The Biscay Model: taxation innovation could help the SDGs. An expert clarifies

The Biscay Model: taxation innovation could help the SDGs. An expert clarifies
  • Taxation is a significant weapon for advancing the SDGs by mobilising resources, redistributing wealth, and encouraging sustainable consumption and production practises.
  • The United Nations report Our Common Agenda 2021 emphasises the importance of a strengthened international tax cooperation framework in order to foster sustainable development and improve digital cooperation.
  • The Biscay Model incorporates design ideas into a portfolio of laws and regulations centred on corporate social responsibility, climate change, and the SDGs.


Taxation is critical to the achievement of the Sustainable Development Goals (SDGs). Modernized and progressive tax systems, stable tax policy and administration, and more efficient tax collection procedures – particularly in a digitalized and globalised world – could help economies foster trade and investment, promote gender equality, biodiversity conservation, and alleviate poverty while mobilising domestic revenue.

Fiscal measures can help to reduce inequality and achieve the greater goal of leaving no one behind. Fiscal incentives, for example, to economic sectors in which women are significant actors, such as small and medium-sized firms, could result in more gender responsive outcomes. By promoting domestic and foreign investment in renewable energy production, it is possible that more inexpensive, clean energy will be produced, as well as the local ecosystem will be rejuvenated. Fiscal policies can thus achieve both a resource mobilisation goal and promote sustainable production and consumption patterns in an economy.

Government innovation is being used to modernise taxation systems.

Improving taxation necessitates the political will to implement the appropriate mix of tax policies, as well as the development of administrative competence to carry them out. Policymakers are encouraged to evaluate and design tax policies to support specific economic objectives and enable modern economies to boost competitiveness and productivity. The Addis Tax Initiative (ATI) Declaration 2025 brings 65 partner countries, development partners, and organisations together to foster tax systems that advance the SDGs and declare their strong political commitment to implementing the Addis Ababa Action Agenda (AAAA), which seeks to align financing flows and policies with economic, social, and environmental priorities.

Tax authorities must improve disclosure and transparency regulations, as well as commit to lowering, and eventually eliminating, illicit cash flows and chances for tax evasion. It is critical to realise the relationship between taxation and the goals established in the United Nations 2030 Agenda. Because such reforms have regressive impacts on the value of goods and services, taxation cannot drive equitable and sustainable development without the purposeful engagement and consultation of the private sector in achieving these goals. Because of the problems connected with defining and assessing the value of intangibles and the location of value generation, the continued speed of technological innovation may provide increased hurdles for existing tax systems.

The Biscay Model is a living laboratory for rethinking taxation.

The tax powers of the Biscay province in Spain's Basque area allow it to accomplish something unprecedented: become the first municipal or regional body to execute fiscal policies linked with the SDGs. The Biscay area has become a "living lab" for a new way of thinking about taxation and sustainability thanks to its collaboration with the UCL Institute for Innovation and Public Purpose (IIPP). This aspiration is consistent with the region's role at the forefront of efforts to achieve sustainable, equitable growth and well-being for its residents, which is made possible by the region's high levels of autonomy, unique history, ability to collect all taxes and establish tax laws, and strong regional commitment to innovation and equality.

The region, however, suffers a number of special issues, and the Government of Biscay has chosen three priority areas that serve as the focus of and drive the Biscay Model for linking SDGs and taxation. These are some examples:

  • Demographic shifts: The regional administration is focusing on population ageing and care, gender equity, low birth rates, and migration.
  • Climate crisis: There is a need in the Biscay region to protect and repair natural areas, as well as to address climate threats through economic reorientation toward more sustainable production.
  • Economic resilience: In order to foster economic growth, the government is aiming to transform the Biscay economy into one that is greener, more inclusive, and focused on innovation and entrepreneurship.

The concept promotes contributions to the SDGs rather than punishing behaviour, and it is intended to be straightforward and inclusive, acknowledging the role of micro and small businesses as well as huge corporate actors. Dr. Kate Roll, Assistant Professor in Innovation, Development, and Value, UCL Institute for Innovation and Public Purpose, shared more about this model, including how it focuses on the interaction between the public and private sectors toward broader considerations of "public value" and how it was enabled by broader shifts across government and society toward sustainable development.

What does a tax system based on the SDGs look like? How does it contribute to the United Nations 2030 Agenda?

Kate Roll, MD: We have been collaborating closely with the tax authorities in Spain's Biscay area to study the role of taxation in establishing a greener and more equitable economy, as well as to develop the tools needed to assess SDG performance.

