Fiscal transparency reduces need for overseas borrowing, ADB says

ASIA-PACIFIC countries must increase efforts to ensure transparent and effective use of revenue to boost tax compliance and reduce the need for overseas borrowing, the Asian Development Bank (ADB) said.

“Efforts to increase domestic resource mobilization have focused more on one side of the equation, fiscal policy to increase tax revenue, and less on the other, financial management systems for effective expenditure management,” authors Eriko Tominaga, Julitta Ponniah, and Ma. Kristina E. Mahilum said in a blog.

The ADB also noted that tax revenue in countries increased with improvements in transparency, oversight, and corruption perceptions.

“Improving domestic resource mobilization can help countries decrease their need to borrow and increase their finances for development,” the bank said.

The bank cited the need for timely and easy access on the government’s budget and spending to understand how tax funds influence budget decisions.

External audits and Congressional scrutiny will also hold governments accountable for spending public funds, ADB said.

Citing the 2023 Transparency International report, the ADB noted that the Asia and the Pacific’s transparency average score stood at 45 out of 100.

“Tax policy and reform without improvements to public financial management systems may not be as effective It is akin to asking lenders and investors to inject more funds into a corporation without disclosing the investment plans or reporting on returns,” the ADB said.

Funding to address development challenges in Asia and the Pacific region is expected to surpass $1 trillion every year, according to the bank.

The Department of Finance has been looking into ways to boost nontax revenue after it shelved proposals for new taxes.

The Development Budget Coordination Committee is scheduled to review the government’s revenue targets next month, Finance Secretary Ralph G. Recto said last week. — Beatriz Marie D. Cruz