KPMG International hosted a roundtable discussion in November 2023 to explore how tax policies can adapt to meet the changing needs of the labour market and emerging industries. This discussion, one of two initial scoping roundtables, the other on the Global North, sought to illuminate some of the critical issues and questions at play on work and tax before a series of deeper dives in early 2024.

This conversation, focusing on the Global South, looked to discuss the unique set of intersecting challenges including the prevalence of informal work arrangements, a burgeoning youthful population and a potential crisis of unemployment, technological disruptions, skills shortages, and gender disparity in labour participation rates.

Can the design and practice of tax approaches play a pivotal role in effectively addressing these growing issues while simultaneously fostering economic growth, promoting sustainability, utilising the potential of a young workforce, and addressing skills shortages - without discouraging entrepreneurship and innovation?

The conversation was held under the Chatham House Rule (which means nothing can be attributed to attendees) and was attended by seven expert participants (see below for a list of attendees). The write-up below summarizes the personal views of participants and does not necessarily reflect the view of any particular organization, including KPMG.

Executive Summary

  • Informality is a key issue in developing countries. Tax systems and regulation needs to be simplified to bring business into the formal sector and there needs to be clear benefits to do so.
  • Consideration of the perception of tax is crucial. How are taxes viewed in the context of the Global South? Would hypothecation promote greater trust and is tax the correct instrument to meet societal challenges?
  • Incentives – whether tax or cash subsidies – are needed to drive investment in education, health, infrastructure and a just green transition.
  • How do we ensure wastefulness is minimised in the design of tax incentives? Are incentives necessary or do we keep taxes as low as possible rather than trying to pick winners and losers or add to the complexity of tax regimes?
  • Domestic revenue mobilisation is a key area of concern – often this is not so much about tax rates but deepening the base and broadening it with wealth or property tax?
  • How can tax revenues be used to crowd in investment?


What does informality actually mean – how do we improve this distinction and allow more people to contribute and benefit from the tax system?

Participants emphasised the prevalence of informal work in many developing economies and the impact these arrangements have on tax and work.

In India, some 96% of industrial units in the Indian economy belong to Micro, Small and Medium Enterprise (MSME)1. It was noted that often, sole traders and small businesses do not actively want to evade tax but rather they want to avoid the burden of overly complex regulation in general and also that paying taxes can be bureaucratically difficult. In some cases, it is also that they simply could not afford to pay tax. Therefore, many small businesses remain invisible to the state. A related issue is that small businesses often see no benefits in becoming formal. In India, there is a portal for businesses to register but there is no benefit in doing so for many enterprises. These factors reduce the efficacy of taxes in terms of generating tax revenue.

Participants suggested that in South Africa too, designing tax mechanisms that can accommodate informal work arrangements is a pressing issue. Though supply chains are vast it is easy for workers at the lower end to be missed.

It was suggested that often, informality stems from a perception that social security benefits provided by formal work are not adequate. It was emphasised that the link between taxes and public goods shouldn’t be ignored as it is vital for how people view and comply with their tax systems.

Participants suggested that there is a tendency to try and emphasise a formal vs informal dichotomy, but this can be problematic. Often businesses can be informal in some respects and formal in others. It was agreed governments need to ensure compliance is made as simple as possible and there are clear benefits in a business becoming formal.

Perceptions of Tax

How are taxes viewed in the context of the Global South? Would hypothecation help and is tax the correct instrument?

It was discussed that the perception of corruption and tax morale are heavily correlated. The perception that revenues will be wasted plays a huge role in the willingness of employees and employers to participate in tax systems. Concerns about corruption also make it challenging to hold public debate on these issues.

One Participant noted that in South Africa, where there is a huge wealth disparity, with one of the highest Gini coefficients in the world, and high levels of corruption. There is a perception that taxes are not being spent appropriately to support social welfare policies or key social issues such as job creation and upskilling. South Africa was highlighted as example of an economy where wealth tax reform is highly anticipated and the hypothecation of these revenues towards specific social agendas would go some way to reduce the fears around corruption and waste.

Participants suggested that tax is often seen as a negative imposition and may not always be the best policy tool. What other policy tools could be more effective?


How do we ensure wastefulness is minimized in the design of incentives? Are they necessary or do we keep taxes as low as possible rather than trying to pick winners and losers?

