Editor’s note: The findings, interpretations and conclusions expressed herein are those of the authors and do not necessarily reflect the view of the World Bank Group, its Board of Directors or the governments they represent.
Even as domestic tax reform is in the political limelight, there is growing attention to taxation in the developing world and the role of citizens in shaping tax policy.
This month Save the Children launched an initiative supporting citizen action in Kenya on domestic resource mobilization (DRM) – as taxation is referred to in the development community. The project is directed at the Kenyan national and county-level tax systems.
Working with local citizens, Save the Children is advocating for fair and transparent tax collection with the ultimate aim of supporting the Kenyan government’s ability to finance basic services for its most vulnerable communities.
DRM assistance typically comes in the form of technical support and capacity building provided by bilateral and multilateral donors directly to developing country revenue authorities or ministries of finance. This assistance, which often involves upgrading information technology and increasing tax officials’ professional competency, is critical.
But citizen engagement in DRM is also crucial to ensuring that tax policy is fair and reflects the popular will, not just the aims of special interests. Integrating the voices of regular citizens into DRM discussions strengthens citizens’ relationship with their government. Paying and spending tax resources is at the heart of the relationship between citizens and the state.
And engaging local citizens in DRM isn’t just good for transparency, it can also result in more effective DRM assistance, because taxation is inherently political.
As the World Bank states, “Even after the formal tax structure and tax administration are reformed, levels of tax collection can remain unchanged unless there is sustained political will….The political dimension is therefore of paramount importance in any kind of tax and revenue reform.”
While DRM is the most sustainable way to finance the Sustainable Development Goals, it must address both the administrative and the policy shortcomings that undermine the fairness of national and local tax systems. To address equity and fairness, DRM assistance should be inclusive of a range of citizen voices – not just technocratic experts – so that the concerns of vulnerable and marginalized groups are integrated into tax policy.
Supporting Citizen Engagement in DRM
In order to support citizen voices in developing world tax reform, we need better data on the quantity and quality of donor DRM assistance.
To this end, the OECD, through its Creditor Reporting System (CRS) foreign assistance database, created a sub-code for DRM assistance to measure its disbursement by bilateral and multilateral donors. This is a big step forward for measuring DRM assistance, and while the data includes significant limitations, it is now possible to ascertain the contours of donor DRM assistance to the developing world, including assistance that supports greater engagement of local citizens in tax conversations.
But in spite of the new data, the extent to which donors support DRM through empowering local citizen voices has not been extensively analyzed. Using the new DRM sub-code, we can begin to measure donors’ support for local citizens as a percentage of their overall DRM support.
The CRS includes a “channel” variable describing how foreign assistance is disseminated. Using the channel variable, it is possible to disaggregate donor DRM funding by using the “NGO and civil society” channel as a – useful, but imprecise – proxy for DRM assistance to local citizens. For the sake of context, the channel variable includes the following options for how donors channel foreign assistance to developing nations:
- Public sector
- NGO and civil society
- Public private partnership
- Teaching institutions
- Private sector institutions
- Not reported
Lack of Donor Emphasis on DRM Citizen Engagement
Overall, direct support to citizens within the DRM sub-code is quite low compared to other development sectors. In 2015, of the total $191 million in DRM assistance provided by all donors and reported through the CRS, only 3% ($6 million) was channeled to local civil society or NGOs.
Contrast this with the level of direct support to citizens for all sectors: In 2015, 12% ($21 billion of the total $174 billion) of all foreign assistance was disbursed to local civil society or NGOs – four times greater than the percentage for DRM assistance alone.
This week donors, developing nations, academics, and multilateral organizations will meet in New York for the First Global Conference of the Platform for Collaboration on Tax: Taxation and the Sustainable Development Goals. Civil society organizations – including Save the Children – will also be present to contribute to the growing dialogue on tax for development.
Aligned with our Kenya tax advocacy work, we will also urge donors and developing nations to do more to ensure that DRM includes space for local citizens’ voices to ensure that tax policy and administration not only spurs development, but also contributes to good governance.
You can read a longer version of this blog post here.