Domestic Resource Mobilisation – Strategic Revenue Enhancement, and Sustainability

Introduction:

• Explanation of the importance of domestic resource mobilisation (DRM) in enhancing economic stability and development.
• The need for strategic revenue enhancement to improve government capacity to fund essential public services.
• Focus on sustainability to ensure long-term financial health and social equity.
• Objectives:
• To strengthen domestic resource mobilisation through improved tax policies, compliance, and collection.
• To develop and implement strategic revenue enhancement initiatives.
• To ensure the sustainability of revenue streams by promoting economic diversification and addressing fiscal risks

Programme Components:

Domestic Resource Mobilization (DRM)

• Objective: Enhance the capacity of the government to generate revenue domestically through effective tax and non-tax mechanisms.
• Key Activities:

1. Tax Policy Reform:

• Review and reform existing tax policies to ensure fairness, efficiency, and growth orientation.
• Introduce progressive taxation measures where appropriate.
• Simplify tax codes to enhance compliance.

2. Tax Administration Modernization:

• Invest in technology to improve tax collection processes.
• Capacity building for tax officials on modern tax administration practices.
• Enhance taxpayer education and outreach programs to improve voluntary compliance.

3. Broadening the Tax Base:

• Identify and integrate informal sectors into the formal tax system.
• Implement measures to capture taxes from digital and e-commerce platforms.
• Develop strategies to tax multinational corporations effectively.

4. Non-Tax Revenue Enhancement:

• Review and enhance user fees, charges, and other non-tax revenue sources.
• Improve management and efficiency of state-owned enterprises to increase their contributions.

Strategic Revenue Enhancement

• Objective: Identify and implement strategic initiatives to enhance revenue collection and create new revenue streams.
• Key Activities:

1. Public-Private Partnerships (PPPs):

• Develop frameworks for PPPs to fund infrastructure and public service projects.
• Encourage investment in sectors with high revenue potential through favorable policies.

2. Revenue Generation through Innovation:

• Promote the use of technology and innovation to create new revenue opportunities.
• Support startups and SMEs in high-growth sectors that can contribute to the revenue base.

3. Debt Management and Fiscal Discipline:

• Implement prudent debt management strategies to prevent excessive debt accumulation.
• Strengthen fiscal discipline through expenditure controls and accountability mechanisms.

4. Improved Customs and Trade Facilitation:

• Streamline customs processes to reduce smuggling and tax evasion.
• Enhance trade facilitation to boost import and export revenues.

Sustainability

• Objective: Ensure long-term sustainability of revenue streams and economic resilience.
• Key Activities:

1. Economic Diversification:

• Promote diversification of the economy to reduce dependence on volatile revenue sources like natural resources.
• Support sectors such as agriculture, manufacturing, and services to broaden the revenue base.

2. Environmental Sustainability:

• Introduce green taxes or carbon pricing to align revenue generation with environmental goals.
• Invest in sustainable industries and renewable energy sectors.

3. Social Equity and Inclusion:

• Ensure that revenue policies do not disproportionately affect vulnerable populations.
• Promote social equity through targeted public spending financed by mobilized resources.

4. Fiscal Resilience:

• Establish fiscal buffers and sovereign wealth funds to manage economic shocks.
• Strengthen financial institutions and regulatory frameworks to safeguard economic stability.

Implementation Strategy:

• Governance and Institutional Framework:
• Establish a dedicated task force or committee to oversee the implementation of the program.
• Define clear roles and responsibilities for government agencies, private sector, and civil society.
• Capacity Building and Training:
• Conduct training workshops and capacity-building programs for stakeholders involved in DRM, revenue enhancement, and sustainability.
• Monitoring and Evaluation (M&E):
• Develop a robust M&E framework to track progress and impact of the program.
• Regularly review and adjust strategies based on performance data and changing economic conditions.
• Stakeholder Engagement and Communication:
• Ensure continuous engagement with key stakeholders, including businesses, taxpayers, and international partners.
• Implement a communication strategy to keep the public informed about program goals, progress, and benefits.

Expected Outcomes:

• Increased domestic revenue generation leading to reduced dependency on external financing.
• Enhanced fiscal capacity to fund public services and infrastructure.
• Long-term economic sustainability and resilience against shocks.
• Improved social equity through inclusive and fair revenue policies.

Budget and Resources:

• Resource Allocation:
• Outline the budget requirements for each component of the program.
• Identify potential sources of funding, including domestic revenues, international grants, and loans.
• Partnerships and Collaboration:
• Identify and engage with international development partners for technical and financial support.
• Foster collaboration between government, private sector, and civil society for successful implementation.

Risks and Mitigation Strategies:

• Political and Economic Risks:
• Address potential political resistance to tax reforms.
• Develop strategies to mitigate economic risks such as downturns or commodity price fluctuations.
• Capacity and Implementation Risks:
• Ensure sufficient capacity within government agencies to implement reforms.
• Use phased implementation to manage complexity and allow for adjustments.