Domestic Resource Mobilization for Poverty Reduction in East Africa: Lessons for Tax Policy and Administration

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Successful implementation of Poverty Reduction Strategy Papers (PRSPs) and National Development Plans (NDPs) depends on effective resource mobilisation and utilisation.

In recent years, development aid has been crucial in filling the financing gap. However, on-going global financial uncertainty is likely to lead to reduced aid and unpredictable private capital flows to Africa.

Continued stability in PRSP or NDP financing will thus depend on a country’s ability to strengthen their domestic resource mobilisation (DRM) efforts. This is especially pertinent in a region like East Africa where countries have historically relied heavily on development aid to finance their public spending.

This flagship report is the outcome of a collaborative study conducted by the African Development Bank in partnership with the African Tax Administration Forum and East African Community Secretariat with financial support from the Korea-Africa Fund for Economic Cooperation.

The study has been conducted over the last two years and also complements the theme of the Bank’s 2010 African Economic Outlook on ‘Public Resource Mobilisation and Aid in Africa’.

The aim of the study was, through case studies, to draw lessons for tax policy and administration in order to enhance DRM in East Africa. The case studies covered the five East African Community Partner States (Kenya, Tanzania, Uganda, Rwanda and Burundi) and two non-members (South Africa and South Korea).

South Africa was chosen as a success story from within the African continent, while South Korea was selected as it has been able to mobilise significant domestic resources to support rapid structural and economic transformation since the 1960s.

We expect that the findings of this report will be used in the East African region, as well as in other countries across Africa, to guide the appropriate reforms and enhance a country’s DRM capabilities. This report is also expected to contribute to harmonisation of tax regimes and thus support the wider regional integration agenda of East African partner states.