28 May 2010

Why don’t aid workers pay tax?

If oil and aid were given directly to citizens rather than governments, then governments would presumably need to generate a bit of revenue through their tax systems to deliver some public goods.
Independent of these arguments – a good tax system is inherently a good thing: providing predictable funding for the government and a bit more accountability.
So why doesn’t the international community do more to support these systems directly by putting their (overpaid?) salaries through them? Hey donors – we’re giving aid anyway, does it really matter if some of it goes into developing country government coffers in a good way? Wouldn’t the increased volumes create demand for a better, more efficient tax system? Is it only Southern Sudan where the entire international community is exempt from paying any income tax?


Matt said...

I'm not sure how foreigners paying tax to governments will create more accountability for the citizens that aren't paying the tax. If there's anything we don't want to do, its to divert even more of the government's attention towards the aid community.

I've often wondered about this too - but it seems that a lot of aid workers are indirectly taxed anyway, through vat, the enormous tariffs on imported goods, cars, etc.

Ranil Dissanayake said...

I'm with Lee on this one. It's got bugger all to do with accountability. We work in a country which provides us with public goods / services (street lights, roads etc) and most aid workers earn enough to get into the top tax bracket and still not exactly have to worry about their savings.

Plus the duty thing is a red herring - aid workers almost always get at least six months of duty free imports. This annoys me enormously. Why the heck should we have been allowed duty free cars in Malawi? I paid duty on mine.

Finally, while Matt might be right about accountability, Lee certainly has a good point about getting the tax system working properly - which is a huge challenge in developing countries. I've blogged about the importance of tax systems before, so it would be hypocritical of me not get behind this opinion.

Of course, it's not exactly in my personal interests. after all, I'm funded by the UN....

btw Lee, I think most ODA donors are tax free, or taxed in their home countries. A few are taxed both in the country they work and in the donor/companies' home country, but they normally have their local tax payments reimbursed by the company.

Related issue - why do we turn a blind eye on it when so many rich aid or NGO workers come to work in a developing country on tourist visa? If that happened in Hong Kong, for any reason, the person would be deported, and it would be the same in the UK if they were caught more often. Why do we set different rules in Africa?

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