Suchergebnisse

The European Union (EU) has provided trade preferences to the African, Caribbean and Pacific (ACP) countries since 1975. To maintain these preferences, a series of economic partnership agreements (EPAs) between the EU and regional groupings of ACP countries are being agreed, (negotiations started around 2003 and many framework agreements have been signed). As multilateral negotiations within the World Trade Organisation have stalled, EPAs are currently the single most important policy issue for ACP trade. This volume assesses EPAs and the potential impact on ACP countries, provides guidance.

Increasing tax revenues in low income countries is essential to address future development finance requirements. This is particularly important for aid recipients, the focus of this paper. Theory shows that although there are many ways in which aid can have indirect effects on tax revenue, the direct effects arise because aid and tax are alternative sources of revenue and political economy factors influence the choices made by government. Aid may discourage tax effort if viewed as a politically less costly source of revenue. Under different conditions, the policies and reforms associated with aid may increase revenue, through promoting growth, encouraging more efficient tax structures or supporting reforms to tax administration. While cross-country evidence reveals no systematic pattern, country studies show that aid can be associated with administrative and efficiency reforms to increase tax revenue. The conclusion discusses how aid and donors can promote increasing domestic tax revenue.

This paper reviews evidence published in the last 10 years that has added to our understanding of the effects of aid on government spending and tax effort in recipient countries, with a discussion of when (general) budget support is a fiscally efficient aid modality. Three generalizations are permitted by the evidence: aid finances government spending; the extent to which aid is fungible is over-stated and even where it is fungible this does not appear to make the aid less effective; and there is no systematic effect of aid on tax effort. Beyond these conclusions effects are country-specific.

Donors are concerned about how their aid is used, especially how it affects fiscal behaviour by recipient governments. This study reviews the recent evidence on the effects of aid on government spending and tax effort in recipient countries, concluding with a discussion of when (general) budget support is a fiscally efficient aid modality. Severe data limitations restrict inferences on the relationship between aid and spending, especially as the government is not aware of all the aid available to finance the provision of public goods. Three generalizations are permitted by the evidence: aid finances government spending; the extent to which aid is fungible is over-stated and even where it is fungible this does not appear to make the aid less effective; and there is no systematic effect of aid on tax effort. Beyond these conclusions the fiscal effects of aid are country-specific.