A joint blog by Manal Corwin, Director, Centre for Tax Policy and Administration, OECD; Manuela Francisco, Global Director, Economic Policies, Prosperity, World Bank; Vitor Gaspar, Director, Fiscal Affairs Department, IMF; Shari Spiegel, Director of Financing for Sustainable Development Office, UNDESA.^[1]

We are at a pivotal moment for taxation and sustainable development. For many countries, the goal of reaching the Sustainable Development Goals (SDGs) by 2030 is slipping out of reach while demands on public finances are growing. Domestic revenue mobilization (DRM) remains central to countries’ financing strategies.

Preparations for the Fourth International Conference on Financing for Sustainable Development (FFD4) in July 2025 are underway. Discussions are taking place against the background in which low-income countries do not have access to global financial markets at favorable conditions. Particularly in low-income countries and emerging economies, public finances are under pressure following the pandemic, the impact of wars, and debt crises—while economic growth remains tepid following a period of high inflation. Challenges go beyond raising more revenues, and include critical discussions around equity and redistribution, as well as demands for more inclusive international cooperation on tax matters.

Domestic revenue mobilization is also a cornerstone for state capacity required to deliver real benefits to people. Countries’ national development plans anchored in the SDGs can serve as a foundation for comprehensive tax reform strategies. Successful tax reforms are paired with targeted spending policies to help address poverty, invest in people through education, and in physical infrastructure such as roads, public transport, hospitals, water, and electricity—the ultimate goal being to improve people’s well-being and create the necessary conditions for growth and job creation.

However, since the pandemic, the SDG financing gap has grown to USD 4 trillion a year according to UN estimates, and it is widely recognized that without large-scale investments, the world faces catastrophic climate consequences. Gaps are particularly large in least developed and other low-income countries. For these countries, achieving SDGs relating to investment in health and education (building human capital), as well as water and sanitation, electricity, and road infrastructure (building physical capital), is estimated to cost 16.1 percent of their GDP. This compares to 4.8 percent in emerging economies and less than 0.2 percent in advanced economies. Improving tax revenues will be crucial to help close these financing gaps. Indeed, tax collection in nearly 80 percent of low-income countries falls below 15 percent of GDP with 13 percent the current average. Based on historical and cross-country data the IMF has estimated that there is a tipping point of around 15 percent of tax-to-GDP above which countries experience significant economic growth and development. More recently, the World Bank has extended this analysis and confirmed  that tax revenues of at least 15 percent of GDP can boost economic growth. Moreover, the analysis has found additional positive effects on enhanced stability and inequality reduction through higher public spending and progressive taxation.

Increasing tax revenues is both vital and feasible. The IMF estimates that low-income countries’ revenue raising potential could be around 9 percentage points of GDP. Achieving increases of those magnitudes would bring the revenue mobilization of low-income countries closer to the level of emerging market economies. Achieving this is difficult and requires sustained, comprehensive tax system reforms, including tax policies, institutions, and legal frameworks. It also requires strong political support for such comprehensive reforms, including efforts to limit the expansion of inefficient tax exemptions and to promote compliance across all taxpayers. Leveraging digital technology in tax collection is critical to improving compliance while mitigating costs to taxpayers.

Developing countries can make significant revenue gains by improving the way they tax consumption (such as value added taxes--VATs), individual incomes, and wealth. For instance, VAT compliance gaps—the difference between expected and actual tax collection—are larger in developing countries. Closing those gaps could raise considerable additional revenues. While corporate income tax is important, and there is scope to further address tax avoidance, evasion and harmful tax competition, corporate income tax alone cannot provide the scale of the revenues required. Countries are encouraged to broaden their tax bases, for instance by reducing VAT exemptions, and better taxing professionals, high wealth individuals and capital. Moreover, beyond increasing revenue collection, such reforms can also be redistributive, especially when combined with targeted spending measures to support the poor. Countries may also want to explore other taxes that can raise revenues while contributing to human development—such as those that discourage unhealthy activities like smoking or encourage lower carbon emissions.

Discussions to update international tax norms and promote international tax cooperation are an essential complement to domestic efforts to boost tax capacity. Since 2009, and especially since the Addis Abba Action Agenda in 2015, there has been an acceleration of and participation in international cooperation on tax matters, with particular focus on tax transparency, international norms on corporate taxation and capacity-building. This includes addressing bank secrecy through exchange of information led by the work of the Global Forum on Transparency and Exchange of Information and mitigating profit shifting by big companies such as the recently agreed global minimum tax, developed by the members of the OECD/G20 Inclusive Framework on BEPS. The United Nations General Assembly in its current 79^th Session is considering draft Terms of Reference for a United Nations Framework Convention on International Tax Cooperation. It is crucial that developing countries can benefit equally from these efforts.

From its inception, the Platform for Collaboration on Tax (PCT) has been guided in its work by the relationship between taxation and achieving the SDGs. To support this agenda the PCT has drawn on the expertise from the PCT partners, and their experience from, collectively, implementing projects in over 150 countries. The PCT has issued guidance and reports on technical issues of common relevance to many countries’ tax systems including on bilateral tax treaty negotiations, tax incentives, transfer pricing, off-shore indirect transfers and carbon pricing. The PCT has also supported the Medium Term Revenue Strategy as a practical framework for comprehensive tax system reform which aims to ensure strong political commitment, stakeholder engagement and a coordinated approach from development partners.

Taxation, finance and development are closely linked. Building developing countries’ tax capacity complemented by strengthened international tax cooperation is essential to healthy public finances and economic development. The July 2025 Financing for Development conference in Sevilla, Spain provides an opportunity to address challenges in taxation in the context of the broader financing agenda. We, the partners of the Platform for Collaboration on Tax, are committed to helping countries strengthen their tax capacity, boost revenue mobilization, and achieve the sustainable development goals.

[1] This blog has been prepared in the framework of the Platform for Collaboration on Tax (PCT) under the responsibility of the Secretariats and Staff of the four organizations. The work of the PCT Secretariat is generously supported by the Governments of France, Japan, the Netherlands, Norway, Switzerland, and the United Kingdom. This blog should not be regarded as the officially endorsed views of those organizations, their member countries, or the donors of the PCT Secretariat.