Does Local Taxation Make Local Government Responsive to Citizens?
There is considerable evidence that a significant cause of bad governance, especially in poorer countries, is that states are financed not from the 'earned income' that they derive from taxing their citizens, but rather from the 'unearned income' derived either from large mineral resources or, less significantly, large aid inflows. (For references to this argument, see Natural Resource Wealth is Bad for Democracy).
How far is the converse true: that the taxation relationship contributes directly to improving governance by creating a productive dependence of the state on its citizens? Odd-Helge Fjelstad is very sceptical. On the basis of extensive experience in East Africa, and detailed field research in two districts of Tanzania, he presents a contrary picture. Local taxes are levied in a largely arbitrary and non-accountable fashion. Their main implicit purpose is to provide income for the collectors, local government staff and politically-influential people. There is no identifiable reciprocity in the taxation relationship; it tends to embody some of the worst patterns of state-society relations.
Fjeldstad, 'Local Government Tax Enforcement in Tanzania', Journal of
Modern African Studies, Volume 39, Number 2, 2001, pp. 289-306.
Keywords: taxation, local government, decentralization.
Commentator: Mick Moore, IDS (November 2001).
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