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__NOTOC__<small-title />[[Image:financing streams icon.png|right|100px80px|]]
The main financing sources to recover the [[Costs of WASH Service Delivery - Introduction | costs of water, sanitation and hygiene service delivery]] are (a combination of) [[Taxes | taxes]] levied by national or regional governments, [[Transfers | transfers]] made by development partners, and [[Tariffs | tariffs]] or own contributions paid by users of a service (see figure 1). These financing sources in the water and sanitation sector are also known as the ''three T''s (e.g. taxes, transfers and tariffs).
'''[[Taxes]]''' refer to funds originating from domestic taxes that are channelled to the sector via transfers from all levels of government, including national, regional and local ([[#GLAAS|GLAAS]], 2012). Such funds would typically be provided as subsidies for capital investment or operations. ''Hidden'' forms of subsidies may include tax rebates, soft loans, e.g. loans at a subsidized interest rate, or subsidized services, e.g. subsidized electricity.
===Examples===
'''Financing flows''' <br>
The way in which the main financing streams, e.g. taxes, transfers and tariffs, typically circulate in the water and sanitation sector is depicted in figure 2. The main actors involved are the water, sanitation and hygiene service providers, households and domestic governments, and development partners.
|<font color=limegreen>'''Tariffs'''</font> <br><font color=dodgerblue>'''Transfers'''</font>
|<font color=limegreen>'''Tariffs'''</font>
|Not applicable
|<font color=dodgerblue>'''Transfers'''</font>
|<font color=limegreen>'''Tariffs'''</font> <br><font color=dodgerblue>'''Transfers'''</font><br><font color=orange>'''Taxes'''</font>
|-
|Existing system
|Not applicable
|<font color=limegreen>'''Tariffs'''</font>
|<font color=limegreen>'''Tariffs'''</font>
|<font color=dodgerblue>'''Transfers'''</font>
|<font color=limegreen>'''Tariffs'''</font>
|Not applicable
|<font color=orange>'''Taxes'''</font>
|<font color=dodgerblue>'''Transfers'''</font>
As shown in table 1 (see above), tariffs are mostly used to cover [[Operational and Minor Maintenance Expenditure (OpEx)|operations and minor maintenance expenditure]] and the [[Cost of Capital (CoC)|cost of capital]]. Transfers are mostly focused on [[Capital Expenditure (CapEx)|capital expenditure]] and [[Expenditure Indirect Support (ExpIDS)|indirect support]]. Taxes are used to cover [[Expenditure Direct Support (ExpDS)|direct support]]. [[Capital Maintenance Expenditure (CapManEx)|Capital maintenance]] is underfundedas its expected to be covered by tariffs, but in reality it is not happening and premature failure of infrastructure is all too often.
====Financing sources in Europe====
In 2012 , the Ecologic Institute undertook an analysis of financing streams in the water sector in eight European countries. Figure 3 shows the percentage of tariffs, taxes and transfers in the overall budget (DANVA et.al, 2012).
[[Image:financing sources fg 3.jpg|thumb|none|500px|Source: DANVA et.al, 2012]]
===Key documents===* Fonseca, C. and Cardone, R., 2003. [http://www.ircircwash.nlorg/pageresources/7582 financing-and-cost-recovery Financing and cost recovery]. (Thematic overview paper / IRC ; 7). The Hague, The Netherlands: IRC International Water and Sanitation Centre* Hervé-Bazin, C., 2012. [httphttps://celinehervebazin.fileswww.wordpressecologic.com/2012/03eu/eureau-3ts-short-guide-version-internet.pdf 4154 ''3Ts'': Tariffs, Taxes and Transfers in the European water sector: short guide]. Brussels, Belgium: EUREAU * Norman, G., Fonseca, C. and Jacimovic, R., 2012. [http://www.ircircwash.nlorg/pageresources/69961 financing-water-and-sanitation-poor-six-key-solutions Financing water and sanitation for the poor: six key solutions]. (Water and Sanitation for the Urban Poor: Discussion Paper; DP#003). The Hague, The Netherlands: IRC International Water and Sanitation Centre and London, UK: Water and Sanitation for the Urban Poor (WSUP)
* OECD,. 2009. [http://www.oecd.org/env/biodiversitywaterandnaturalresourcemanagement/42350563.pdf Managing water for all: an OECD perspective on pricing and financing: key messages for policy makers]. Paris, France: OECD
* Pezon, C., Fonseca, C. and Butterworth, J., 2010. [http://www.ircircwash.nlorg/contentresources/download/152801/519929/file/02_Background_Paper_zw.pdf irc-symposium-2010-pumps-pipes-and-promises-background-paper-pumps-pipes-and-promises IRC Symposium 2010 Pumps, Pipes and Promises: background paper: pumps, pipes and promises: costs, finances and accountability for sustainable WASH services]. The Hague, The Netherlands: IRC International Water and Sanitation Centre.
* WHO and UN-Water, 2012. [http://www.who.int/water_sanitation_health/publications/glaas_report_2012/en/index.html UN-Water global annual assessment of sanitation and drinking-water (GLAAS) 2012 report: the challenge of extending and sustaining services]. Geneva, Switzerland: World Health Organization (WHO)
* Winpenny, J., 2011. [http://www.gwptoolbox.org/images/stories/Docs/euwi%20fwg%20primer%20on%20financing%202011.pdf Financing for water and sanitation: a primer for practitioners and students in developing countries]. Stockholm, Sweden: The European Union Water Initiative Finance Working Group, EUWI-FWG.
* OECD. 2009. [http://www.oecd.org/env/42350563.pdf Managing water for all: an OECD perspective on pricing and financing]. Paris: OECD.
===Links===[http://www.ircircwash.nl org/ IRC International Water and Sanitation Centre] is a knowledge broker, innovator and catalyst of change within the water, sanitation and hygiene (WASH) sector working internationally and in selected focus countries and regions. IRC seeks to extend WASH services to the less privileged, while ensuring that services are based on the sustainable use of water resources, are appropriately managed, and are better governed. IRC works in partnership with governments, the public and private sector, Dutch and international organisations, UN institutions, development banks and non-governmental networks and organisations. For more information see: [http://www.ircircwash.nlorg/resources/financing -and-cost-recovery Financing and Cost Recovery]
<div id="GLAAS">'''GLAAS'''</div>
[http://www.who.int/water_sanitation_health/publications/glaas_report_2012/en/index.html Global Analysis and Assessment of Sanitation and Drinking-Water (GLAAS)] is produced every two years by the World Health Organization (WHO) on behalf of UN-Water. It provides a global update on the policy frameworks, institutional arrangements, human resource base, and international and national finance streams in support of sanitation and drinking-water.