Donors, Aid and Taxation in Developing Countries – An overview

There is growing interest among development policymakers in taxation, both as a crucial source of revenue for development and because taxation is central to economic growth, redistribution and broader state-building and governance goals. This paper explores the direct impact of donor supported tax reform efforts; the indirect impact of aid and related donor policies on domestic tax effort; the potentially perverse effects of tax-related conditionality; and the impact of broader donor policies including global tax arrangements. It makes detailed recommendations about future donor support for tax reform.