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Establishing Good Tax Governance in the Arab World – Speech – Eurasia Review

Good Morning – Sabah Al-Khair ! I am pleased to return back to Dubai,
this tomorrow a city the place you – its financial leaders – are dedicated

This imaginative and prescient is predicated on the nicely-being that everyone shares,
poor and middle class, residents and immigrants; and
alternatives for all, together with ladies. It's a imaginative and prescient
justice for the kingdom and impartiality and confidence in authorities policy
is directed to the widespread good.

This can be a great imaginative and prescient. But like Sheikh Mohammed bin Rashid Al Maktoum once
stated: "The larger your vision, the higher the achievement … we will't
let worry maintain us small. We have to be daring to be nice. ”

As you properly know, fiscal policy plays a key position in creating and
promoting a imaginative and prescient of sustainable and inclusive progress – particularly when
sustainable improvement goals. It’s because we’d like it
– fiscal status for well being, schooling, social protection and. ,
public funding – all the key priorities in this area

That's why I needed to go back to the Arab forum – fourth
now. In recent times, I have spoken in element about fiscal policy – spending and
to realize sustainable and inclusive progress. This
Yr, I need to go deeper – the foundation of tax policy
and good monetary management

As a result of and not using a secure foundation, even the greatest insurance policies can wrestle.
And not using a strong foundation, fiscal policy lacks credibility.

In this context, I cope with two good fiscal policies: i)
a robust fiscal framework; and (ii) good governance and transparency

Prelude: international and regional background

Earlier than I do that, I need to say a number of words about the broader financial context

Unfortunately, the area is just not yet absolutely recovering from the world
Economic Crisis and Different Main Economic Disruptions in the Last Decade

Progress has been accelerating among oil importers, however it is nonetheless under the crisis.
levels. The fiscal deficit stays excessive and public debt has risen rapidly
64% of GDP in 2008 to 85% of GDP in a decade. Public debt
Over 90% of GDP in virtually half of these nations

Oil exporters haven’t absolutely recovered from dramatic oil prices
the surprising progress continues, however the prospects are great
unsure – partly mirror the want for nations to maneuver shortly
renewable energies in new many years in accordance with Paris
Settlement. When revenues fall, the authorities deficit is just sluggish
despite vital reforms, both in terms of expenditure and income
together with the introduction of VAT and excise duties. This has led
a pointy improve in public debt – from 13% of GDP in 2013 33
proportion in 2018.

At this stage, international enlargement is deteriorating and risks are rising.
Just some weeks in the past, revised forecasts have been launched. We are considering now
The worldwide financial system will grow by three.5 per cent this yr, 0.2 per cent
points decrease than we expected in October. And the risks are rising
growing tensions in trading and tightening financial circumstances.
It isn’t shocking that the weaker international setting has an impression
by way of totally different channels – trade, remittances, capital flows,
uncooked materials prices and monetary circumstances

The bottom line: the region's economic path is difficult.
This makes the fiscal coverage activity far more troublesome, which in flip does
More importantly, it’s essential to create robust foundations for anchoring tax coverage

1. The fiscal framework

The first a part of this foundation is sweet fiscal coverage. by
I mean legal guidelines, institutional preparations and procedures
crucial to realize the budgetary targets. Such a body
provides governments the opportunity to finances in the medium term in a means that’s
mirror clear, consistent and credible objectives

The area has opportunities to improve its fiscal framework. Some
weaknesses are brief-time period and inadequate credibility

Brief-term: provided that inclusive and sustainable progress is
The medium-term goal is that fiscal policy is a medium-time period path.
Focusing on the instant horizon makes it troublesome to important, however
lengthy-term reforms in areas resembling excessive public service
designing effective social safety techniques and detrimental
gasoline subsidies. The brief term term signifies that tax coverage is strengthened
than darken the growth and chest waves, making it troublesome to succeed in
sustainable and inclusive progress

The credibility of taxation: referring to main elements
the quantity of expenditure has been stored outdoors the finances and poor danger management. Measurement
it’s common for state funds to finance immediately
tasks bypassing the normal budgetary procedure. And state-owned corporations
In some nations, loans are excessive – once more, outdoors
price range. Fixing these fiscal dangers wouldn’t only improve the price range
credibility and transparency, but would assist to protect corruption.
The credibility of the price range also requires higher danger management
A comprehensive price range based mostly on practical forecasts

The excellent news is that many nations are already establishing their own
fiscal framework – many with the help of the IMF. Simply give examples:

