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Taxation on the Political Agenda, North and South

Author: M Moore
Date: 2004
Size: 26 pages (77.9 KB)

Summary

Compared to their prominence in Organisation for Economic Co-operation and Development (OECD) countries, taxation issues appear infrequently on public political agendas in most Southern countries. What are the structural and historical reasons for this difference? This article in the Forum for Development Studies addresses this question and looks at how recent changes in the fiscal environment in the South will raise the profile of taxation issues. This is likely to contribute to better governance and to development generally, although such an outcome is contingent on factors not yet understood.

In most OECD countries, taxation issues have been prominently and continuously on public political agendas for several decades. The public political agenda is the range of concerns that politically engaged citizens debate, and around which political parties and interest groups organise. With some exceptions, taxation issues have been far less prominent on the public political agenda in the South – the politics of taxation are generally not public, tending instead to be narrow, specialised and confined to non-public spaces.

Likely explanations for the weak prevalence of tax issues on the public political agenda in the south include:

Low ratios of tax revenue to public expenditure. Many contemporary Southern states are dependent on unearned rents, resulting in a reduction in the demand that governments place on citizens for tax revenue. Citizens are therefore less likely to mobilise around taxation issues.
The prevalence of indirect taxes. Governments of poor countries rely heavily on invisible, indirect taxes. A lower proportion of citizens pay direct taxes on income, wealth and property, and are therefore less likely to mobilise.
Incentives for individualised political strategies. Much government tax revenue comes from a relatively small number of taxpayers. Taxation systems can be complex, changeable and discretionary, providing strong incentives for individual negotiation rather than group mobilisation.
The political consequences of high inflation. High inflation discourages most political actors from engaging in public debate over tax policy. Any gains in negotiating on taxation could be wiped out quickly.

A growth in taxpayer activism in the South is unlikely to be unreservedly positive. There will be costs. However, taxpayer interest groups have a particularly high potential to act as countervailing forces to the inflated power of many Southern states. Three clusters of factors are likely to affect the articulation of taxpayer interests in the South for the foreseeable future:

Changes in rents. Natural resource and strategic rents are likely to change considerably. Reduced public expenditure and serious attempts to tax citizens are both on the cards.
The fiscal environment. The spread of VAT, simplification of tax systems and reduced inflation are likely. Political activism may well be dominated by business rather than economic elites operating in an individual capacity.
Changes in political activism. The growth in popularity of the idea of budgetary transparency and direct participation in budgeting.

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Source: Moore, M., 2004, ‘Taxation on the Political Agenda, North and South’, Forum for Development Studies, vol. 31, no. 1, Centre for the Future State, University of Sussex, Brighton
Author: Mick Moore , M.P.Moore@ids.ac.uk
Centre for the Future State, http://www.ids.ac.uk/gdr/cfs/