12/04/19

Tax reforms can help fund SDGs in Asia Pacific

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Two farmers smile as they carry sacks. Smart Tree-invest is an action research project of the World Agroforestry Centre that aims to improve the livelihoods and resilience of smallholding farmers by helping them become less vulnerable to the effects of climate change. Copyright: Dienda Citasyari Putri Hendrawan/World Agroforestry Centre [CC BY-NC-SA 2.0]. This image has been cropped.

Speed read

  • Asia Pacific needs extra annual investments worth US$1.5 trillion to meet SDGs
  • Tax reforms and reduced corruption can help direct funds towards the SDGs
  • The private sector can be made to integrate sustainable development into plans

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[BANGKOK] Implementing financial reforms throughout Asia Pacific can help release funds needed to combat climate change, poverty, inequality and achieve agreed development objectives, say reports released this month by the UN and other agencies. 

Asia Pacific’s developing countries need additional annual investments worth US$1.5 trillion on average to eliminate extreme poverty, provide basic healthcare and quality education to all and meet other Sustainable Development Goals (SDGs).

“Public resources alone are not going to be enough. That’s why we are encouraging more engagement with the private sector”

Hamza Malik, Economic and Social Council for Asia and the Pacific

“Those numbers are huge,” says Hamza Malik, senior official with the UN’s Economic and Social Council for Asia and the Pacific (ESCAP), which released a report on the region’s investment needs to meet the SDGs. UN members had adopted the 17 ambitious SDGs in 2015, promising to tackle environmental, poverty and other issues by 2030. But there is concern at the slow pace of progress. 

Countries must overhaul their tax systems, find new ways to ease national debt, boost trade and introduce reforms to free more money for investment in sustainable development. This, according to a new and major report on the SDGs this month (April). More than 60 groups participated in this report, including the International Monetary Fund and the World Trade Organization.

Although tax revenues have been increasing in some countries, others need to improve tax policy and collection to raise revenues and to improve the fairness, transparency and efficiency of their systems, the report said.

The ESCAP report, focusing on Asia Pacific, said these reforms are particularly needed in this region. “It’s extremely important for this region. If you do a global comparison with other regions, then…Asia Pacific stands out for the wrong reasons,” says Malik.

Cambodia, The Maldives, Myanmar, Nepal, Samoa, Sri Lanka and Tonga have all significantly raised their tax revenues in recent years through comprehensive reforms, one of which is broadening their tax bases.

But more reforms are needed across the region to tackle bribery, corruption and tax evasion —businesses are transferring earnings across borders, for example. These reduce revenues, the report said.

Coordinated reforms between national and local governments are also needed to raise revenues. Many Asian cities are struggling to provide basic services for growing numbers of residents. An extra 160 million people in the region are expected to pour into urban centres by 2025, the ESCAP report says.  

“Asia Pacific is the fastest growing region. And urbanisation is the fastest in this region, so infrastructure needs are very pronounced,” Malik tells SciDev.Net.  “[Even with reforms] public resources alone are not going to be enough. That’s why we are encouraging more engagement with the private sector.”

SDGs infographic

More private funds are also needed for climate financing and for micro, small and medium enterprises, the ESCAP report said. Governments should introduce reforms and frameworks to encourage more public-private partnerships and long-term institutional investors, such as pension funds and sovereign wealth funds, to invest in sustainable projects. 

“Private sector capital is [key] to the endeavour of achieving the SDGs. It’s not marginal and can’t be treated as peripheral,” says Thomas Beloe, UNDP’s regional SDG finance advisor.

Governments in the region have already introduced a string of successful initiatives to encourage the private sector to integrate sustainable development and the SDGs into their plans, according to Beloe. He also says many companies are also undertaking initiatives voluntarily.

India’s government, for example, has introduced a law requiring large companies to spend at least two per cent of their profits every year on corporate social responsibility projects. Fiji and Indonesia are among countries in the region to issue green bonds to increase the flow of private capital for combating climate change, increasing renewable energy and other green projects.

“The key now is to move from a piecemeal approach to private sector capital and the SDGs towards a systemic approach,” Beloe says. 
 
This piece was produced by SciDev.Net’s Asia & Pacific desk.