To present, scientists and policymakers interested in taxation and the SDGs have concentrated their efforts in two areas. To begin, the focus in low-income nations is on whether tax revenues are sufficient to finance important state services linked to the SDGs. This includes investments in health (SDG 3) and education (SDG 4), as well as connections to strong institutions (SDG 16) and the state's ability to engage in innovation and sustainable enterprises (SDG9). This connects the SDGs to important work on base erosion and profit shifting (BEPS).

Others have linked disincentives and "sin taxes" to the SDGs; for example, tobacco taxation may be considered SDG-aligned. As a result, there is a chance to examine a tax system and analyse the extent to which tax incentives and disincentives are aligned with the SDGs. This begs the issue, "Are income taxes progressive (SDG1)?" What changes may be made to minimise disparities (SDG 10)?

While acknowledging this work, IIPP has adopted a different approach, concentrating on how taxation and other fiscal policy may help promote greener and fairer markets. This is consistent with Professor Mariana Mazucatto's seminal work on directionality: the state plays an important role not only in fixing markets, but also in establishing markets and defining the course for growth and innovation.

The Biscay Model proposes a method for aligning taxation with the SDGs, as well as draught criteria for measuring corporate SDG success. Our vision of an SDG-aligned tax system combines the three perspectives mentioned above: taxes are sufficient to support state functions; incentives and disincentives reinforce SDG principles; and taxes and other fiscal policy levers are used to direct investment and growth in a greener, fairer direction.

Adding value to the public good through fiscal policy

How can fiscal policy influence market behaviour? How can an SDG-focused tax system promote market activities to provide "public value" while retaining innovation and consistent revenue?

According to Miedzinski, Mazzucato, and Ekins, "there is a need to re-align and simplify public policies and investments to more effectively harness the benefits of Science, Technology, and Innovation (STI) for the SDGs." Fiscal policy tools range from indirect financial assistance, such as corporate tax cuts, to direct financial assistance, such as public procurement or state investment; governments also support innovation and market development through tools such as advisory services, governance and regulatory frameworks, and collaborative platforms.

For a long time, policymakers were regarded as "market-fixers." In contrast, we concentrate on recognising their active role as market builders, reminding us of the critical role of the state in the development of foundational technologies and emphasising the importance of tools such as procurement, taxation, patient public investment, and conditionalities for public value creation. These technologies are critical for connecting investment in innovation with the development of public benefit.

How may a system like the Biscay Model help workers and communities transition more "justly"?

We see work that connects business tax incentives with SDG achievement as one of several fiscal policy tools that states will need to promote greener, more fair economies and indicate their commitment to just transitions. States can help to establish a robust renewable energy ecosystem by using tax instruments that recognise movements toward the usage of renewables, for example.

However, introducing patient finance, reconsidering public procurement, and imposing limitations on state contracts or investments could all help. These programmes must collaborate in order to create new employment and industries that will benefit people and communities. Taxation is also still mostly a top-down instrument; such methods must be supplemented by real engagement with those affected by climate change, as well as the phase-out of carbon-intensive businesses. What does a fair transition entail for them?

Increasing public-private cooperation in order to encourage meaningful engagement in tax reform.

Given that investor strategies are attempting to embrace the whole spectrum of ESG characteristics of responsible investment, what incentives do you propose for growing private sector engagement in such a model?

Regional and national tax authorities are uniquely placed to require disclosures while also providing financial incentives and disincentives. They have a potent set of carrots and sticks at their disposal to encourage engagement. There are several tax incentive programmes available to firms, such as green R&D incentives.

However, in addition to providing a direct incentive, accurate evaluation of corporate SDG achievement may have additional benefits. The Biscay Model, as previously stated, provides a framework for the state to measure and gauge progress on the SDGs. Companies that have demonstrated good SDG performance may be appealing to people looking for responsible investing. Corporate SDG performance can also be utilised as a screening tool for government procurement and investment. In this way, the development of a credible standard provides greater confidence and allows for the formation of new ecosystems.

The Biscay model exemplifies what a region may accomplish when mutualistic relationships between the public and private sectors are carefully planned. How can governments around the world be more proactive and think more broadly about the tools at their disposal to advance sustainable development?

We frequently emphasise the critical role of the public sector in innovation and the development of public benefit in our research, policy work, and teaching. To adopt a more proactive and comprehensive approach to the SDGs, governments must first re-examine their own role and their investment in associated competencies. This viewpoint is depicted in the figure below: This transition necessitates a move from fixing to constructing markets, from picking winners to selecting the willing, from de-risking to accepting uncertainty, and from levelling possibilities to tilting the playing field and providing guidance. This new style of thinking is reflected in the Biscay Model.