Raising Revenue Right: A Roadmap for Domestic Resource Mobilization

Overview

Governments across emerging markets and developing economies (EMDEs) face a growing fiscal challenge: how to finance essential public services at a time of rising debt burdens, higher interest costs, and uncertain external assistance. Yet the challenge is not simply about how much revenue countries collect. Tax systems in most EMDEs are also inefficient and inequitable, leading to costly economic distortions while failing to adequately support vulnerable households.

Raising Revenue Right: A Roadmap for Domestic Resource Mobilization examines how countries can raise the revenue they need in ways that are more efficient, fair, and supportive of inclusive growth. The report introduces the concept of the fiscal frontier: the best possible combination of efficiency and fairness that a country can achieve for a given level of revenue and its underlying structural constraints. Its central finding is that many EMDEs operate well below this frontier—and that reforms can improve efficiency, equity, and revenue performance at the same time.

The report offers a practical roadmap for domestic resource mobilization, showing how advances in technology, transparency, and trust—the 3Ts—can help countries move toward the fiscal frontier.

➜ Read Foreword.

Full Report Overview

Main Messages

Today’s tax systems are not meeting development needs

Tax revenues as a share of GDP have remained largely unchanged even as fiscal pressures have intensified. Tax systems are also weakened by exemptions and loopholes that narrow the tax base, while heavy reliance on consumption taxes and preferential treatment of top incomes limits their ability to support inclusive growth.
Tax reforms can improve both efficiency and fairness

Because most countries operate below the fiscal frontier, governments often do not need to choose between efficiency and fairness. Simplifying tax rules and reducing poorly targeted exemptions can improve both while raising the same amount of revenue.
Technology, transparency, and trust are expanding what tax systems can achieve

Technology can strengthen tax administration and enforcement, transparency limits opportunities for avoidance and evasion, and trust strengthens voluntary compliance. Together, the 3Ts can help countries move toward the fiscal frontier by building more efficient, equitable, and effective tax systems. Continued innovation can also push the frontier outward.
There is no one-size-fits-all approach to tax reform

Tax policy choices should reflect each country's circumstances, priorities, and development goals. The Marginal Value of Public Funds (MVPF) provides a framework for deciding whether and how to raise revenue by weighing the social benefits of public spending against the costs of taxation.

Four pathways to better and more equitable tax systems

There is no single path to a stronger tax system. The report proposes a two-step approach to help countries identify reforms that fit their circumstances. First, countries assess their structural fundamentals—the underlying economic and institutional conditions that shape what their tax systems can achieve. Second, they compare their tax system performance against peers with similar fundamentals to identify the distance to the fiscal frontier.

Together, these two dimensions define four broad reform pathways, each with distinct priorities for strengthening tax systems—whether by moving closer to the fiscal frontier or, for stronger performers, pushing the frontier outward.

Build foundations

Countries facing weaker fundamentals and farther from the fiscal frontier should focus on getting the basics right. Priorities include strengthening core tax administration, expanding taxpayer registration and filing, simplifying compliance, and establishing the basic digital systems needed for effective tax collection. The tax mix should shift from transaction taxes toward broad-based VAT, with transfers used to support redistribution.

Expand coverage

Countries with weaker fundamentals but closer to the fiscal frontier should focus on extending the reach of the tax system. Priorities include broadening the tax base, bringing more taxpayers, firms, and properties into the tax net, and investing in tools such as electronic invoicing, third-party information, and improved property registration and valuation. The tax mix should complement VAT with a gradual expansion of income and property taxation.

Simplify and build trust

Countries with strong fundamentals but farther from the fiscal frontier should focus on making better use of their existing capacity. Priorities include simplifying tax rules, reducing ineffective exemptions and other distortions, strengthening enforcement, and improving transparency and trust around who pays taxes, who benefits from tax provisions, and how public revenues are used. The tax mix should shift revenue collection toward the most effective instruments while simplifying underperforming taxes.

Deepen transparency and coordination

Countries with stronger fundamentals and closer to the fiscal frontier should focus on using more sophisticated tools to further improve tax system performance. Priorities include deepening international tax cooperation and transparency through tools such as automatic exchange of financial information and beneficial ownership registries, and leveraging advanced data and analytics to strengthen compliance. The tax mix should increase the contribution of top earners, supported by international coordination to protect mobile tax bases.

Data Highlights

Figure O.1: Stagnant Tax Revenues, Growing Fiscal Pressure

The problem: Fiscal pressures are rising, but tax revenues have not kept pace. Across many EMDEs, deficits and interest burdens are growing while tax revenues remain broadly stagnant. With external assistance less certain, governments increasingly need to finance development from domestic resources.

Figure O.3: The equity-efficiency frontier (holding revenue fixed)

The opportunity: Raising revenue does not necessarily require sacrificing efficiency or equity. The fiscal frontier represents the best attainable combination of the two at any given level of revenue. Countries below the frontier have room to improve both.

Figure 9.1: Locating countries in the reform space

How much room depends on where countries stand. Among countries with similar structural conditions and revenue levels, some perform much better than others. Those farther from the frontier have greater scope for reform.

