13. Reforming Tax Systems: Key Policy Considerations from South and South-West Asia

In South and South-West Asia, tax systems face several challenges which are reflected in poor efficiency in trying to mobilize and manage public financial resources. The complexity of tax structures and the granting of exceptions undermine effectiveness, introduce regressiveness in tax systems and hinder the social contract, all of which take a toll on tax morale and promote informality. Tax reforms are necessary to avoid this vicious circle, while streamlining the tax systems to make them simpler, faster and more effective. Special attention should be paid to coordination of tax administration at different administrative levels, increasing the tax base and strengthening transparency to deter corruption—which may thrive due to the many possibilities for interpreting tax systems. Reforms may not be easy to undertake because the costs of implementing them are borne in the short term, but their benefits are realized in the medium to long run. However, reforms will be the only way to go if South and South-West Asia is to implement the 2030 Agenda.