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.

The Political Economy of Domestic Tax Reform in Bangladesh: Political Settlements, Informal Institutions and the Negotiation of Reform

“…Among the former, most focus has been on the collective action potential of larger businesses, which may also enjoy personal ties to the political and administrative leadership (Bird, 1992;Elizondo, 1994;Fairfield, 2013;Quinn & Shapiro, 1991). More recently, research has noted the potential for well-organised small businesses and shop owners to become mobilised in response to certain types of reform (Prichard, 2009(Prichard, , 2010. Meanwhile, growing attention has been paid to resistance by tax administrators with vested interests in defending existing ways of doing business, patronage networks, and areas of authority and autonomy (Devas, Delay, & Hubbard, 2001;Fjeldstad, 2003Fjeldstad, , 2006Joshi, Prichard, & Heady, 2012;Prichard, 2009;Varsano, 2003).…”

Improving Transparency and Accountability in the Budget Process: An Assessment of Recent Initiatives

“…Groups in some lower-and middle-income countries have expanded public understanding of revenue issues and influenced government revenue policies. In Kenya, for instance, the National Taxpayers' Association, an initiative of the Centre for Governance and Development, is working to strengthen public understanding of existing tax burdens and of the connection between taxes and public spending (Prichard, 2010). International 'tax-justice' efforts have been launched to ensure that multinational corporations pay their fair share of revenues, and that information on these payments is made public.…”

“…He also documents a connection between political openness and a greater willingness of citizens to accept new taxes. Prichard (2010) attempts to translate the findings of existing research into a practical agenda for action, focusing on how governments could strengthen the state-building role of taxation. As evidenced by campaigns like Publish What You Pay and the Extractive Industries Transparency Initiative, there are clear links between transparency and accountability in the budget process and improved natural-resource governance.…”

The Governance Agenda in Long Term Perspective: Globalisation, Revenues and the Differentiation of States

“…In recent years, a body of more explicit and testable propositions has begun to emerge, most of it from research relating to developing countries. There is now a substantial literature that explores the implications of the fact that, unlike virtually all OECD states for the past century and more, many states elsewhere in the world do not finance themselves mainly from general taxation, but depend on a range of other sources, most notably the rents from oil, gas and other natural resources, and development aid (Brautigam et al 2008;Chaudhry 1989Chaudhry , 1997Dunning 2008;Gervasoni 2010;Martin et al 2009;Moore 2004Moore , 2007Prichard 2009Prichard , 2010aWinters 1996). Insofar as there is a core proposition, it is that governance is better where the behaviour of political authorities is constrained by a need to negotiate and bargain for their key financial resources with the actors -mainly but not only taxpayers 13who will be most affected by the ways in which these resources are used.…”