More efforts are needed to improve tax collection in countries in South Asia to address inequality, a new report from the World Bank says.
The World Bank’s report, “Addressing Inequality in South Asia,” says the South Asia region is home to some remarkable social protection programs, but tax collections are low compared with the rest of the world due to very low compliance rates and the allocation of substantial tax expenditures to regressive subsidies.
The World Bank said: “Much of the social assistance in South Asia benefits those that are better off. For instance, the benefits from energy subsidies are mostly captured by the rich. In addition, the situation is made worse by pervasive tax avoidance and evasion, which results in South Asian countries unable to raise sufficient revenue and political capture in which the wealthiest promote practices that are beneficial to their interests.”
“Governments in South Asia are small and haven’t been able to raise sufficient revenue for decades,” said Philippe Le Houérou, World Bank Vice President for South Asia. “How can they finance all the necessary investments?”
“Things need to change for South Asia to double its growth to nine percent. Unless governments can raise more tax and boost private sector development, South Asia will not end poverty and address inequality,” he said.