To put an end to aid dependency, Mali intends to raise tax revenues to 20% of GDP by 2019. But increasing the tax burden without redistributing resources towards basic social sectors would risk exacerbating inequalities.
Every year, during budget discussions in parliament, the legitimacy of the Official Development Assistance budget is a subject of debate. “What is the point of increasing aid if it is not effective?”. Yet aid works! For example, thanks to aid, the number of deaths from malaria among children under five has fallen by 58% in fifteen years and we are on the verge of eradicating polio.
Another major benefit is that when it is well used, aid can be the best remedy against itself. Indeed, during the conference on financing for the Sustainable Development Goals in Addis Ababa in July 2015, the international community realized that development assistance has a major role to play in catalyzing development countries’ own resources and, in the long run, in allowing them to finance essential services themselves, such as health, education or access to water and sanitation.
During the meeting of the Interministerial Committee for International Cooperation and Development (CICID) in November 2016, France renewed its determination to support countries in the South in mobilizing domestic resources. Yet the financing has yet to materialize, despite the political commitments. In 2015, France only devoted EUR 4.9m of public funds to mobilizing domestic resources, whereas countries like the UK have made it a budgetary priority, with over EUR 51m.
Despite this, a number of these crisis or post-crisis countries, such as Mali, have decided to make the mobilization of domestic resources a national priority to finance their economic and social development. Several donors are assisting the country in this process, including France. A joint Oxfam France and Oxfam in Mali report released in November 2017 looks at the role played by French ODA in helping Mali mobilize its domestic resources. While several initiatives and results appear to be encouraging, there are potential avenues for improvement in order to accelerate the impact that aid has on mobilizing domestic resources.
France’s commitment to strengthen tax revenues in Mali
Mali has been a top priority for France’s foreign policy since the military intervention in 2013. Five days after his election in May 2017, the French President, Emmanuel Macron, chose to go to Mali for his first visit outside Europe and announced EUR 470m to support the country’s development. During the Franco-German Council of Ministers on 13 July 2017, Emmanuel Macron officially launched the Sahel Alliance, with the aim of stabilizing and eradicating poverty in the Sahel region, and particularly in Mali.
While poverty has increased in Mali since the onset of the crisis in 2012, the country has set the objective of increasing its threshold of tax revenues as a percentage of GDP to 20% by 2019, against 15.4% in 2013 and an average of 34% in OECD countries. To help the country take up this challenge, donors, including France, have pledged to assist it in the implementation of two priority tax policies: to fight against tax fraud and fight against tax evasion.
French expertise supporting the fight against tax fraud in Mali
France’s Official Development Assistance makes concrete efforts to build the technical capacities of Mali’s tax administrations. One of the issues identified is to extend the tax base to medium-sized enterprises, which take advantage of the informal economy to deliberately avoid paying taxes. Technical experts from the French Ministry of Finance, in partnership with Expertise France, train Malian tax officials and develop tools to better cross-check files from the various tax services and thereby identify companies which commit customs or tax fraud. All sectors of the economy are concerned, including banking and insurance, the telephone sector, agribusiness, the cotton sector and the mining industry.
While working on broadening the tax base is indeed of key importance in increasing domestic resources, these technical capacity building projects for tax and customs administrations also need to aim to ensure that these revenues are collected in a fair and equitable manner. VAT is the main source of tax revenues in Mali and in 2013 accounted for 31.5% of revenues, while corporate tax and income tax only accounted for 16% and 15.3% of tax revenues, respectively. The international community needs to promote progressive tax policies, aiming, for example, at reducing the Government of Mali’s dependence on VAT and increasing corporate tax or income tax. While certain donors, such as Canada, have set “tax fairness” as a top priority in Mali, the Oxfam study shows that this dimension is still not included in the tax projects conducted by the French Ministry of Foreign Affairs in Mali.
