Press Release No. 11/133

Press Release: Donors Agree to Support the IMF’s Topical Trust Fund on Tax Policy and Administration

April 13, 2011

Donor countries and agencies have agreed to support the International Monetary Fund’s (IMF) technical assistance in 12 low-income and lower middle-income countries, which aims to strengthen member countries’ tax policies and administration. Representatives from Germany, Switzerland, the Netherlands, Belgium, Luxembourg and Kuwait endorsed the first work plan at the inaugural Steering Committee meeting of the Topical Trust Fund on Tax Policy and Administration, which convened on April 12 at IMF headquarters in Washington, D.C.

The trust fund, first launched in December 2010 (see Press Release No. 10/500), will provide about US$30 million over five years to finance technical assistance to contribute to the development of tax systems in low- and lower-middle income countries, using the Fund’s proven expertise and infrastructure. The multi-donor trust fund—one of a number being set up to finance IMF technical assistance in specific priority fields—will address weaknesses underlying low revenue collection rates, including fragmented administrative structures, poorly designed operational processes, and unclear accountability.

The steering committee discussed and endorsed the work plan for the first year of the trust fund’s operations, commencing May 1, 2011, which foresees technical assistance costing approximately US$4 million for 12 low-income and lower-middle-income countries. The beneficiary countries are being selected according to their need for revenue mobilization, commitment to reforming their tax administrations, and their absorptive capacity.

The steering committee unanimously appointed Germany and Switzerland, two leading contributors to the trust fund, as the chair and vice-chair, respectively. “Revenue mobilization for development and poverty reduction is extremely important for all the donors represented on the Steering Committee. We also hope that this trust fund will strengthen and harmonize cooperation between bilateral and multilateral bodies in this area,” Hans Wollny, of the German Federal Ministry for Economic Cooperation and Development, the newly appointed Chair.

“As Vice Chair, we look forward to sharing our experience from other trust funds and to working on behalf of the steering committee with the Fund to ensure that the trust fund delivers real change in beneficiary revenue administrations,” Carlos Orjales, representing Switzerland’s State Secretariat for Economic Affairs (SECO), said.

“Improving revenue mobilization is an important area for the Fund’s technical assistance progam, as it will enhance beneficiaries’ capacity to fund their development needs, which is increasingly important as donor resources come under pressure,” Nemat Shafik, IMF Deputy Managing Director, said in an address to donors.