fellow of the Center for Global Development and the Inter-American Dialogue, and non-resident senior research fellow at UNU-WIDER 1


Learn more about this timely topic at the upcoming
Global Forum on Development on 5 April 2017.
Register today to attend!


E_SDG goals_icons-individual-rgb-01Countries around the world committed to the Sustainable Development Goals (SDGs).  However, achieving some of the SDGs could happen at the expense of the overarching goal of reducing poverty, at least in the short-run.2  One key factor to achieving the SDGs will be the availability of fiscal resources to deliver the floors in social protection, social services and infrastructure embedded in the SDGs. A significant portion of these resources is expected to come from taxes in developing countries themselves, complemented by transfers from the countries that are better off.3 In developing countries, however, raising additional taxes domestically for infrastructure, protecting the environment and social services may leave a significant portion of the poor with less cash to buy food and other essential goods.  Continue reading

Informal is normal in Latin America: taxes matter

By Juan Carlos Benítez, Economist at the Latin American and Caribbean Unit, and Angel Melguizo, Head of the Latin American and Caribbean Unit, at the Organisation for Economic Co-operation and Development (OECD)

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Informality equals vulnerability. In emerging economies and particularly in Latin America, informal is normal. On average, 55% of workers in the region did not contribute to pension or healthcare programmes in 2013. Although informality rates vary significantly across countries (Figure 1), a common feature of informality is its large prevalence amongst the poor and low-middle income workers (e.g. Jutting and De Laiglesia, 2009). On average, 85% and 73% of households in the lowest earning quintiles do not have any member contributing to social security schemes. Furthermore, informality is “one of the most striking differences, within the middle sectors, between the vulnerable population and the consolidated middle class” (Lustig and Melguizo, 2015).

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