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World Bank Support for Domestic Revenue Mobilization

Report to the Board from the Committee on Development Effectiveness

The Committee on Development Effectiveness met to consider the Independent Evaluation Group report World Bank Support for Domestic Revenue Mobilization and the World Bank management response.

The Committee welcomed the evaluation and noted the timeliness of the subject in the context of the Bank Group’s evolution road map, which prioritizes domestic revenue mobilization (DRM) as a core focus area for increased Bank Group support. They underscored the importance of DRM as a reliable pillar of finance for countries’ development goals that deserves a long-term approach, and they called on the World Bank to consider providing a more systematic and streamlined approach to DRM and develop a DRM framework.

Members appreciated management’s response to the report’s recommendations, including plans to introduce a new core advisory services and analytics instrument, Public Finance Reviews (replacing Public Expenditure Reviews), to address knowledge gaps and set priorities for analytical and operational World Bank support to improve DRM and to support client countries in their DRM efforts by systematically assessing various tax policies. They concurred with management about the need for more robust indicators to measure DRM efforts and welcomed the focus on improving the use of results indicators at the project level as well as part of the new Bank Group Corporate Scorecards. They highlighted that this would strengthen corporate incentives and create the foundations to implement the recommendations. In addition, members noted some concerns related to the Independent Evaluation Group’s findings that tax policy reforms supported by development policy operations were often reversed, and they encouraged the World Bank to implement recommendations 2 and 3 and address other related issues to avoid tax policy reforms reversals.

Members urged management to strengthen recruitment efforts and ensure that the right incentives are established to increase the in-house expertise on DRM and to possibly lower the reliance on short-term consultants or extended term consultants. They further emphasized the need for greater incentives for sustaining tax and structural reforms and called on the World Bank to enhance its support for capacity building for tax administration in this regard. They underscored the importance of continued collaboration with development partners and effective cross-use of existing resources in the organizations. In addition, some members and nonmembers inquired about the World Bank’s perspective and plans to help countries tackle illicit financial flows, tax evasion, and asset recovery. They also inquired about the World Bank’s plans to formalize informal economy activities that have market value to help expand countries’ tax base and boost DRM and asked management to provide a Board seminar on informality to improve the Board’s understanding and discuss appropriate policy interventions.