This book provides insights into the evolving debate regarding the mobilization of domestic resources and the crucial role that financial development can and should play in this regard, exploring aspects of the financial development–domestic resource mobilization nexus, including country case studies.

Public spending plays a key role in the economic growth and development of most developing economies. This book analyzes revenues, policy, and administration of Domestic Resource Mobilization (DRM) in developing countries. It provides a broad landscape of practical examples, drawing from lessons learned in World Bank operations across Global Practices over the past several decades. It should be thought of as a starting point for a more comprehensive research agenda rather than a complete inventory itself. This book reviews the trends in tax revenue collection in developing countries. It provides an overview of efforts to close the revenue gap, many of which have been supported by World Bank operations. The book reviews the special challenges facing low income countries, which have traditionally relied on indirect revenues in the context of limited formalization of their economies. An overview of tax policy and administration reform programs is presented, with an overview of outstanding issues that will shape the policy agenda in years ahead.

There is real promise for developing economies in the mobilization of their own domestic resources. For example, in 2010, tax revenue on the Africa continent was eight times larger than the foreign assistance received. And as aid levels from wealthy nations continue to be uncertain, countries have an impetus to finance their own development in order to deliver responsible, transparent public services—all of which require a strong tax base from the formal sector. The Global Partnership for Effective Development Co-operation, launched in 2011 at Busan, relies heavily on this principle of domestic resource mobilization as a means of country ownership. How we leverage the expertise of donor governments in partnership with local governments in implementing this agenda is key to its success.