Transforming Tax Systems: UNDP's 2023 Leap Towards Sustainable Development Goals

The UNDP Tax for SDGs Initiative has made significant strides in 2023, focusing on enhancing tax systems to support Sustainable Development Goals (SDGs). Key achievements include launching new Tax Inspectors Without Borders (TIWB) programs, introducing the SDG Taxation Framework, and promoting digital transformation in tax administrations across various regions. The initiative emphasizes aligning tax policies with SDGs to foster equitable opportunities and strengthen tax capacities in developing countries.

The year 2023 has been a landmark one for the United Nations Development Programme (UNDP) as it continues its mission to enhance tax systems worldwide. The UNDP's Tax for Sustainable Development Goals (SDGs) Initiative has brought about transformative changes in tax administration, policy alignment, and capacity building across developing nations. This initiative, backed by the governments of Finland and Norway, aims to foster equitable opportunities and strengthen the ability of tax administrations to support the SDGs.

A Year of Significant Progress

From January to December 2023, the Tax for SDGs Initiative has achieved remarkable milestones. The initiative successfully reached agreements with 17 more countries this year, bringing the total to 22 out of the 25 targeted nations. Additionally, 14 National Coordinators have been appointed to ensure the effective implementation of these plans. The signing of these CEPs signifies a commitment to reforming tax systems in alignment with the SDGs.

One of the notable successes of this year has been the launch and implementation of various Tax Inspectors Without Borders (TIWB) programs. These programs have been instrumental in enhancing the capacities of national tax administrations to address issues such as tax avoidance, evasion, and illicit financial flows (IFFs). In 2023 alone, 19 new TIWB programs were launched, resulting in an additional $230 million in tax revenue collected and $1.11 billion in tax assessed.

Embracing Digital Transformation

The initiative has also placed a strong emphasis on digital transformation. Countries like Comoros, Kenya, Tanzania, Nigeria, Armenia, Lebanon, and Honduras have received support to improve their digital tax administration and data governance. For instance, Armenia has been advised on establishing a digital forensic laboratory to combat tax evasion and improve tax collection.

In Kenya, the initiative supported the Kenya Revenue Authority (KRA) in reviewing and aligning its digital transformation strategy with international best practices. Similarly, in Tanzania, a baseline study on revenue for 23 regions led to the development of a software solution for local government revenue collection, which is now being piloted in two jurisdictions.

Aligning Tax Policies with SDGs

A critical aspect of the initiative is ensuring that tax policies are aligned with the SDGs. The draft SDG Taxation Framework (STF) (Diagnostics) was introduced and piloted in nine countries, providing a comprehensive tool for national governments to optimize their tax systems. This framework has helped countries like Bhutan, Maldives, Armenia, Uzbekistan, and Nigeria in identifying areas of tax policy support to further progress in achieving the SDGs.

For instance, in Bhutan, the STF (Diagnostics) assessment focused on gender equality and climate change taxation. In Armenia, technical assistance led to legislative changes in excise duties on tobacco products, demonstrating the initiative's impact on health outcomes.

Regional Highlights

The initiative's impact is evident across various regions:

• Africa: In Eswatini, the first TIWB program was launched, focusing on digital service taxation and tax-SDG linkages. Ghana trained 645 revenue officers and supported health-related tax reforms. Nigeria developed a digital transformation roadmap and implemented the Gender Equality Seal, while Seychelles revitalized TIWB programs and established a Tax Investigation Unit.

• Arab States: Djibouti focused on aligning tax policies with SDGs and initiated South-South partnerships. Egypt engaged in TIWB programs and explored green and digital taxation. Lebanon supported digital transformation and facilitated youth volunteer programs for tax administration support.

• Asia and the Pacific: Bhutan launched its second TIWB program, supported digital property tax systems, and conducted workshops on tax treaty negotiations. Maldives undertook studies on tax and foreign direct investment frameworks, while Sri Lanka engaged in capacity-building workshops and promoted SDG-aligned tax awareness.

• Europe and Central Asia: Armenia initiated TIWB programs and performed STF (Diagnostics) assessments. Uzbekistan launched TIWB programs, conducted STF (Diagnostics) assessments, and committed to the Gender Equality Seal initiative.

• Latin America and the Caribbean: Colombia enhanced tax auditing and TP capabilities through TIWB and conducted workshops on SDG alignment.

Looking Ahead

The UNDP Tax for SDGs Initiative continues to support developing countries in enhancing their tax systems to achieve the SDGs. By promoting sustainable development and fostering global tax policy dialogue, the initiative aims to create a more equitable and just world. The progress made in 2023 sets a strong foundation for future efforts, highlighting the importance of aligning tax policies with sustainable development goals and strengthening tax administrations worldwide.

FAQs

Q1: What is the UNDP Tax for SDGs Initiative?

A1: The UNDP Tax for SDGs Initiative aims to enhance tax systems in developing countries to support the Sustainable Development Goals (SDGs). It focuses on domestic resource mobilization, reducing dependence on international assistance, and addressing tax avoidance, evasion, and illicit financial flows (IFFs).

Q2: What were the key achievements of the initiative in 2023?

A2: Key achievements include signing 17 new Country Engagement Plans (CEPs), launching 19 new Tax Inspectors Without Borders (TIWB) programs, and introducing the draft SDG Taxation Framework (STF) (Diagnostics) in nine countries.

Q3: How does the initiative support digital transformation?

A3: The initiative supports digital transformation by assisting countries in improving their digital tax administration and data governance. This includes developing digital forensic laboratories, creating software solutions for revenue collection, and aligning digital strategies with international best practices.

Q4: What is the SDG Taxation Framework (STF) (Diagnostics)?

A4: The SDG Taxation Framework (STF) (Diagnostics) is a comprehensive tool designed to help national governments optimize their tax systems in alignment with the SDGs. It has been piloted in nine countries to assess and improve tax policies.

Q5: How does the initiative promote gender equality?

A5: The initiative promotes gender equality by implementing gender-responsive tax reforms and the Gender Equality Seal. This involves training tax administrations and policymakers on the interconnections between tax policies and gender equality.