The fight against tax evasion: France’s weakness link in Mali
According to the Publish What You Pay Coalition, total tax exemptions in the extractive industry sector in Mali represent an annual loss of revenues of several billion CFA francs for the country. In an assessment of the tax exemptions granted to companies operating in Mali, the European Union denounces VAT exemptions “engaged in outside any budgetary control by the administrative authority, sometimes even in disregard for the law”. These exemptions represent close to 11% of Mali’s budget and are 3.5 times higher than the country’s education budget. If this sum was invested in health, for example, it would provide over 4 million Malians with access to primary healthcare.
Certain donors are particularly committed to transparency and reducing the tax exemptions provided for by Malian law, or granted by a ministerial or administrative order. For example, the European Union, African Development Bank and International Monetary Fund have decided to make the continuation of their technical and financial assistance conditional on the progress achieved by Mali in reducing tax exemptions. While France has recognized technical expertise in the field of the fight against tax fraud, the study conducted by Oxfam reveals that it has so far not conducted any initiative to reduce tax exemptions in Mali. At the end of January 2018, Agence Française de Développement did, nevertheless, submit a EUR 10m project to support the mobilization of domestic resources to its Board of Directors. This 4-year project aims to finance a number of activities provided for in the Public Finance Management Reform Plan in Mali (PREM), which include an adequate management of tax and customs exemptions and an annual evaluation of tax exemptions.
Better reallocating tax resources to fight poverty
Increasing Mali’s available tax resources is not sufficient to effectively fight against poverty, it is necessary to ensure that these resources actually benefit the most vulnerable. An increase in the tax burden without a redistribution of resources towards basic social sectors would even risk exacerbating inequalities. For example, despite the gradual increase in tax revenues in Mali, only 5% of budgetary resources were earmarked for the health sector between 2012 and 2014, whereas the Abuja Commitment sets the target at 15%. There are dramatic consequences: while 59.2% of municipalities do not have doctors, the maternal mortality rate is high, with 368 deaths per 100,000 births and over a quarter of children are suffering from acute malnutrition.
Projects to mobilize domestic resources must seek to ensure that there is a more effective allocation of these resources towards basic social sectors. Consequently, is essential to build the capacities of Malian Ministries and local authorities to manage public finances in an efficient and transparent way. With this aim in mind, Agence Française de Développement financed a decentralized cooperation project from 2014 to 2017, to assist elected officials in the Mopti region in developing annual programs and budgets, set up and support intermunicipal associations to ensure the proper management of essential equipment and services, and train civil society in how to challenge decision-makers over the proper use of public funds.
Accountability: the key to a successful tax reform in Mali
To fight against corruption, it is vital to promote a real culture of accountability. France needs to commit to building the capacities of Mali’s internal and external control bodies, such as NGOs, the Court of Auditors, judicial institutions, the Malian Parliamentarians’ Network Against Corruption and independent media. Check-and-balance bodies have an essential role to play in holding Malian policymakers accountable for the proper use of tax resources and their allocation to basic social services.
It is, in particular, thanks to the Office of the General Auditor, financed by the Canadian project PAMORI II, that the misappropriation of public funds for the presidential plane was brought to light in 2014. Furthermore, thanks to projects supported by the Swiss Government, civil society organizations are taking action at local level to help citizens better understand budgets and hold their local elected officials accountable. These organizations need more support from France to effectively challenge the Government and Parliament of Mali.
It is only by directly involving civil society in projects to support the mobilization of domestic resources that France will be able to ensure that these tax revenues actually contribute to reducing poverty and inequalities. It is possible to put an end to Mali’s aid dependency, all we have to do is give ourselves the means to do so!
 United Nations, “The Millennium Development Goals Report”, 2015, p. 6
 OECD, Development Co-operation Report 2017, December 2017 p. 154
 International Monetary Fund, “Tax Policy (Diagnostic)”, September 2014, p. 11-12
 Oxfam France/Oxfam in Mali, Mobilising Domestic Resources to Help Mali’s Poorest Populations: The Role of French Development Aid, December 2017, p. 7-8
 Delegation of the European Union, Assessment of the Amount and Allocation Process for Tax and Customs Exemptions, November 2016
 Oxfam France/Oxfam in Mali, Op. cit., p. 10
The opinions expressed on this blog are those of the authors and do not necessarily reflect the official position of their institutions or of AFD.