Switzerland launches tax programme for developing countries
Bern, 18.10.2023 - Tax revenues in developing countries are usually very low. With increased revenues, these countries could meet the basic needs of their populations and reduce their dependence on development aid. The Federal Council therefore decided on 18 October that Switzerland will provide up to CHF 28.5 million in the period to 2028 in order to support developing countries in reforming their tax systems.
Governments use revenues, especially funds obtained from taxation, to invest in social and economic development, alleviate poverty, provide public services and manage crises. But tax revenues account for only about 10 to 14 per cent of the gross domestic product (GDP) in developing countries, compared to 20 to 30 per cent in wealthier nations. This is caused by weaknesses in the tax system, such as high levels of tax evasion, inadequate redistribution, lack of capacity in tax administrations, a large informal sector, and corruption.
The Swiss Tax Programme for Development (STP4D) will continue SECO's previous successful work on taxation in developing countries. Given the complexity of tax reforms, the large number of technical support providers involved and the experience gained from previous tax programmes, SECO is bundling its main activities in the tax field into a lighthouse project. The STP4D combines the major multilateral tax programmes of the International Monetary Fund, the World Bank and the OECD. The STP4D is specifically supporting Ukraine in strengthening its tax system, which has been severely affected by Russia's military aggression.
Existing economic development cooperation funds will be used to finance the programme.
The new lighthouse project will enable SECO to better manage its tax-related activities and deploy resources efficiently and coherently. It will also simplify communication with the authorities and with other donors and development partners.
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