Concluding the ATI Tax Expenditure Workshop Series in Nepal: A Milestone in Capacity Building and Regional Collaboration

Read the full report

The ATI Follow-up Technical Meeting on Tax Expenditure (TE) held in Kathmandu, Nepal, from 7-9 May 2024, contributed to the global efforts to enhance tax transparency and efficiency. This event jointly organised by the Council on Economic Policies (CEP), the German Institute of Development and Sustainability (IDOS), the United Nations Development Programme (UNDP), and the Asian Development Bank (ADB), and hosted by the Inland Revenue Department (IRD) of Nepal, concluded a highly impactful series of workshops that have been conducted over the past two years.

A Gathering of Minds

The workshop in Nepal brought together 60 participants from nine Asian ATI partner countries. The three-day event featured 11 sessions with presentations from 20 esteemed experts. The diversity of participants and the richness of discussions underscored the importance of regional cooperation in advancing tax expenditure management. The opening remarks, delivered by Alistair Lobo on behalf of the ATI Steering Committee, Ms. Ayshanie Labe, Resident Representative of UNDP Nepal, Sandeep Bhattacharya on behalf of ADB, Christian von Haldenwang on behalf of IDOS, and Dr. Ram Prasad Ghimire, Secretary (Revenue) of the Nepalese Ministry of Finance, set a tone of collaborative effort and shared goals. Each representative of the co-hosting organisations underscored the importance of rationalising TEs to improve countries’ abilities to effectively mobilise domestic revenues to finance the sustainable development agenda.

Since the last workshop in March 2023 in Manila, ATI partner countries have made remarkable strides in enhancing TE reporting and transparency. Notably, the Maldives and Bangladesh, which joined as non-member countries in Manila and subsequently became ATI members, have published their first TE reports. Nepal has initiated its first internal study on tax expenditures, assessing and estimating revenue forgone. These developments highlight the growing commitment to fiscal transparency and effective public financial management.

The workshop series, which spanned over two years and featured six workshops across three regions, has successfully achieved its primary goals: providing capacity development and knowledge transfer to ATI partner countries and establishing robust regional networks of TE experts. These achievements have laid a solid foundation for ongoing and future collaborative efforts.

The comprehensive programme of the workshop covered a wide array of topics crucial for effective TE management. The sessions ranged from discussing the data requirements for TE estimation and evaluation, to practical exercises on estimating revenue forgone, to exploring the governance of TE regimes. These sessions provided participants with both theoretical knowledge and practical skills, ensuring a well-rounded learning experience.

Detailed Insights from the Workshop Sessions

Day 1: Data Requirements and Benchmarking

The first day focused on the foundational aspects of TE management. The sessions highlighted the importance of robust data for TE estimation and evaluation. Participants delved into the intricacies of data collection, including the types of data needed and potential sources. This was complemented by discussions on establishing benchmarks for TE analysis, which is essential for evaluating deviations from standard tax policies.

Day 2: Estimation and Reporting

Day two built on the knowledge gained in the first day, with sessions dedicated to the estimation of revenue forgone through TEs. Participants engaged in practical exercises to apply the concepts and methodologies discussed. The day also covered TE reporting, with examples of best practices and effective communication strategies. This session emphasised the importance of transparency in TE reporting and the need to communicate the findings to stakeholders effectively.

Day 3: Evaluation and Governance

The final day focused on the evaluation and governance of TEs. Participants learned about ex-post evaluation methods and the importance of assessing the actual impacts of TEs. Participants also discussed the potential impacts of the new GloBE rules, specifically the global minimum tax resulting from Pillar 2 of the OECD’S Base Erosion and Profit Shifting (BEPS) process via a practical exercise session. The discussions also covered the governance frameworks needed to manage TEs effectively. This included insights into legislative frameworks and the need for coherent policies that align TE objectives with broader fiscal and development goals.

Participants of the workshop highlighted several key takeaways that they plan to implement in their respective countries. These include:

• Providing written recommendations to their Ministries of Finance for conducting ex-ante assessments. Such assessments are critical in forecasting the potential impacts of tax expenditures before their implementation, thereby ensuring more informed policy decisions.
• Creating a “TE reporting manual” to ensure knowledge transfer within tax authorities and the Ministry of Finance, especially important given high turnover rates of personnel. This manual would standardise procedures and maintain consistency in TE reporting.
• Offering technical advice to parliamentarians for overseeing tax expenditures. By equipping legislators with the necessary knowledge and tools, they can better scrutinise and evaluate the efficiency and effectiveness of tax expenditures.
• Improving data quality and redesigning tax reforms to better capture TE data. High-quality data is essential for accurate TE estimation and evaluation, and reforms that facilitate better data collection can significantly enhance the transparency and accountability of tax systems.
• Incorporating “TE passports” for each tax expenditure and projecting TE data for future fiscal years. TE passports would provide detailed information about each tax expenditure, including its objectives, beneficiaries, and costs, thereby enhancing transparency. This is one of the main recommendations by the Global Tax Expenditure Transparency Index (GTETI)
• Advocating for legislation governing TE reporting and evaluation. A strong legislative framework can institutionalise the practices of TE reporting and evaluation, ensuring their continuity and effectiveness.

The workshop concluded with closing remarks that summarised the key insights and outlined the next steps. Participants expressed their commitment to applying the knowledge gained in their respective countries and continuing the collaboration through the networks established. The emphasis was on the continuity of efforts and the importance of maintaining the momentum built over the past two years.

"We are working to ensure that the networks endure, and that further support is available. This will mean countries that wish to build on this momentum, to make a step change on such an important issue, are assisted to do so".

Mr. Alistair Lobo, (FCDO) 

While significant progress has been made, the journey towards optimal tax expenditure management is far from complete. The networks and collaborative platforms established through these workshops will continue to play a vital role. Future engagements with ATI partners will focus on further refining tax expenditure frameworks, fostering peer learning, and implementing the best practices identified during the workshop series.

Sustained Commitment and Collaborative Efforts

As we move forward, the commitment of ATI partner countries, development partners, and supporting organisations remains steadfast. The work initiated in these workshops will continue to evolve, ensuring that the principles of good financial governance are upheld and that the capacity to manage public resources is continually enhanced.

The collaborative efforts of organisations such as the ATI, CEP, IDOS, as well as the numerous institutional, regional and local partners have been instrumental in the success of these workshops. Their continued support will be crucial in sustaining the progress made and addressing the challenges that lie ahead.

In conclusion, the ATI Follow-up Technical Meeting on Tax Expenditure in Nepal has not only marked the successful conclusion of a series of transformative events but also set the stage for continued collaboration and innovation in tax expenditure management. The insights gained and the networks formed during these workshops will undoubtedly contribute to more transparent, efficient, and effective public financial management across the region.

By fostering a culture of transparency, accountability, and collaboration, these workshops have paved the way for sustainable fiscal policies that can support development goals and improve the quality of life for citizens in ATI partner countries. The journey towards optimal tax expenditure management continues, with a renewed commitment to making a meaningful impact on public financial management globally.