Measuring the gap between ability and effort in domestic revenue mobilization

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This blog was first published in Brookings Future Development Blog. The authors, Ipchita Bharali and Indermit Gill have authored a policy brief and a report "Enhancing domestic revenues: constraints and opportunities" available for download here. Developing countries should expect foreign aid to fall during the transition from low to middle income, and end soon after. In low-income countries, the share of foreign aid is about 2.5 percent of GDP. This drops to 0.8 percent in lower-middle-income economies; by upper-middle-income levels, it is a negligible 0.2 percent. For both givers and receivers of foreign assistance, one of the main concerns is that foreign aid weakens the incentives to build domestic revenue administration capacity and make sensible tax policy choices. The stakes can be high. Even a pre-announced and gradual reduction of foreign…
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