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COVID-19 has amplified existing imbalances, institutional and financing constraints associated with a development strategy that did not take sufficient account of challenges with emissions, environmental damage and health risks associated with climate change in a number of countries, including China. The recovery from the pandemic can be combined with appropriately designed investments that take into account human, social, natural and physical capital, as well as distributional objectives, that can also address commitments under the Paris agreement. An important criterion for sustainable development is that the tax regimes at the national and sub-national levels should reflect the same criteria as the investment strategy. Own-source revenues, are essential to be able to access private financing, including local government bonds and PPPs in a sustainable manner. Governance criteria are also important including information on the buildup of liabilities at all levels of government, to ensure transparent governance. Despite differences in political systems, the Chinese experiences are relevant in a wide range of emerging market countries as the measures utilize institutions and policies reflecting international best practices, including modern tax administrations for the VAT, and income taxes, and benefit-linked property taxes, as well as utilization of balance sheets information consistent with the IMF's Government Financial Statistics Manual, 2014. The options have significant implications for policy advice and development cooperation for meeting global climate change goals while ensuring sustainable employment generation with transparency and accountability.

COVID-19 has amplified existing imbalances, institutional and financing constraints associated with a development strategy that did not take sufficient account of challenges with emissions, environmental damage and health risks associated with climate change in a number of countries, including China. The recovery from the pandemic can be combined with appropriately designed investments that take into account human, social, natural and physical capital, as well as distributional objectives, that can also address commitments under the Paris agreement. An important criterion for sustainable development is that the tax regimes at the national and sub-national levels should reflect the same criteria as the investment strategy. Own-source revenues, are essential to be able to access private financing, including local government bonds and PPPs in a sustainable manner. Governance criteria are also important including information on the buildup of liabilities at all levels of government, to ensure transparent governance.Despite differences in political systems, the Chinese experiences are relevant in a wide range of emerging market countries as the measures utilize institutions and policies reflecting international best practices, including modern tax administrations for the VAT, and income taxes, and benefit-linked property taxes, as well as utilization of balance sheets information consistent with the IMF's Government Financial Statistics Manual, 2014. The options have significant implications for policy advice and development cooperation for meeting global climate change goals while ensuring sustainable employment generation with transparency and accountability.

The new global emphasis on public infrastructure for connectivity builds on the declarations of the UN Sustainable Development Agenda, and most recently the Belt and Road Initiative that seeks to connect global economies and recreate old trading links and generate new ones. Infrastructure also holds the key to addressing the Middle-Income Trap, along with education and innovation. Yet, there is considerable evidence from the EU, Latin America and China to show that while the advantages of connectivity investment are significant and necessary, in isolation these are far from sufficient in ensuring more inclusive and sustainable outcomes. Sustainable growth involves private investments that are channeled to the most promising and productive activities. Of course, firms respond to price signals, but with imperfect or incomplete information, tend to reinforce existing profit centers where the jobs tend to be concentrated (London, Barcelona, Milan, Shanghai, Guangzhou-Shenzhen, Santiago de Chile), typically resulting in increasing inequality, congestion and pollution. The resulting conurbations attract migrants, and in large metropolitan areas in Latin America and South Asia, there is a sharp increase in informality that leads to incentives for cheating that result in low productivity (see Levy, #ref1376#2008#/ref1376#). Regional connectivity may not always result in a more equal or level playing field and in the cases mentioned above may have exacerbated imbalances and inequalities. As seen in the UK, which has experienced a strong recovery since the 2008 crisis, the Brexit vote suggests that there may be a political backlash if employment and income generation, or adjustment costs, are not more evenly distributed. In this paper, we argue that a combination of instruments is likely to be needed at both national and local levels, including tax handles, and full information, particularly involving liabilities within an intertemporal framework, to ensure sustainable and inclusive development. Since most of the policies are implemented at the sub-national level, local financing, institutions and incentives affect the possibility of creating new "growth hubs" or clean and efficient cities that are needed for sustainable growth. We draw on evidence from the EU, China and Chile, which is considered by the IFIs as one of the leading countries as far as investment management is concerned. We also use empirical illustrations based on the theory of reform applied to the Chilean case to illustrate how to improve on the investment allocations that are already praised as arms-length by the Bretton Woods Institutions, to develop a sustainable growth strategy that also addresses the middle-income trap. This has wider applications in Europe, and China, and in the implementation of the Belt and Road Initiative.

