OECD: New tool supports tax reform for social protection in developing countries
The OECD has launched a new tool to assist low- and middle-income countries in strengthening their tax systems to better support social safety nets and public services. The Domestic Resource Mobilisation (DRM) Framework is designed to help governments:
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Benchmark their tax systems against peer countries
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Evaluate multiple reform scenarios
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Understand trade-offs between policy options
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Estimate potential revenue outcomes
Key findings and applications:
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In Cameroon, the DRM Framework indicated that tax reforms could yield:
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+3% of GDP in additional short-term revenue
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+9% to 12% of GDP in the medium term
These funds could support the country’s push for universal health coverage through measures such as:
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Increased excise duties on tobacco
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Reduction of VAT exemptions
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Stronger tax enforcement
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According to the OECD report, an additional 5%–16% of GDP is required in many low- and middle-income countries to fund basic universal social protection programs.
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The tool also highlights the current gaps in coverage:
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Only 50% of people in lower-middle-income countries have access to healthcare
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Just 40% of individuals above statutory retirement age receive pension benefits
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Recommended reform strategies include:
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Broadening tax bases
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Enhancing progressivity in taxation
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Encouraging formalization of informal sectors by:
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Simplifying tax filing and payment procedures
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Introducing cash accounting and voluntary registration options
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The OECD’s initiative aims to support fiscal sustainability and inclusive growth by equipping countries with actionable policy insights tailored to their economic contexts.
Source: oecd.org