Participants suggested that from a Global South perspective, incentives are necessary to encourage investment in growing needs as labour markets are being restructured. The need for more employment, certainly a need for investment in job creation and economic infrastructure – demands incentives that could create more jobs and better jobs.

Furthermore, incentives designed to improve education, healthcare and infrastructure will be crucial to support workers. It was argued that they can also nurture business development and growth in an intelligent way, promote upskilling and try to ensure that technological advances do not displace workers but instead increase their level of skill.

Concerns included the need to evaluate current incentives to make sure they are cost-effective to implement. One participant reflected that in many countries incentives require dedicated departments working on a case-by-case basis and this incurs a huge compliance cost.

There was also concern that incentives may present unfair advantages to those who are able to navigate the systems to their own benefit and leave those from lower incomes and lower levels of literacy out in the cold. How can incentives be designed to allow more equitable access? And how can they be managed to effectively ensure they are not wastefully abused? One participant noted that tax incentives are often seen as benefiting employers and a better tool might be direct cash subsidies for training and reskilling.

Participants agreed that any incentives should be focused on benefits to the labour market with the most pressing needs of the economy. For example, matching incentives to reduce youth unemployment with the upskilling that is required to meet the demands of an agile tech market.

Domestic Revenue Mobilization

How do we increase tax revenues? How do we ensure these measures are progressive? How do we make sure the revenue generated is used appropriately?

Participants in the discussion highlighted the need to consider the type of taxes that may be most effective in increasing tax revenues in a progressive way.

Wealth taxes were highlighted as one area for reconsideration, particularly in India where more than 40% of the wealth created in the country from 2012 to 2021 had gone to just 1% of the population while only 3% had trickled down to the bottom 50%.2

Compliance was also highlighted as a serious concern in terms of increasing revenues in the Global South. 96% of industrial units in the Indian economy belong to Micro, Small and Medium Enterprise (MSME)3. Many of these entities remain hidden from the tax system due to their size, transiency, and the complexity of administration.

Participants also discussed the issue of targeted vs universal taxes. One interesting strategy at the state level in India is Social Welfare Boards whereby firms in a particular sector are charged a levy, the revenues from which are used to provide social security for that particular sector. It was argued, however, that the implementation of these boards so far has been problematic, with funds unable to reach those who need them because the schemes through which they are administered are so complicated. It has led to a hugely fragmented system locking up funds.

Participants suggested that in a dynamic labour market like today, traceability and portability of benefits are necessary for workers who are constantly moving. A state-level fund for basic benefits for all workers was put forward as a solution here.

Increasing Investment

How do we use increases in tax revenues to crowd in investment internationally for larger projects?

Participants highlighted the pressing need for investment in the restructuring of economies due to multiple pressures such as growing young populations, the shift towards self-employment, the rise of platform and gig economies, and AI. There is also a need for the state to be able to provide the architecture to transition skills to clean energy and a question of where this money is going to come from.

It was suggested that tax revenues hypothecated for, youth initiatives, upskilling and targeted taxes that fund specific social care needs is one path to consider – even though it was recognised that treasury departments often oppose hypothecation as they prefer revenue to be fungible. The management of these systems will be key in delivering the desired outcomes, as previously suggested, it is important that funds are unlocked and flowing through to support the initiatives for which they were

designed and a central, as opposed to regional, mechanism was highlighted as a potentially more efficient means to achieve this.

It was also asked whether increases in tax revenue could be used to crowd in investment into green technologies and retraining initiatives by de-risking private investment. Blended finance to support investments was put forward as one solution with a fixed return on investments also suggested. However, it was also noted that any such initiatives need to avoid socialising any losses while leaving profits to the private sector.

We welcome ideas about areas of focus for this Work and Tax programme, please get in touch and let us know your thoughts:

The discussion was attended by:

  1. Sabina Dewan, President and Executive Director, JustJobs Network, New Delhi
  2. Becky Holloway, Programme Director, Jericho
  3. Neal Lawson, Partner, Jericho
  4. Martin Miklos, Research Economist at the Centre for Tax Analysis in Developing Countries (TaxDev), Country Programme Manager Ghana, IFS
  5. Chris Morgan, Head of the KPMG Global Responsible Tax Project, KPMG International
  6. Reema Nanavaty, Director, Self-Employed Women’s Association (SEWA)
  7. Dr Ayesha Sayed, Department of Finance and Tax, University of Cape Town