Taxation is a central part of a new era of development that has fiscal resilience, system change and people at its core. Getting tax reform right, however, is not just a challenge for governments that have traditionally been recipients of aid. It is a shared challenge for the broader ecosystem of actors including traditional aid donors, new funders, and civil society. This week’s Global Partnership Conference (GPC) is an opportunity to move from debate to action, but this action must be grounded in evidence on what works and what doesn’t in tax reform.
Shrinking aid budgets, uncertainty and political contestation
The GPC, co-hosted by the UK government, is taking place against the backdrop of a sudden and unprecedented reduction in official development assistance (ODA): the OECD recently reported a further drop of 23 per cent in 2025, the largest contraction on record, whilst the UK’s own aid budget has shrunk by 40 per cent. Equally, we are seeing significant political contestation and uncertainty, around the world both nationally and internationally.
Key tensions – from shrinking financing to heightened citizen dissatisfaction – and challenges – from structural under-financing for health to building climate resilience – will no doubt feature prominently at the conference. These are not mere bumps in the road, but systemic shifts that require bold, practical and tested ideas, approaches, and tools. This clear opportunity to reimagine development must go beyond high-level statements and provide a clear roadmap for action.
Getting tax right is key to advancing system change and country-led development
At the conference, I will be setting out two key reasons for why getting tax right is a central part of that roadmap, at a joint ICTD-TaxDev side event.
Firstly, tax is already the largest and most reliable source of development finance. Scaling up tax capacity – and doing so effectively, equitably, and sustainably – is a necessary condition to strengthen country systems and to address ever more pressing development financing needs. This is because tax funds spending that other sources of finance typically don’t, such as health and education systems – not just individual clinics or schools. Taxation is also a critical space where trust between governments and citizens is built or eroded. It is a litmus test for a government’s political legitimacy and technical competence in responding to the pressing demands and priorities of its citizens and businesses.
Secondly, the tax “problem” is primarily one of insufficient financing: governments in low-income countries work on less than half the budget than higher-income ones, with tax to GDP ratios in these groups averaging respectively 14 per cent and nearly 40 per cent. However, while tax revenue has to increase, and dramatically so, how that happens is equally important. We know that poorly evidenced and ineffective reforms not only fail to raise revenue, they can also erode public trust, fuel discontent, and ultimately close political space for further reform. Getting tax right means learning key lessons from the past decade of context specific evidence on what works and what doesn’t. There are three main lessons on politics, data, and equity.
Tax reform must be grounded in political realities, it is never only technical
Tax reform should not be considered as merely a technical matter for auditors, data infrastructure experts, and policy analysts. Even the most uncontroversial tax reform is deeply political and can encounter significant resistance if political realities are not accounted for.
A case in point comes from tax protests that many African countries have recently experienced. Initially sparked by proposed tax reforms, these protests often quickly spread beyond tax, to question government legitimacy and competency more broadly. Citizens’ dissatisfaction is often fuelled by perceptions of distrust and unfairness grounded on tax reforms that bear heavily on low-income earners and micro firms, which make up the bulk of many African economies.
ICTD’s research on mass registrations and simplified tax regimes has shown that these reforms not only fail to generate significant revenue; their implementation can generate excessive costs for both firms and governments, ultimately undermining future prospects for reform and revenue mobilisation. The political feasibility of tax reform is deeply affected by the choice and sequencing of reforms, as well as how changes are implemented and communicated to citizens and businesses. This already complex reality is compounded by the huge pressure on governments to act quickly to increase revenue, which risks creating the wrong incentives, and by high debt servicing costs that break the link between more tax and better public services.
Local data and embedded partnerships key to evidence-informed policy
When I started working on tax, over 15 years ago, no one was doing research using data from tax administrations from lower-income countries, largely because that data only existed in paper archives or in scattered excel spreadsheets. Instead, lower-income countries had had to rely on studies from vastly different contexts, like the US or Europe. Everything changed when trusted partnerships between independent researchers (such as ICTD) and tax administrations enabled the sharing and analysis of anonymised taxpayer data. This change boosted opportunities for country-specific evidence, grounded in local realities feeding into informed decision-making in tax administrations and ministries of finance. This possibility to make reform decisions based on local data and country-specific evidence has led to a quiet but transformational shift.
Much remains to be done, however. Many countries still lack digitised tax data of sufficient quality. Even where data is available, capacity to use it remains low – so its potential to inform decisions and be systematically integrated into tax collection functions is still largely untapped. In many cases, partnerships with independent researchers are not in place to make the most of these data.
We know that transformational change is possible, as we in ICTD have seen in countries like Rwanda, Uganda, and Eswatini, among others. But expanding and sustaining progress requires strong partnerships and continued investment in the people and institutions that design and implement reform.
Equitable tax reform is the most efficient way to raise revenue while enabling growth
Equity is often pitted against efficiency, and sometimes growth, in trade-offs that I believe to be largely overstated. In fact, equitable tax reform is probably the most efficient – and sustainable – way in which governments can increase revenue, for three reasons.
First, some of the most inefficient approaches to tax mobilisation are those that disproportionately impact people on low incomes, particularly in the informal sector. A recent ICTD study found that administering a stamp duty (a tax on micro firms) costs the Ghana Revenue Authority nine times the revenue it generates.
Second, governments that are highly constrained in both human and financial resources should deploy their capacity in areas with the greatest revenue potential, while preserving equity. This includes improving enforcement of taxes that bear more on the wealthy, which are often poorly implemented – if at all – and are the most under-performing ones in low-income countries. Another example is rationalisation of tax incentives, which currently represent revenue foregone worth US$4 trillion. Reform here should start from regular, specific, and transparent reporting.
Third, equitable tax reforms hold huge potential not only for revenue generation but also for building trust that underpins the social contract between citizens and their governments. This, in turn, lays the foundations for strong institutions, better public services, and more transparent, accountable government. All this, ultimately, contributes to attracting private capital and to enabling growth.
If you are attending the GPC next week, please come and find us on Tuesday 19th at 15:05 in the Spotlight Room A.
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This blog was originally published by IDS and is part of a series of expert opinions on the Global Partnership Conference.
