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How to help more citizens participate in the global tax agenda

Andrew Wainer's picture
Photo: Mohammad Al-Arief/The World Bank.

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
  • Other
  • 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

Comments

Submitted by arturo on

". . .DRM is the most sustainable way to finance the Sustainable Development Goals . . ."

I concur with this fact, it's the reality cognizance of unsustainable nature of most of our physical resources!

The bone of contention as far as Africa is concerned, has been summarized in the article:

". . . levels of tax collection can remain unchanged unless there is sustained political will…"

Yet, we remain positively optimistic not to remain this way as change is inevitable being the only permanent episode in life.

So, the awareness campaign shall continue until the political will is entrenched in the minds of the populace!

Well done

Submitted by David Harold Chester on

The one subject of vital importance to most people is to do with the economy of making a living and the most efficient way to use the earnings. Yet when it comes to the Big Picture of the whole of society, nobody is serious enough about to the regard it as an aspect of this matter. There is no attitude that regards it as a serious science that is more than of a pseudo-kind. In the universities the kinds of economics that are taught are not particularly useful because in practice the qualification is more associated wit intelligence level that practical knowledge. They do not show how our social system can be expressed in logical and more exact ways.

Making Macroeconomics a Much More Exact Science

Today macroeconomics is treated as an inexact topic within the humanities, because at a first look it appears to be a very complex and easily confused matter. But this attitude does not give it fair justice--we should be trying to find a better way to approach and examine the subject, in a good way that avoids these problems of complexity and confusion. Suppose we ask ourselves the question: “how many different KINDS of financial transactions occur within our society?” Then the simple answer is that only a limited number of them are possible.

Although our society comprises of many millions of participants, to answer this question properly we should be ready to consider the aggregates of all the various kinds of activities (no matter who performs them), and then idealize these activities so that they fall into a acceptable number of more general terms, for the expression of a relatively small number of different but specific social functions. Here, each activity is found to apply between a particular pair of entities—with each entity being expressed by its having individual properties. Then to cover the whole social system of a country (excluding foreign trade), the author finds that it takes only 19 mutual flows of money for the purchase and payment of goods, services, access rights, taxes, credit, investments, valuable legal documents, etc. Also these flows are between only 6 different representative entities.

The analysis that led to this unexpected result was performed by the author and it may be found in his working paper (on the internet) as SSRN 2865571 “Einstein’s Criterion Applied to Logical Macroeconomics Modeling”. In this model these 19 double flows of money verses goods, etc., are shown. They are found to pass between only 6 kinds of role-playing entities. Of course, there are a number of different configurations that are possible for this type of simplification, but if one tries to eliminate all the unnecessary complications and sticks to the basic activities, then these particular quantities are the most concise result. They provide the most simple yet fully comprehensive and satisfactory analysis.

Surprisingly, past representation of our social system by this kind of an interpretation model has not been previously properly examined nor presented before. Other partial versions have been previously modeled (using 4 entities, by Professor Hudson), but they are inexact due to either their being over-simplified, or in the case of econometrics, much too complicated.

These are the two reasons for the earlier non-scientific confusion by many economists and their failure to obtain a good understanding about the way the whole system works. The model being described here is unique, in being the first to include, along with some additional aspects, all 3 factors of production, of Adam Smith's “Wealth of Nations” book of 1776. The three factors of production are Land, Labor and Capital and along with their returns of Ground-Rent, Wages and Interest/Dividends, respectively, which are all included in this presentation diagram.

The diagram of this model is in my paper, and in Wikimedia Commons as Diag.Func.Macro.Syst.pdf, which needs enlargement to see all of the aspects included in the one view. A mention of the related teaching process is also provided in my short working SSRN 2600103 “A Mechanical Model for Teaching Macroeconomics”. With this model in its different forms, the various parts and activities of the Big Picture of our social system can be properly identified and defined. Subsequently by analysis, the way our social system works can then be properly calculated and illustrated.

It is done by the mathematics and logic that was devised by Nobel Laureate Wassiley W. Leontief, when he invented and introduced the important "Input-Output" matrix methodology (that he applied it to the production sector only). This short-hand method of modeling the whole system replaces the above-mentioned block-and-flow diagram. It enables one to really get to grips with what is going-on within our social system. Subsequently it will be found that it is the topology of the matrix which actually provides the key to this. The math is not hard and is suitable for high-school students who have been shown the basic properties of square matrices.

By this technique it is comparatively easy to introduce a change to a pre-set social system that is theoretical in equilibrium (even though we know that this ideal is never actually attained)--it being a convenient way to begin the study. This change will then create an imbalance and we must then introduce a process for regaining equilibrium again. The introduction of sudden changes or policy decisions my thus be simulated and the effects determined, which will point the way to what policy is best. In my book about it (see below), 3 changes associated with taxation are investigated in hand-worked numerical examples and the logical and irrefutable results are a surprise even to this author!.

Developments of these ideas about making our subject more truly scientific (thereby avoiding the past pseudo-science being taught at universities), may be found in my recent book: “Consequential Macroeconomics—Rationalizing About How Our Social System Works”. Please write to me at [email protected] for a free e-copy of this 310 page book and for additional information.

Submitted by David Harold Chester on

The global tax agenda should be about taxing the one thing that is being withheld from use for speculation in its growing value, namely the useful land. With land value taxation, these speculators would find better uses for their investment money. This would allow the opportunities provided by access to the land to be more widespread and for landless people to enjoy more opportunities to earn and reside. Also the speculators money would then find use in providing more and better buildings, tools, transports and education for a more prosperous situation that when land is withheld and the rents being collected are artificially raised and production costs excessive.

TAX LAND NOT LABOR; TAX TAKINGS NOT MAKINGS!

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