The 1994 reforms in China were remarkably successful in stabilizing the economy and raising revenues for the benefit of sustainable growth and permitting the central government to redistribute resources to poorer regions through an equalization framework. However, the rise of informal local borrowing in the absence of effective own-source revenues raises possible risks and imbalances in the future. There is thus a need to reconsider the fundamentals of intergovernmental fiscal relations, building on the basis laid in the 1994 reforms.

Allama Iqbal stressed the need for khudi in terms of national
identity and focus on selfreliance, without which there would have been
no chance to break colonial bounds. The message still resonates today,
in a period of economic crisis and lack of national agreement on tax
reforms. International experience with decentralisation also emphasises
the importance of significant own-source revenues in generating
accountability and effective service delivery at all levels of
government. Although the 18th Amendment of Pakistan Constitution makes
significant strides towards clarifying spending responsibilities, the
issue of subsidiarity is not effectively addressed, nor is the issue of
implementable own-source of revenues. This runs the risk of generating
unfunded mandates, further pressures and weakening of public service
delivery, leading possibly to strengthening of ethnic and parochial
divisions and centrifugal forces. Iqbal's message is as important now as
it was in the last century. JEL classification: H 77 Keywords:
Intergovernmental Fiscal Relations

Should tax reforms be guided by rules of thumb suggested by the IMF, or directions or reform based on analytical approaches, such as optimal tax theory? In many cases, the applications of the directions of reform—which suggest a differentiation of the structure given distributional, incentive and revenue concerns, can be brought close to the IMF prescriptions by a judicious balancing of tax instruments—such as a single or dual rate VAT together with systems of excises. But in some cases, such as Pakistan, neither prescription has yielded either the revenues anticipated, nor the necessary salutary effect on incentives for production—despite repeated attempts during successive IMF programs over 20 years. The proposition in this paper is that the collusion between vested interests, including the tax administration has led to the difficulties that have also exacerbated the "trust deficit" between the federation and the provinces. In this paper we examine issues of collusion between the tax administration and vested interests, and also difficulties arising from assigning a very mobile base to a level of government that does not have the technical capability to administer it. Section I examines method, based on the theory of reform. Section II posits the antecedents of tax reform in Pakistan over the past 50 years. Section III focuses on the design and implementation of the GST. Section IV examines the political economy of provincial revenue assignments; and Section V concludes.

1. Property Taxation, Instruments, Models, Administration, and Potential Effects -- 2. Failure and Promise of Property Taxation in Senegal -- 3. Challenges of Property Taxation in Tanzania -- 4. Financing Sustainable Local Spending and Infrastructure in China -- 5. Mexico: Failure of the Traditional Property Tax and Proposed Beneficial Property Tax Alternative -- 6. Administration of Property Taxes -- 7. Toward a Beneficial Property Tax Agenda for Sustainable Growth.

This book presents a new approach to recurrent property taxation based on occupancy, size, and location, that will strengthen local governments. Reflecting on the concept of "beneficial property taxation" first proposed by Alfred Marshall, the political economy constraints faced by traditional property taxation are examined and compared with evidence for beneficial property tax seen in China, Mexico, and sub-Saharan Africa. The benefits of this form of taxation are highlighted in relation to the financing of local public services and infrastructure that are required for sustainable development. This book provides a policy-oriented look at property taxation that engages with the sustainable development goals and lay the foundations for a post-pandemic recovery. It will be relevant to researchers and policymakers interested in development economics and the governance of taxation. Ehtisham Ahmad has been Visiting Professor at the LSE Grantham Research Institute, Pao Yu-Kong Professor at Zhejiang University and has held senior positions at the IMF. Giorgio Brosio is Emeritus Professor of Economics at the University of Torino.