Table O.1: Reform Pathways Toward the Fiscal Frontier via the 3Ts

A country’s position helps identify where reform should start. Combining its structural fundamentals with its distance from the fiscal frontier yields four broad reform pathways, with priorities ranging from building basic administrative capacity to expanding coverage, simplifying taxes, strengthening trust, and deepening transparency and cooperation.

Endorsements

"Raising Revenue Right offers a clear-headed roadmap for improving the revenue system of developing countries. It is informed by the latest research findings and the latest technological advances in information processing, while being grounded in the realities of tax collection in the developing world. It doesn’t promise that policy improvement will be easy, but it does point to policy directions that can deliver more equitable and efficient tax systems. Policymakers would be well-advised to absorb its messages."

Joel Slemrod

Professor of Economics and Paul W. McCracken Collegiate Professor of Business Economics and Public Policy at the Stephen M. Ross School of Business, University of Michigan

"Raising domestic revenues is a top priority and in-fact a matter of urgency for most EMDEs in this era of uncertainty and geopolitical fragmentation where development aid and investments flows are much diminished. This volume provides a terrific framework and a workable roadmap for countries to act. From my experience as a former finance minister struggling to fix tax administration and mobilize domestic revenues in Nigeria, I find the book of great practical use for policymakers."

Ngozi Okonjo-Iweala

Director–General of the World Trade Organization, former Finance Minister of Nigeria, and former Managing Director of Operations at the World Bank

"Raising Revenue Right makes a compelling case that domestic resource mobilization is not simply about collecting more, but about collecting better. Drawing on a rich body of evidence, the report shows that better-designed taxes, stronger administration, and greater transparency can raise revenue while improving both efficiency and equity. Particularly welcome is its emphasis on protecting poor and vulnerable households while ensuring that those with greater ability to pay contribute their fair share."

Nora Lustig

Professor Emerita and Founding Director, Commitment to Equity Institute, Tulane University, and Professor, Office of the President, El Colegio de Mexico

"As aid contracts, developing countries are being told to finance more of their own development. This report goes past the familiar benchmark of a target tax-to-GDP ratio to ask which reforms are actually feasible, and where. Its central claim is that most developing countries are not yet up against the classic trade-off between efficiency and equity and can improve both at once. Technology and transparency are widening that space further. Its treatment of politicians, bureaucrats, and citizens as three parties who must genuinely cooperate reflects a serious engagement with the political economy of taxation. Bachas, Okunogbe, Shaukat, and Tortarolo have produced the rare synthesis that consolidates frontier research and still tells practitioners where to start."

Adnan Khan

Professor at the School of Public Policy, London School of Economics and Political Science, and former Chief Economist to the Foreign, Commonwealth and Development Office of the United Kingdom

About the Authors

Pierre Bachas
Senior Economist, Development Research Group
Pierre Bachas is a Senior Economist in the World Bank’s Development Research Group. He also coordinates the Tax Evasion Program at the International Tax Observatory. His research focuses on public finance, particularly tax and transfer design, international taxation, and the role of digital technology. Previously, he was an assistant professor of finance at ESSEC Business School in Paris. He holds a PhD in economics from the University of California, Berkeley and a BSc and MSc in economics from the London School of Economics.
Oyebola Okunogbe
Senior Economist, Development Research Group
Oyebola Okunogbe is a Senior Economist in the World Bank’s Development Research Group, focused on public economics and political economy. Her research has studied how governments in lower-income countries can improve revenue collection, with particular attention to the role of technology, tax administration, and politics, and her work was recognized with the Best Paper award by the American Economic Journal: Economic Policy in 2023. She is on the board of management of the International Institute of Public Finance and is an affiliated researcher with the Centre for Economic Policy Research, Institute for Fiscal Studies, and International Centre for Tax and Development. A native of Nigeria, she holds a PhD in public policy from Harvard University, an MPA in international development from Harvard Kennedy School, and a BA in economics from Dartmouth College.
Mahvish Shaukat
Economist, Development Research Group
Mahvish Shaukat is an Economist in the World Bank’s Development Research Group, with a focus on public economics and governance. Her research has studied the determinants of tax compliance, particularly tax morale, and implications for tax policy. Her work has also examined approaches to improving efficiency and fairness, as well as strengthening tax-benefit linkages, in collaboration with the tax authority in Pakistan. She holds a PhD in economics from the Massachusetts Institute of Technology, MA/MS from Stanford, and a BA from the University of California, Davis.
Dario Tortarolo
Economist, Development Research Group
Dario Tortarolo is an Economist in the World Bank’s Development Research Group, with a focus on public economics. His research has studied how public policies affect workers, businesses, consumers, and governments, with particular attention to distributional impacts. His work has also examined how governments can address tax avoidance and evasion, especially at the top of the income distribution. Prior to joining the World Bank, he was an assistant professor at the University of Nottingham and a postdoctoral fellow at the Institute for Fiscal Studies. He holds a PhD in economics from the University of California, Berkeley and a BSc and an MSc in economics from Universidad Nacional de La Plata. He received the National Tax Association’s Outstanding Doctoral Dissertation prize in 2020.