Financing social protection—Possible “additional sources” (from the paper) Developing community-based schemes Attracting private-sector investment in social protection Redirecting other state funds towards social protection Reductions in fossil-fuel subsidies (which mostly accrue to the middle- and upper-class households) Tapping sovereign wealth funds (Azerbaijan, Kazakhstan, Turkmenistan, Uzbekistan) More robust direction of budgetary procurement and contracting resources to companies (e.g. social enterprises) that explicitly promote social inclusion Raising new revenues: Higher taxes on environmentally unsustainable activities More aggressive measures to capture “illicit financial flows” “Other micro-levies” (e.g., airline taxes, sugar taxes, financial transactions taxes)

Global finance for development framework The Addis Ababa Action Agenda (global finance for development conference, July 2015) prioritizes reductions in: Illicit financial flows: “We will . . . substantially reduce illicit finan­cial flows by 2030 . . . to eventually eliminat[e] them” Reflected in SDG indicator 16.4.1 Fossil fuel subsidies: “We reaffirm the commitment to rationalize inefficient fos­sil-fuel subsidies . . . including by restructuring taxation and phasing out those harmful subsidies . . . to reflect their environmental impacts” Reflected in SDG indicator 12.c.1 Redirected/reduced illicit financial flows, fossil fuel subsidies, can finance social protection in the region If we cut taxes on labour, how do we make up the resulting budget gap? The outcome document from the July 2015 global finance for development (the “Addis Ababa Action Agenda”) summit inter alia called for reducing fossil fuel subsidies, and cracking down on illicit financial flows, in order to free up fiscal space for development. This logic is also apparent in indicators for SDGs 12 and 16. If countries in our region did this, would significant financing possibilities result?

Possible shares of GDP accruing to state budgets Capturing 10-20% of losses from “misinvoiced foreign trade transactions” could significantly increase fiscal space Possible shares of GDP accruing to state budgets UNDP calculations, based on IMF, Global Financial Integrity data, annual averages.

Fossil fuel subsidies—Particularly large in Caspian basin, Ukraine Fossil fuel subsidies (% of GDP)—budget allocations plus foregone tax revenues (2013, 2015 averages) This chart shows IMF estimates (as shares of GDP) of fossil fuel subsidies, for 2013 and 2015. For some countries in the region, these are quite large. The point is that reductions in illicit financial flows, and fossil fuel subsidies, could generate significant increases in fiscal space for many countries in the region. This could make possible lower taxes on labour, increased spending on vocational education and social care infrastructure, legal assistance, and other measures to reduce inequalities. UNDP calculations, based on IMF data.