Taxation and State Building: Towards a Governance Focused Tax Reform Agenda

Abstract

SummaryTaxation is fundamental to sustainable development, as it supports the basic functions of an effective state and sets the context for economic growth. More often overlooked is the role of taxation as a catalyst for the development of responsive and accountable government, and for the expansion of state capacity. Recent research has begun to focus on this broader relationship between taxation and state building, but the analysis has frequently remained relatively theoretical and abstract. This paper seeks to chart new territory by translating the findings of existing research into a practical agenda for action, focusing on the specific measures that governments, with the support of development partners, could be taking to strengthen the state building role of taxation. In short, this paper seeks to outline the core elements of a governance focused tax reform agenda.

Local Government Revenue Mobilisation in Anglophone Africa

“…Many local tax systems in anglophone Africa are characterised by high levels of arbitrariness, coercion and corruption (Bahiigwa et al 2004;Fjeldstad and Therkildsen 2008;Juul 2006;Prichard 2010;Pimhidzai and Fox 2011). A widely-found feature is the huge number of revenue instruments used by local authorities (Brosio 2000;Fjeldstad and Semboja 2000).…”

“…In Ghana, for example, national tax officials report that local tax officials sometimes urge citizens to pay local taxes instead of national taxes (Prichard 2010). Meanwhile, local officials complain that the national government has monopolised virtually all the available tax bases, and offers little if any administrative support.…”

Taxing the Informal Economy: The Current State of Knowledge and Agendas for Future Research

“…Second, individuals are more likely to make demands for responsiveness and accountability if they are paying taxes, due to a sense of ownership over government activities (Bird & Vaillancourt, 1998, pp. 10-11;Prichard, 2009Prichard, , 2010a. Third, efforts to tax informal sector operators could catalyse collective action and political engagement by informal sector associations, providing a foundation for expanded bargaining (Joshi & Ayee, 2008;Prichard, 2009).…”

People's Views of Taxation in Africa: A Review of Research on Determinants of Tax Compliance

“…Quasi-voluntary compliance is relatively important, thus providing stronger incentives for governments to seek a tax bargain (Bates and Lien 1985); and 7. There is a minimum level of trust between taxpayers and government in order to facilitate bargaining (Prichard 2010). …”