Figure 10 Health spending as a percentage of total public expenditure (Second scenario, Option A) 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
before the improvement
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after the improvement
Sources: Our compilation based on our calculations and latest World Bank data (accessed December 2010)199 Note: The evolution of health spending is compared to total spending (including the potential revenue collection improvement) and to the international 15 per cent goal.
In reality it is up to each country to decide how to spend tax revenue. But if the proposed tax reforms were successful, they could increase resources for financing basic services quite significantly. In addition to allocating 40 per cent of the increased tax revenue to health and education respectively, the remaining 20 per cent could be left to a government’s discretion, depending on the specific needs of each country (e.g. social inclusion programmes, the fight against hunger, social services, and investment in infrastructure and Research, Development, and Innovation, or even increasing the percentage dedicated to education and health, if considered appropriate). In countries with extractive or agro-exporting industries (marked by a double asterisk in Table 5), it is suggested that a share of the increase in tax collection (for example, 50 per cent) might be allocated to a specific fund in order to reduce dependence on such industries and develop other sectors of the economy. Given the volatility of commodity prices, the fund could serve as a contingency to avoid an abrupt drop in public revenue at times when income from commodities is low. In countries dependent on extractive industries, a reconversion plan is essential, given that the resources being extracted are 200 non-renewable. The creation of such a fund would mean that the proposed increase in tax revenue channelled into education and health would be 50 per cent lower in these countries. Thus, education and health would get 20 per cent of the revenues respectively, leaving the remaining 10 per cent available for other purposes. The total amount that could be generated for such a fund in countries dependent on extractives and agro-exports would be $32bn per year under the more ambitious Option A and half that figure under the more moderate Option B.
Owning Development, Oxfam Research Report, September 2011
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