the reality of sub-national taxation in conflict … · thank you vanessa van den boogaard...
TRANSCRIPT
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THE REALITY OF SUB-NATIONAL
TAXATION IN CONFLICT-AFFECTED
STATES
VANESSA VAN DEN BOOGAARD
IMFG Graduate Fellow
May 24, 2018
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Outline
I. Introduction: taxation, development, and state-
building
II. Informal fiscal realities in Sierra Leone and the
DRC
III. Implications for state-building
IV. Policy implications
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I. INTRODUCTION
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Taxation and state-building
Sustainable
development
State capacity
State-society
accountability
processes
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Theory vs. practice
Limited capacity and poor incentives
Predatory taxation
Obstacles to collective action
Focus on formal tax systems
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Informal Fiscal Realities
Informal tax
Contributions from individuals, households and businesses
Enforced through means outside of the formal legal system
May finance local public goods in the absence of strong state institutions
Importance of user fees
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Why does this matter?
Underestimation of tax burdens
Misunderstanding of dynamics of local governance
– and appropriate policy responses
Need to rethink the potential of taxation to provide
spur for greater accountability or institutional
development
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Case study: Sierra Leone
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Case study: DRC
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Research Methods
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II. INFORMAL FISCAL REALITIES
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Informal Fiscal Realities
Definition Examples
User fees Fees charged directly for
government services
School fees
Public health fees
Informal user
fees
Fees charged to finance a local,
non-governmental public good, or to
provide supplemental financing to a
governmental public good
Contributions to support community
teachers
Payments to caretakers of water wells
Payments to service providers (nurses,
police, etc.)
Informal taxes Contributions collected by non-state
actors to finance local public goods
or support non-state institutions
Contributions for community
development projects, community
security, hosting guests
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Magnitude of Informal Tax
12%
27%
29%
13%
19%
Proportion of mean tax payments, Sierra Leone
Central government taxLocal government taxUser feesInformal user feesInformal tax
51%49%
Proportion of mean tax payments, DRC
Formal taxes and user fees
Informal taxes and user fees
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III. IMPLICATIONS FOR
STATE-BUILDING
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Taxpayer Perceptions – Sierra Leone
0%
25%
50%
75%
100%
Centralgovernment
taxes
Localgovernment
taxes
User fees Informal userfees
Informal taxes
Mostof thetime
Someof thetime
Noneof thetime
Share of respondents who believe that revenues are used to benefit the community
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Impact on Tax Morale - DRC
0%
25%
50%
75%
100%
Central government Local government Customary authorities
Share of respondents agreeing that government always has the right to makepeople pay tax
Share of respondents agreeing that not paying taxes is wrong and punishable
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Typology of formal-informal relations
Taxpayers may pay to both
state and non-state institutions
for the public good
Taxpayers may pay to either
state and non-state institutions for
the public good
No state option
exists for the
public good
Coexistent Supplementary
State option
exists for the
public good
Complementary Substitutive
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IV. POLICY IMPLICATIONS
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Implications
The informal is critical to the reform of the formal
Reforming existing forms of revenue raising
Considering “hybrid” options
“[Informal tax] is normal… it helps
communities to be self-reliant…because it takes
development where government cannot
reach.”
Local government official, Koinadugudistrict, Sierra Leone
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Formal-Informal Partnerships
“Our role now as councils is to give oversight and a
supervisory role over these facilities and structures set
up in the form of committees. This is how we want to
go and the way to go while we move along... the
lines between formal and informal taxes are getting
thinner [within communities].”
Chief Administrator, Koinadugu District Council, Sierra Leone
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Risks and remaining questions
Accountability and
transparency
Effectiveness
Capture by local elites
Impacts on long-term
sustainability