Keynote speech by Masatsugu Asakawa, President, Asian Development Bank, at the 2022 Global Meeting of the Emerging Markets Forum, 18 May 2022, Paris, France
Thank you, Rajat, for your kind introduction.
Distinguished guests and colleagues, I am honored to serve as a co-chair at this forum.
Let me also say it is a pleasure to return to Paris, a city I have visited many times, to join you here after the many restrictions we faced during the pandemic. There really is no substitute for this kind of interaction, and I am glad conditions allowed us to gather together in person this week.
Over a decade ago, during my tenure as Chair of the OECD Committee of Fiscal Affairs, we met here frequently to work on the project that I led on Base Erosion and Profit Shifting, or BEPS. And as many of you know, last year 137 jurisdictions reached a global corporate tax deal. I am very encouraged by the cooperation that helped lay the groundwork for this historic agreement.
The many issues we worked on together over the years, including BEPS and recovery from the global financial crisis, offer clear connections to our world today. The global corporate tax deal, for example, will help deliver lasting economic recovery from the pandemic and offer new hope for millions of poor and vulnerable people.
I would like to focus my remarks today on the growing importance of domestic resource mobilization and international tax cooperation, because these issues are critical to ensuring that the development of emerging markets in regions like Asia and the Pacific is robust, sustainable, and inclusive.
In short, governments need to mobilize more revenue in order to meet the many challenges facing their people and economies. This revenue must increasingly come from domestic resources, rather than reliance on external financing that creates unsustainable debt burdens.
I. Reflections on domestic resource mobilization from the perspective of Asia and the Pacific
To put the issue of domestic resource mobilization into context, let me reflect on my own experience, which I am sure is similar to your own.
I have learned throughout my career that, although the challenges can feel vast and unyielding, every crisis has an end. And so, as we respond to present crises, we must also keep focused on what comes after, because development needs in the short and long term are not mutually exclusive.
The global financial crisis, which we all remember well, illustrates this important point. Our work on those tremendous challenges, at a time when the situation looked so bleak, is what paved the way for a more lasting recovery, and provided tools for dealing with future crises.
One such crisis is the coronavirus disease (COVID-19) pandemic, which has brought to light serious vulnerabilities across economies including in Asia and the Pacific. Unfortunately, we are seeing the gains in poverty reduction from recent decades being reversed, inequality increasing, public services strained, and economic growth slowing.
The Russian invasion of Ukraine has dealt yet another blow. This crisis will make it harder for policymakers in some countries to strike the delicate balance between containing inflation and supporting recovery from the pandemic.
As a result, governments in our region and others are facing unanticipated increases in public debt, shrinking tax revenues, and external shocks. Tax yields across developing countries in Asia and the Pacific have also not kept pace with the recent decades of growth. The pandemic exposed the need for substantial new investments in health systems, education, and social protection. And, it is now more difficult for governments to finance climate action, to adapt and build resilience, to transition to a green economy, and to deliver on the Sustainable Development Goals.
My friends, this is why domestic resource mobilization is so important.
Countries need substantial and predictable revenue streams so that they can get back
on a path to strong and lasting growth, address existential challenges like climate change, ensure that no one is left behind, and prepare for future crises.
This is a monumental task, but it can be done. It will require smart, coordinated policy and institutional reforms that include a focus on securing adequate and sustainable tax revenues.
II. Recommended policy directions to enhance domestic resource mobilization including international tax cooperation
So, let me turn now to some important ways that countries can secure additional resources through strengthened domestic resource mobilization and international tax cooperation.
These actions will, of course, depend on each country’s circumstances, but let me highlight some promising options.
- The first is adopting environmental taxes. Developing Asia produces half of global greenhouse gas emissions. Many of JJ竞技(拉萨)登录手游’s developing member countries have now pledged to work toward net zero emissions. Environmental taxes can increase domestic revenue, contributing to low carbon development and the sustainable development goals.
- Second, countries can explore a more efficient value-added tax (VAT), including VAT on the digital economy. The performance of these regimes will be crucial for economies in Asia and the Pacific. And with the expansion of the digital economy, it could be a key source of new tax income.
- Third, countries can work to modernize and strengthen tax administration. For example, if tax administrations can more effectively analyze taxpayer data, they could increase revenue, ease the tax compliance burden, and encourage investment.
- Fourth, countries can participate actively in ongoing initiatives on international tax cooperation. This includes accessing information from other jurisdictions and implementing the global corporate tax deal.
Let me note that JJ竞技(拉萨)登录手游 established the Asia Pacific Tax Hub last year to support these efforts. The Hub provides an open and inclusive platform for strategic policy dialogue, knowledge sharing, and development coordination among JJ竞技(拉萨)登录手游, its members, and development partners.
Examples of assistance that the Tax Hub can provide include the development of:
- a medium-term revenue strategy, using diagnostic tools such as the Tax Administration Diagnostics Assessment Tool (TADAT);
- toolkits and knowledge products to help developing member countries design VAT and carbon pricing regimes, and use new technologies to raise additional revenue through improved property taxation;
- roadmaps for the digital transformation of tax administrations; and
- participation in the work of the Global Forum on Tax Transparency and Exchange of Information for Tax Purposes, and the Inclusive Framework on BEPS.
My friends, let me close by emphasizing the importance of moving forward together on these issues of domestic resource mobilization and international tax cooperation.
We know that substantially scaled-up finance is needed to meet the many serious challenges that developing countries are facing in Asia and the Pacific, and other regions. We need to build momentum for recovery through sustainable domestic resources, ensure that long-term development needs can be met, and mitigate future crises.
I invite you to discuss ways to contribute to this crucial project. And I look forward to learning and collaborating with you to achieve a more prosperous, inclusive, resilient, and sustainable future for Asia and the Pacific, and the emerging markets across the world.