The Politics of Taxation and Implications for Accountability in Ghana 1981–2008

Abstract

SummaryIn many ways the raising of tax revenues is the most central activity of any state, but it is only recently that the development field has begun to take questions about taxation and its relationship to the performance of government seriously. This research seeks to investigate the particular hypothesis that a government that relies primarily on tax revenues, as opposed to natural resource rents or foreign aid, is more likely to be accountable to its citizens.This research seeks to capture the evolution of the Ghanaian central government tax system since 1982. The first goal is to understand the politics behind this evolution, in order to pinpoint the factors influencing the willingness and ability of governments to raise domestic revenue. The research then proceeds to ask whether the evolution of the tax system provides evidence that government efforts to raise taxes have given rise to successful demands for greater accountability.The research finds that there is significant evidence that taxation has often been a catalyst for demands for greater accountability, but also finds that the nature of this relationship has varied dramatically across time, context and tax types. While generalisations demand further research, initial evidence points to several factors that shape the nature of state-society bargaining over taxation, among them: the broader state of politics, the role of elites, the mobilising capacity of civil society, the motives for the tax increase and the type of tax in question.

Donors, Aid and Taxation in Developing Countries: An Overview

“…The impetus for such a broadening of the focus of reform efforts comes from recent research suggesting that taxation and tax reform may contribute to broader governance gains through three channels (OECD 2010, Prichard 2010a):…”

“…OECD (2010) and Prichard (2010a) outline the possible outlines of such an agenda, though there remains a need for much greater research. The key suggested elements are:…”

“…In a recent paper Fairfield (2011) presents a typology of such strategies, paying particular attention to strategies to minimise elite resistance to reform. At a more general level, Prichard (2010a) argues that a focus on principles of equity, transparency and inclusiveness are frequently likely to play a role in both building support for reform and weakening likely resistance. A focus on transparency and inclusiveness holds the potential to minimise popular resistance to reform.…”

“…However, a governance-focused tax reform agenda, as described here, does nonetheless imply changes to internationally sponsored tax reform efforts. These changes would not represent a repudiation of existing strategies, but rather a reorganisation of priorities, particularly with questions about transparency, inclusiveness, equity and local government taxation taking a more prominent role in reform efforts (Prichard 2010a, OECD 2010. Achieving such a reordering of priorities would require two broad shifts within the policy community.…”

“…While the extent of the changes should not be overstated, meaningful policy change, administrative reform and increased revenue collection were all apparent. Similarly, in Ghana after a first effort to introduce VAT in 1995 was reversed in the face of major public opposition, donor support figured prominently in supporting the efforts of reform leaders to successfully reintroduce the controversial tax in 1997 (Prichard 2010a). …”