  • Saudi Arabia, Kuwait, UAE, Sudan, Qatar and Lebanon have all arrange
    macro-monetary models – a useful first step in strengthening taxation
  • Algeria has lately adopted a new finances regulation with a robust medium-term perspective
    and Bahrain has launched a fiscal program
    achieve stability in the medium term
  • Mauritania, Morocco, Jordan and Lebanon have made progress
    Planning and implementing medium-time period public investment
  • Egypt is now publishing its finances danger report and producing
    inner price range danger assessment. The UAE also goes a
    a public finance danger administration undertaking – with the assist of the IMF – and produce it
    First Tax Stress Check This Yr

There’s nonetheless room for improvement. Perhaps oil exporters might
to comply with the example of other useful resource-wealthy nations resembling Chile and Russia
Norway uses taxation rules to deal with key priorities
Expenditure on volatility in commodity prices

Robust fiscal frameworks have other necessary benefits. They type the basis
reliable debt management. Additionally they permit for better coordination
tax and financial policy so that each macroeconomic issues

2. Good Governance and Transparency

I might now like to turn to a different pillar of excellent governance – good
governance and transparency. Right here the administration refers
institutional framework and practices in the public sector. Robust
institutions are essential to legitimacy, a clearer understanding
understanding of coverage goals amongst citizens, t
and creating a buy-in for fiscal coverage

On the different hand, as lots of you might have stated, weak establishments mean weak
a political basis that would break and crumble – as a result of it is inadequate
legitimacy and public duty. Even worse, these cracks might also
Let corruption fade. And you recognize so properly, this can be a social poison
feeds on inconsistency, breakout and disappointment, especially
younger. The word corruption, in any case, comes from the Latin root of rotting,
decomposition – decomposition. And the Arabic phrase, fasad also

Corruption is a serious disruption to fiscal coverage. Without confidence
the fairness of the tax system, it is turning into more and more troublesome to boost the needed revenue
crucial spending on well being, schooling and social safety. And
Governments may be tempted to favor tasks for white elephants
funding in individuals and productive potential. Add this, and we’ve a
recipe for unsustainable fiscal coverage and social inconsistency.

This international challenge that’s essential for giant and small nations, superior and
low-revenue financial system and the public and private sectors. That’s the reason it is
it’s no shock that the IMF research found that weak governance and corruption are
progress, funding, direct overseas funding and taxes

Particularly, we found that enhancing the index of corruption and administration by shifting from the lower quarter to the common is said to the investment-to-GDP ratio of 1.5-2. proportion points and annual GDP per capita improve by half a proportion point or extra. [1] The upcoming Fiscal Monitor has extra evaluation on the tax prices of corruption and the position of tax authorities

What is the answer to poor governance and corruption? For tax functions,
It requires extra transparency in taxation – to enlighten everyone
budgetary and public accounting points. This may give extra
a precise picture of the place and outlook for public funds, lengthy-term costs
and the potential advantages and potential fiscal risks
might throw them off the course. There are some enhancements in this space

We all know that such reforms are costing. Take the case of Georgia
example. Until 2003, it was thought-about one in every of the most corrupt nations
world. But then it reformed the institutions and broke
corruption. This, together with the tax reform, led to instant improvements. Tax
Revenue grew from 12% of GDP in 2003 to 25% of GDP in 2003. T
In 2008, taxpayers believed in the equity of the system

that the IMF has enhanced its commitment to the region
corruption. Last yr, we introduced a new framework
is predicated on a extra systematic, even, environment friendly and trustworthy
collaborating in these issues with the Member States. We’ll achieve
to leaders in this space to discuss how we will work collectively

With higher governance, we will exchange the "disintegration" of corruption in the "integration" of a productive financial system. We will exchange with the facade islah – make things right, match individuals with one another.


Give me a wrap. I have argued this morning that good fiscal policy requires
good institutional foundations. And a strong basis for industries like
The fiscal framework and administration give citizens the confidence that tax
politics serves everyone, not just wealthy or properly-related.

I need to end some of the clever phrases resulting from the great Ibn Khaldun, "He
The one who finds the new path is the path, though the path must be discovered
others again; and one who walks removed from his age is a
manager. ”

You’re peddlers, leaders, visionaries. We hope we will
give useful directions, however we are ready so that you can discover the proper path
this vision is real.

Thank you – shukran !

[1] Extra specifically, these positive aspects are related to the transition from 25 th proportion factors to 50 th proportion points in the Corruption and Administration Index