The query was to provide a review of latest thinking/literature (academic and practitioner) on the linkages between taxation and stability.
Tax reform agendas have traditionally focused on increasing public revenue in an economically efficient manner. However, Prichard (2010) argues that there is a case for linking revenue enhancement more explicitly to broader governance objectives. It should be noted that increased domestic revenue generation will only lead to improved development outcomes if the new revenue is translated into productive public expenditure.
Key findings of the review include:
- State of the evidence: there is a large, varied and multidisciplinary
body of academic and grey literature that discusses the linkages
between taxation and development. The literature on taxation and
statebuilding is primarily theoretical and guidance-oriented, with
some supportive case study evidence. This rapid review found a more
limited academic and grey literature focussed explicitly on taxation
in fragile and conflict affected states.
- Latest theory and policy about the role that taxation can play
regarding stabilisation/conflict: discussions regarding taxation have
predominantly focused on how best to enhance revenue collection to
finance redistribution and public goods and services, and the role of
tax policy in strengthening incentives for economic growth.
Increasingly, there is a focus on the role taxation can play in
enhancing stability, and fostering improved governance.
- Key theories of change used in a selection of donor funded taxation
reform programmes in post-conflict and fragile countries: broadly
speaking, donor funded taxation reform programmes share a common logic
or theory of change, i.e. that the reform of the tax system and
improvement in tax collection are considered critical for the
consolidation of the state, peacebuilding and political stability
(Ndikumana, 2015). This reform can be accomplished by focusing on a
number of key areas: broadening the tax base; managing natural
resource revenues better; minimising tax incentives/exemptions for
corporate interests; encouraging transparency by multinational
enterprises; and building tax morale (i.e. via voluntary compliance).
Avis, W.R. Linkages between taxation and stability (GSDRC Helpdesk Research Report 1346). Governance and Social Development Resource Centre, University of Birmingham, Birmingham, UK (2016) 13 pp.