Reflections on politics of state revenue in Africa

Author: Moses Khisa. PHOTO/FILE

What you need to know:

Governments can impose and collect taxes even as they do little to provide critical public goods and services

I rarely write about academic work in this column. But here is an exception. A small group of us, scholars from Denmark, Norway, Tanzania and Uganda have been meeting this week at Aarhus University, Denmark, to reflect on five years of research on the politics of state revenue in several African countries.

Much of our work has focused on Senegal, Tanzania and Uganda, but with broader implications for much of the continent.

When we set out to do this work in 2016, we were interested in understanding the compromises and concessions that take place between revenue collectors – governments and public authorities – on one hand, and revenue providers – business groups, individuals and different economic actors – on the other.

We wanted to study both the principles and theories, the practices and empirical realities. We positioned the analytical lens and empirical aperture to capture the interactions between policy and power, the relations between state and society.

Over the years, we have learnt a lot, and have adjusted our assumptions and conclusions we previously held in light of new empirical findings and theoretical insights.

Let me back up a bit and say a few basics. States and governments are for the most part defined by their ability to tax and extract resources from people under their jurisdiction and control. In fact, a central feature of the modern state, especially as it emerged in Europe, was the capacity to collect taxes and other forms of revenue in exchange for providing security and protection.

The state bureaucratic apparatus, that is, the army of civil service officials and the routinized rules that govern day-to-day affairs of government first emerged around the push for mobilisation of resources needed to prosecute wars and provide national defence.

This phenomenon, rooted in European political economy, gave rise to the theory of fiscal contract – the idea that revenue providers and the government that takes this revenue engage in some kind of contractual reciprocity, written or unwritten, whereby taxes are collected and in turn services are provided.

This becomes the source of demand for accountability and the responsiveness that comes from holders of state power. There is an old dictum of ‘no taxation without representation’, meaning that those who are taxed must have a voice or that those who collect taxes, the government and politicians, must listen to the demands and desires of taxpayers.

Does this hold in Africa and especially in the country case-studies our research project has focussed on? Does more taxation and domestic revenue collection enhance government responsiveness and representation of citizens’ voices? Does the quest for more revenue through taxation compel governments to listen to groups and individuals from whom taxes are collected? For the most part, no.

Governments can impose and collect taxes even as they do little to provide critical public goods and services. But it is also true that governments are amenable to conceding and compromising on granting club goods to specific social groups depending on the groups’ holding power or their capacity to influence policy through lobbying and other forms of bargaining.

In Uganda, tax exemptions and waivers in the agricultural sector, for example, can be attributed to the organisational power and the political influence of key actors in this sector, among whom are political elites doubling as commercial farmers, including the president!

But there is a trade-off here. Concessions granted to the agricultural sector go along with government failure to provide public goods and services for that sector. That is, the government can grant a waiver of value-added tax on agricultural inputs, for example, at the same time as it doesn’t provide extension services for farmers. The sector gains from being tax-exempted but loses by not getting services from government.

Another lesson is that organised lobbying sometimes makes a difference. The Private Sector Foundation, Uganda (PSFU), for example, has played key roles in driving tax reforms in recent years.

However, given a neoliberal economic environment of generally limited interest aggregation and articulation means that a government can introduce and pursue new taxes such as taxes on mobile money and internet-use without consultation and input from citizens.

At another level, in both Tanzania and Uganda, among the leading beneficiaries of tax exemptions are individuals and companies that make generous campaign finance donations to the ruling CCM and NRM, respectively.

A lot has changed on the revenue landscape of African countries in recent years. Many countries are less dependent on foreign aid and external grants, but most still do not collect as much domestic revenue as they should and need to. This is unlikely to change any time soon.

A lot depends on the social terrain and the nature of political systems or settlements obtaining in a specific country. Hopefully, our work can inform policy debates and decisions now and in the future.

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