Working Paper 241
Lower-income countries, donors, and international organisations have devoted considerable effort over the past two decades to strengthening lower-income countries’ capacity to tax cross-border economic activity. These efforts have primarily been orientated around the adoption and implementation of international standards developed in bodies of the Organisation for Economic Co-operation and Development (OECD). Yet, critics have argued that those standards are inappropriate for lower-income contexts. To investigate the effectiveness in practice of efforts to apply international tax standards, the International Centre for Tax and Development (ICTD) undertook a project, ‘Comparative Perspectives on International Tax from the Global South’. In this project researchers from seven countries studied the status of tax systems in the areas of exchange of tax information and corporate taxation, including bilateral tax treaties and the taxation of digital services.
This paper synthesises the findings of these studies. Some administrations have had a degree of success in applying international standards to strengthen enforcement and raise revenue – but these gains are uneven, often slow to materialise, and difficult to attribute. Implementing international tax standards yields full benefits when they are part of broader improvements in legislation, administration, and dispute resolution. Weak foundations can lead to higher compliance costs and superficial convergence with global best practice. Where progress is slow, this may be because the initial motivation for adoption was unrelated to revenue gains, there were challenges in maintaining support, or resource needs were underestimated. Adoption triggers lock-in and cascading effects, since there is a degree of interdependence between the standards we evaluated. Simpler alternatives are rare, as countries typically embrace OECD-style approaches. They are driven by investment concerns and the dominant position of international standards, even when these do not align with local requirements. Policymakers must therefore evaluate carefully before making commitments. International standards can deliver benefits where domestic conditions allow, but, where they do not, there is a risk that substantial investment will deliver only limited returns.
