The main objective of this paper is toprovide support for the World Bank’s task team leaders ofPERs that would include a chapter on taxation. It seeks toprovide broad guidance for the TTLs to: (a) Lead dialogueswith client countries on the scope of the tax chapter inview of Government’s on-going and planned reforms of taxpolicy and/or tax administration; (b) Evaluate the magnitudeof data requirements and limitations in the country-specificcontext; and (c) Establish an appropriate team, particularlyconsider selection of technical staff or consultant anddiscuss with the team on scope of the chapter on taxationand suitable analytical tools and techniques to be applied.The paper may also serve as a helpful input on taxcomponents in the preparation of lending operations, in thisway supplementing other diagnostic tools. To serve theseobjectives, the paper aims to presents an overview of majortaxes and respective list of data requirements as well aspossible sources; tool and techniques in assessing theefficiency, effectiveness and equity in tax policy design(at both national and sub-national levels) and taxadministration. In doing so, the authors acknowledge thatthis is not a straightforward task. No one-size-fits-allapproach would exist to covering the revenue chapter, andthis is driven by the complexities on the ground in terms of(1) the existing literature, and the mismatch betweenrigorous application of appropriate tools and techniques onthe one hand and data available on the other; (2) existenceof or immediate plan for parallel studies on tax revenues(including the IMF TA on tax policy and administration beingprovided); (3) the country’s economic structure, includingthe factors such as country’s abundance of extractiveresources or aid dependence; and (4) the government’srequests for further support in revenue mobilization (taxpolicy or administration or both). This paper consists offour parts. The first part discusses major taxes at thenational or central level of government with a reference togenerally accepted notion or principles of a ‘good’ taxsystem. Part two is focused on the major tools andtechniques for analysis of the performance of a tax systemand of tax expenditures. The discussion of revenue modelingcovers different methods, such as GDP based,micro-simulation, national accounts/inputs-outputs tablesbased and regression analyses. Part three sheds light onsubnational government taxation. It covers the revenueissues at both at the regional and local levels. Inaddition, it introduces a framework on measuring taxingpowers at subnational level, with a view to ensureappropriate ground for the fiscal dialog across levels ofgovernment. Finally, part four points to potential questionsto assist in assessing the strengths and weaknesses in taxadministration, drawing on Jit Gill (2000) and the newlydeveloped tax administration diagnostic tool TADAT (2016).
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