Wednesday, November 12, 2008

Shadow Report on German Development Cooperation – support for tax and public revenue systems

The 2008 shadow report (in German) on German Development cooperation sheds light on the German support for public finance systems that enhance developing countries' capacity to fight tax evasion and capital flight.

Each year, tax evasion and capital flight cause some US$ 500 Billion to be lost as public revenue for developing countries, which is 5 times as much as total ODA. Although case studies show the enormous effectiveness of money spent to support tax and public revenue systems, only 0,07% of global ODA is actually spent on this. Reasons might be the unattractiveness of such measures, as compared to support for health or education. Furthermore the international trend of deregulation, decentralization and privatization for a long time has not supported projects that aim to increase government incomes. With the development discourse on 'good governance' and 'ownership' the issue became more important.

Recent calculations of the UN Millennium Project show that even if all donors would reach the ODA target of 0,7% immediately, it would not be enough to achieve the MDGs. For this the development countries themselves need to increase their public spending on poverty alleviation, hunger and social protection. According to the UN, there is a huge potential to increase public income if one compares economic strength and actual public revenue in developing countries.

The German Ministry for Development Cooperation identifies programmes to increase local public resources as one priority for the upcoming Doha Conference on Development Finance in December. The shadow report notes an increase of resources allocated for this purpose within the German ODA. However Germany ranks 9th among the biggest donors in this area with the UK spending more the 5 times as much. Furthermore German engagement is fragmented, uncoordinated and lacking clear political orientation, according to the authors of the report.

The 'Shadow Report of German Development Cooperation' is published by Terre des Hommes Germany and Welthungerhilfe and is seen as a critical counterpart to the OECD-DAC report regarding German cooperation. It analyses whether promises by the German government are actually met.

by Martin Behrens

Read BMZ statement on the report

See the Euforic dossier and newsfeed on German cooperation