Photo credit: Susan Warner / Save the Children

Taxation with Representation: Citizens as Drivers of Accountable Tax Policy

Written by Andrew Wainer, Director, Policy Research  and Sadie Marsman, Research Assistant
Photography credit: Susan Warner / Save the Children

Protests by citizens against their government’s tax systems have not just occurred across cultures and centuries, but have led to revolutions.

In 18th century America, for example, the British crown’s assertion of its right to tax colonists without consent led to the Boston Tea Party and, eventually, the American Revolution. “No taxation without representation” is perhaps that revolution’s most famous slogan. Since then, it’s been played out in countless other parts of the globe.

Throughout history, taxation has been controversial and often dramatically contested. Yet today it is accepted as one of the primary ways for governments to increase domestic revenue in order to better meet the basic needs of citizens.

Save the Children’s new report, Taxation with Representation: Citizens as Drivers of Accountable Tax Policy, analyzes the evidence on citizen tax advocacy in developing countries in order to garner insights, and identify trends, on how civil society organizations (CSOs) contribute to accountable and progressive tax policies within the framework of equitably financing the Sustainable Development Goals (SDGs).

The report, being launched this week in Berlin at a meeting of the Addis Tax Initiative, is intended to:

  • Provide additional guidance to policymakers seeking to support pro-development and accountable DRM in developing countries, and
  • Contribute to the growing evidence base on the role of CSOs in tax policy

A Tax and Governance Virtuous Circle?
Tax policy isn’t just about tallying revenue collection numbers and tax-to-GDP ratios. It’s also about ensuring revenue collection is pro-development, and contributes to enhanced governance. A broad representation of citizens’ voices must be included in that tax policy’s development and execution including marginalized and vulnerable groups.   

To create a tax system that is representative of broad societal goals, factors such as gender, ethnicity, geography and language must all be considered. While technical experts should, and will, continue to play a central role in tax policymaking, domestic resource mobilization (DRM) will fail to achieve its potential as a key source of finance to achieve development goals if it’s pursued without citizen input, and without prioritizing equity.

With this in mind, the report analyzes a series of cases in the research and policy literature on civil society engagement in tax policy at the national and subnational levels. The goals of our analysis are to illustrate what has worked and what is needed to support citizen engagement for more accountable tax policies.

 Citizen Engagement at the Subnational Level: Burundi
A 2014 World Bank study in Rutegama, Burundi, found that fostering partnerships between civil society and local administrators was necessary for successful citizen engagement, given the low levels of civil society capacity and state administrative capacity in fragile contexts.

Capacity building had to happen with citizens and the state, together.

World Bank researchers found that, “Within the Burundi context [it]…must be done in tandem with encouraging state developmental responsiveness.” In Burundi, as in other instances analyzed in the report, international donors–in this case primarily the Swiss Agency for Development and Cooperation (SDC) and the German Agency for International Cooperation (GIZ) – facilitated the decentralization process, encouraging engagement between CSOs and local fiscal officials.

In Rutegama, the municipal administrator created a partnership with local civil society, in which they were involved in discussions on budget and tax collection. Burundian law facilitated more equitable participation of women because gender balance is enshrined in law at both the local and national levels.

For example, communes in Burundi are governed by a council of 15 members that must also reflect a degree of gender balance (by law, at least 30% must be women).

For its part, matching the local government commitment, civil society raised awareness among taxpayers on the links of taxation to public expenditure. At the time, the public already had access to budget expenditures, but many citizens were unable to read the documents in French or make sense of the budget’s complicated format, so additional taxpayer education was conducted.

Due to the government’s commitment to transparency and social accountability, and gender equality, citizens placed more trust in their government and were more willing to pay taxes. After the program was implemented in 2010, Rutegama experienced increasingly larger revenue collections each year for the next three years.

Recommendations
Based on the analysis of the country cases, the report presents recommendations on how to support citizen engagement in DRM including:

  • Support subnational-to-national links through donor DRM programming. Donors can build national-level civil society tax advocacy through supporting more developed subnational work. Local level civil society advocacy can be foundational for building broader national campaigns and serve as the training ground for tax policy advocacy.
  • Support government and civil society co-design of tax policy. Engaging civil society and governments together – particularly at the local level – has a track record of success. The citizen-state compact can be strengthened when capacity needs are addressed together, rather than only building the capacity of government.  Confrontations between citizens and government tend to occur when there is no platform to engage on tax issues.
  • Engage in the full budget cycle. Over the last decade, civil society organizations across the world have advocated for effective and equitable provisions of services through the budgeting process. In so doing, they have gained expertise as well as become agents of change able to influence budget allocations at all levels of government. Combining tax advocacy, with budget advocacy, civil society can be more effective in advocating for accountable and equitable revenue collection and spending on public services

To ensure that a tax policy is pro-development, and contributes to enhanced governance and social inclusion, a broad representation of citizens’ voices must be included.  Otherwise, DRM will fail to achieve its potential as a key source of finance for development around the world. We look forward to presenting that case to our ATI partners this week in Berlin.