A new report by UNESCO suggests that financing for education in developing countries can be found through reforming taxation and combating tax evasion. EURACTIV France reports.
Investing in developing countries’ educational systems must involve increasing tax revenue, according to a new report by UNESCO.
If the 67 developing countries with low to medium tax revenue even slightly increased their fiscal efforts, and dedicated one fifth of their added revenue to education, $153 billion (€111 billion) could be released and invested into education in 2015.
Many countries have experienced economic growth without fairly distributing its benefits.
The report points out that “Nigeria’s economy, for example, grew by at least 5% per year since 2003, but its net enrollment ratio has fallen from 61% in 1999 to 58% in 2010”.
Increasing government spending on education
UNESCO claims that it is vital to put in place strong fiscal policies which ensure access to education for all.
“Governments should commit at least 6% of gross national product to education and should spend at least 20% of their budgets on education. These targets should be included in post-2015 global education goals.”
UNESCO estimates that countries need to raise 20% of their GDP in taxes to achieve the UN Millennium Goals, yet countries which meet this target are few and far between.
“Of the 67 countries for which data are available, 37 are below the 20% threshold on both indicators”, indicates the report.
The UNESCO report shows that taxes collected are often insignificant, and education is the first to suffer from low government revenue. For example, in Pakistan, tax revenue represents only 10% of GDP and only 10% of public spending is allocated to education.
By comparison, the tax revenue of high-income countries, notably in North America and Western Europe, represented 27% of GDP in 2011, while in Sub-Saharan countries they represented just 18% of GDP.
Fighting tax evasion
According to the report, countries with low tax revenue often grant companies tax relief.
“In much of sub-Saharan Africa, these exemptions can amount to the equivalent of 5% of GDP. In the United Republic of Tanzania, for instance, tax exemptions were equivalent to around 4% of GDP between 2005/06 and 2007/08; it is estimated that if these taxes had been collected, they could have provided 40% more resources for education.”
Tax evasion also accounts for low funds allocated to education. The Tax Justice Network estimates that between $21 trillion and $32 trillion is concealed by individuals in tax havens worldwide. According to Oxfam, developing countries are the main victims of illicit financial flows.
“Taxing capital gains on this wealth at 30%, would generate revenue of between US$190 billion and US$280 billion a year. If 20% of this revenue were allocated to education, it would add between US$38 billion and US$56 billion to funding for the sector”, according to the report.