Passage from MDGs to SDGs - harnessing domestic resources

For more reasons than one, particularly in the face of declining foreign aid, it has become imperative that internal resources are ideally mobilised and fully utilised to drive economic development. Ideas presented in various consultations and discussions on the post-2015 sustainable development goals (SDGs) in different parts of the world suggest that the objectives and targets are likely to be more ambitious than those of the millennium development goals (MDGs). This implies that more financial resources will be required to drive development, and that aid alone will not be enough. Therefore, domestic resource mobilisation (DRM) will be critical, more so because external assistance is becoming few and far between due to economic depression in the industrially developed Europe, the major donors.  
In fact, mobilisation of domestic resources has long been recognised as an important source of development finance.  The Monterrey Conference of 2012 recognised DRM as one of the six leading sources of finance to achieve the MDGs. However, under the MDGs financing plan, DRM was restricted to revenue accruing to governments through taxation, excluding savings and investment generated by households and domestic firms. Given that the post-2015 development agenda is likely to be broader in scope, there is a need to include these additional domestic options in the financing architecture. For example, Africa, in the last decade, witnessed a dramatic rise in tax revenues and remittances, which exceeded recent aid inflows. While this progress is remarkable, it will be misleading to view DRM as a substitute for aid. Indeed, both are complementary, though DRM is less volatile and more sustainable. Aid uncertainty was found to impact private investment negatively. Aid also tends to reduce incentives for DRM, create indebtedness and inhibit economic expansion through "aid tying".
Beyond its financing role, DRM helps strengthen fiscal institutions, which often are viewed as imperatives of state building and key to improving accountability. In essence, more effective and transparent tax systems can contribute to broader governance reforms. Less dependence on aid can also promote domestic ownership of development programmes, thereby helping to improve the allocation of resources in a way that maximises social benefits. Therefore, socio-economic development should be bolstered by harnessing resources from internal sources and ensuring an equitable distribution thereof without falling back on foreign aid on one pretext or the other. For this, taxes must be well structured and collection of taxes ensured. At the same time, tax management should be so developed that the revenue collected is best utilised and the tax payers get the best return for their money.
Revenue collection from July to February of current financial year is Tk.798.0 billions, while the same for the corresponding period of the last fiscal was Tk.600 billion. While this is a healthy growth in terms of revenue collection, one of the problems being faced by Bangladesh is its comparatively lower tax-GDP (gross domestic product) ratio. In spite of that, many recommend reduction in tax rates.
Corporate tax rate in case of publicly-traded companies is 27.5 per cent, while that for non-publicly traded companies is 37.5 per cent. Corporate tax rates in different countries are: Australia- 30 per cent, Brazil- 34 per cent, Canada- 26 per cent, China- 25 per cent and USA- 40 per cent.
Tax-GDP ratio in Bangladesh in 2014-15 is 9.79 per cent against 15 per cent in India, 12 per cent in Pakistan, 13 per cent in Sri Lanka and Nepal and 14 per cent in Bhutan. Since the economy is expanding, tax-GDP ratio for Bangladesh should be higher.  
While DRM is, no doubt, an important sustainable source of financing the post-2015 development agenda, there are concerns that "natural resource curse" in some countries may limit its effectiveness. These concerns are backed by the experience of some countries where natural resources are the dominant sources of government revenue, and yet these have not been used to improve service delivery.
Instead, resource endowments have promoted bad governance and political instability. This is further compounded by the magnitude of capital flight. A recent study estimates that capital flight and stolen assets from sub-Saharan Africa between 1970 and 2010 stood at US$ 814 billion, exceeding both Official Development Assistance (US$659 billions) and foreign direct investment (US$ 306 billions) over the same period.
Another concern is about "resource prioritisation". Most resource-rich countries allocate a large portion of their revenues to unsustainable and unproductive activities, such as fossil fuel subsidy. This displaces resources needed to finance 'useful' development and also encourages excessive consumption of fossil fuel; thereby promoting its negative consequences for the environment.
This is certainly a threat to the environmental sustainability mission of the post-2015 framework. In addition, fuel subsidies tend to have a "ratchet effect" - without a 'sunset' clause which is difficult to reverse.
The overall discussion has two important implications for post-2015 development framework. First, the set of goals for post-2015 development agenda must pay particular attention to domestic ownership and national priorities. Unlike in the past when countries depended on external resources, the post-2015 agenda should draw on DRM and other innovative domestic financing options, including repatriation of stolen assets.
The post-2015 agenda should recognise national and regional priorities. Setting the same targets for countries at different stages of development or with different needs would certainly not be the right way to go. In all, finding the right mix of goals, targets and financing options that leaves no individual and country behind should be the concern of everyone.
Second, the proposed governance goals for post-2015 should include the key building blocks of fiscal accountability and transparency. Present discussion on governance goals have mainly focused on improving human rights. While countries should be allowed to manage their own resources to their best interest, there is a need to provide mechanism to guard against mismanagement and misallocation of scarce resources. With aid, donors can make their interventions conditional on improving specific domains of governance, which could enhance DRM systems.
Lastly, leaving no one behind will require leaving no stone unturned in all spheres of the post-2015 agenda: finance, governance, policy implementation, global partnership, among others. Development cooperation, more than anything else, is required to achieve this daunting, but important task.
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