Supporting sustainable, locally-led tax policy through Medium-Term Revenue Strategies (MTRSs)

Summary

Many low- and middle-income countries (L&MICs) face persistent challenges in raising sufficient domestic revenues to finance development priorities. While agile policymaking can be essential during periods of crisis, it can also produce short-term, reactive tax measures that fragment policy, undermine economic performance, and erode public trust. Medium-Term Revenue Strategies (MTRSs) can provide governments with structured roadmaps which link tax policy and administration to broader economic and social goals.

In recent years, the Governments of Ethiopia, Ghana, Rwanda, and Uganda have developed MTRSs to increase revenues, strengthen policy coherence, and promote greater transparency around future reform direction. TaxDev has worked with other development partners to provide timely and flexible analytical and technical support throughout all stages of the MTRS process — from inception and design through to implementation and evaluation. This has involved co-producing analysis, facilitating stakeholder consultation, and contributing to the design, sequencing, and evaluation of reforms aimed at improving fairness, efficiency, and fiscal sustainability.

The policy challenge

Tax-to-GDP ratios remain low across many L&MICs, while economic shocks — including COVID-19 and global commodity price volatility — have contributed to high debt burdens and fragile public finances. Developing an MTRS requires in-depth technical inputs, reliable analysis to help policymakers assess the impacts of proposed reforms, and effective coordination across Ministries of Finance, revenue authorities, and other government agencies. Sustaining momentum through strategy development, implementation, and evaluation — while remaining responsive to changing political and economic circumstances — presents a further challenge, particularly in resource-constrained environments.

The impact

In each country, governments led the process, with TaxDev providing analytical and technical support tailored to the context and priorities.

In Uganda, TaxDev supported the Government to assess the strengths and weaknesses of the existing tax system and policymaking process, helping to align the Domestic Revenue Mobilisation Strategy (DRMS) with the National Development Plan. More recently, TaxDev has supported the development of Uganda's first National Tax Policy, reviewing evidence, strengthening reform rationale, and aligning proposals with East African Community commitments, alongside preparation for an extension of the DRMS to 2030.

In Rwanda, the Government set out clear reform principles and invited technical input from partners. TaxDev helped structure the MTRS to contribute to Rwanda's Vision 2050, and through collaborative appraisal, costing, and sequencing of reforms, informed legislative changes that have improved PAYE progressivity, simplified corporate tax rules, enhanced VAT compliance, and aligned excise taxes with health and environmental goals. Rwanda's first MTRS reform package is expected to raise the tax-to-GDP ratio by 1% by 2025/26, and MINECOFIN has evaluated progress to inform its second MTRS cycle.

In Ghana, Ministry of Finance officials led the development of a National Revenue Policy to clearly articulate high-level tax policy principles, and the MTRS was developed to operationalise these. Technical working groups involving officials from the Ministry of Finance, the Ghana Revenue Authority, and other state institutions identified a long-list of reform options, while TaxDev provided support for revenue forecasting, policy costing, and distributional analysis, integrating training and professional development throughout the process. TaxDev also worked with partners to document and publish lessons from the process, informing institutional memory and future MTRS implementation in Ghana and beyond.

In Ethiopia, the National Medium-Term Revenue Strategy (NMTRS) was developed and led by the Tax Policy Department of the Ministry of Finance, in collaboration with representatives from the Ministry of Revenues. The strategy was approved by the Council of Ministers and published in 2024. TaxDev, together with other development partners and institutions, provided technical and analytical support throughout the strategy development process. The NMTRS aims to increase Ethiopia’s tax-to-GDP ratio by 6.9 percentage points by the end of the strategy period. The Ministry of Finance is currently reviewing the measures implemented.

Lessons and next steps

Experience across these four partner countries points to a number of lessons:

• Government ownership and leadership in designing and leading the development process is essential to ensure strategies reflect national priorities and are politically feasible.
• Strong coordination across institutions matters. Effective collaboration between Ministries of Finance, Revenue Authorities, and other bodies such as investment agencies is necessary for a whole-of-government approach.
• Senior buy-in, clear governance structures, and dedicated project management help maintain momentum and align agencies during both strategy development and implementation.
• High-quality analysis helps build consensus around difficult reforms by enabling transparent assessment of trade-offs and revenue impacts.
• Ambitious but realistic revenue targets can promote accountability in the delivery of key reforms, although setting them requires careful judgement.
• Stakeholder consultation improves legitimacy and policy design, but determining who to consult and when requires careful consideration to yield the most useful outcomes.
• Flexible planning and effective phasing are crucial to accommodate and adjust evolving political and economic realities.
• Monitoring and evaluation plans should be realistic and proportionate, particularly in resource-constrained contexts.

Looking ahead, TaxDev is working with partners as they review, evaluate, and update their MTRSs, and is keen to support peer learning and collaboratively document lessons that can be used by other governments and development partners.