Domestic public finance is essential to providing public goods and services, increasing equity and helping manage macroeconomic stability. It is a central component of financing across the sustainable development goals (SDGs), as well as all the cross-cutting issues covered in the Addis Ababa Action Agenda. Many commitments and actions in this area are national in nature, but the Addis Agenda underscores that implementation needs to be supported by international actions and cooperation.
This action area of the financing for development outcomes focuses on raising resources and expenditures, as well as the quality and alignment of both with sustainable development. A defining feature of the last decade of public policy has been increased attention to and real improvements in domestic resource mobilization. Tax administration and public financial management capacities have dramatically improved in many States, and there is strengthened awareness of the link between taxation, expenditure and the accountability and legitimacy of the State. However, as emphasized in the Addis Agenda, the mobilization and effective use of significant additional domestic public resources will be critical to achieving the sustainable development goals. Additional domestic resources will be, first and foremost, generated by economic growth. Improved policies and administration will also help realize more efficient and effective resource mobilization. However, in a world of cross-border trade, investment and finance, there are limits to what can be done by domestic policy alone, necessitating strengthened international cooperation.
Source:Commitment to Equity Institute Data Center on Fiscal. Redistribution (2019); OECD Income Distribution and Poverty (2018).