CHAPTER 1
Introduction
Tax Compliance: A Persistent Challenge Questions of how to effectively reform and strengthen tax systems have moved to the center of development debates. On the one hand, recent successes present opportunities for emulation and further progress. In many low- and middle- income countries, governments have achieved significant administrative and policy modernization as well as meaningful improvements in revenue mobilization. On the other hand, successes have been uneven, and major challenges remain. Tax revenue in many countries continues to be well below the level needed to finance achievement of the United Nations’ Sustainable Development Goals (figure 1.1)— 15 percent of the gross domestic product (GDP) is often cited as a rough minimum annual target (Gaspar, Jaramillo, and Wingender 2016). Meanwhile, revenue collection is frequently characterized by much unfairness and inequity, with especially weak compliance and enforcement among the rich and significant, though overlooked, formal and informal burdens on lower-income groups. There is a growing consensus that these persistent challenges reflect not only technical challenges, but also persistent political barriers to reform (Moore and Prichard 2017). Observers have likewise questioned whether recent improvements in revenue collection have contributed adequately to the construction of broader social contracts.1 Revenue collection is not an end in itself. It only becomes socially desirable if it results in efficient, productive spending. Extensive research now documents the ways in which the expansion of taxation may spur greater
Introduction
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