Working Papers

This paper examines whether Official Development Assistance (ODA) is disproportionately allocated to countries that need to make the most progress on the Millennium Development Goals (MDGs). We expect MDG-sensitive distribution of foreign aid – or a good donor-recipient match – to be guided by the principles of the Global Partnership for Development. When we apply the MDG-sensitivity criteria for aid allocation, the results indicate that ODA allocation since the Millennium Declaration has become more MDG-sensitive – ODA is given to countries that need it most. While such trends in aid disbursements are commendable, total aid flows, however, fall short of promised levels.

Effective income and wealth taxation is a central development cooperation issue because taxation of foreign companies and their own residents’ overseas assets remain problematic for developing countries. Estimates of the scale of undeclared expatriated profits and overseas assets, and thus the income tax lost to developing countries, are large relative to other forms of innovative development finance. The international cooperation required involves information exchange between jurisdictions to allow the full application of existing tax codes. This expanded global tax base would be a more sustainable and equitable system than the traditional donor-recipient relationship.