What is the MTRS?
The Medium-Term Revenue Strategy is a comprehensive approach for undertaking effective tax systems reform for boosting tax revenues and improving the tax system over the medium term through a country-led and whole-of-government approach. The MTRS was introduced in the 2016 PCT report on Enhancing the Effectiveness of External Support in Building Tax Capacity in Developing Countries. More information about the MTRS can be found below.
Why the MTRS?
A medium-term and comprehensive approach to reform the tax system’s components is beneficial because:
- A medium-term tax policy enables governments to have a clearer picture of their likely revenues over a meaningful planning period, and taxpayers to have more certainty on how they will be treated and what the tax implications of their investment and other decisions will be.
- Tax priorities are too often driven by short-term considerations. Commitment to reforms over the medium term can help prioritize intermediate objectives, such as increasing the number of high-value taxpayers.
- Institution building in tax administration is complex and needs sustained effort over several years.
- The legal framework requires a timely change to support evolving policy and administration.
- Successful reform requires continued commitment and trust among a wide range of stakeholders.
The MTRS provides a setting to achieve all these critical goals. An MTRS does not mean that benefits come only in the medium-term; it also provides the setting for short-term measures that are of high quality and consistent with the vision of fundamental improvement.
Presently, 25 countries are engaged with Partners in discussing, formulating or implementing an MTRS. See the latest list of countries discussing MTRS.
The MTRS has four interdependent components.
The four MTRS components
Revenue & Other Goals
to finance expenditure needs.
The first MTRS component is about determining spending required to support economic and social development. This goal-setting exercise has to be led by the government and, at the same time, be inclusive; involving a broader stakeholder community; and ideally society as a whole to help navigate the political economy difficulties of tax system reform. In this way, the MTRS links closely to recovery from the COVID-19 pandemic and the Sustainable Development Goals (SDGs), and their financing.
Tax System Reform (TSR)
to meet goals
The second MTRS component is the tax system reform road map itself—covering all relevant aspects of the tax system, including tax policy, revenue administration, and the legal framework. Why take this comprehensive view of the tax system? Tax system reform must be formulated to mobilize the needed revenues in the medium to long term, for example, to address the COVID-19 pandemic and achieve the Sustainable Development Goals, while promoting private sector development and social goals such as health outcomes (through taxes on tobacco and sugar-sweetened beverages), climate change (through taxes on carbon), as well as fairness and equity.
Sustained Political Commitment
to fully develop and implement TSR
The third MTRS component is about sustained medium-term government commitment to reform. For the formulation and steady implementation of the tax system reform, enduring political support is necessary. And government commitment must be expressed in concrete and visible measures within a whole-of-government approach, with buy-in at the highest level and leadership of the minister of finance.
to suport TSR implementation
The final component of the MTRS approach is coordinated external support to the tax system reform under country leadership. An MTRS identifies the resources needed for the process of reform itself, much of which will come from the country itself. But additional assistance for capacity development will be required in many cases. So, the MTRS will help align and coordinate external support under the umbrella of the government-led reform effort.
Some 25 countries are currently involved in discussing, formulating, and implementing MTRSs. These countries receive extensive support for their MTRSs from PCT Partners, in particular, the IMF and World Bank who can leverage their typically large presence at the country level. Many countries are already fully engaged in tax administration, law and/or policy reforms domestically that provide a sound basis for adopting a holistic approach–particularly one integrated with and based upon an analysis of development spending needs. In some cases, these ongoing reforms are taking place through intensive engagements financed, for example, under the IMF’s Revenue Mobilization Thematic Fund (RMTF) or World Bank’s Global Tax Program (GTP). In other cases, for instance, the UN supports MTRSs through its linkages with the Sustainable Development Goals while OECD provides support in some countries by training on international tax, exchange of information and the Tax Inspectors Without Borders (TIWB) program.