Friday, October 1, 2010

My newest all-encompassing silver bullet for Development

Tax reform.

Yup, that's it.

Governments that have efficient, working tax systems will be held more accountable for their actions. They are likely to be more participatory for the fact that people are concerned with where their money is going. They will be more responsible to the citizenry because the people are the major revenue stream.

Let's takes a skeptical view of governments - say we label them large, inefficient public corporations. One could argue that they are inherently self interested organizations. (If we begin from this premise we need not rely on altruism.) If a government effectively views the health, education and well being of citizens as a profitable long term investment for its own benefit - for the benefit of the government - incentives are in order and Development is bound to take place

Governments often tap into other revenue sources outside income tax, sources that, towards development, are benign at best and devastating at worst. Rent from extractive industries, or simply from big businesses like MNC, distortive duties, bribery, and untied aid are all markedly worse than revenue from good ol' income tax. Here's a li'l stat I just found from the OECD.

In Africa as a whole, non-resource related revenue increased by less than 1% of GDP over 25 years.

As of right now I have not done any research into the subject beyond that quote. I am putting forward this theory as fresh from my mind ( It likely has a huge literature already that I have somehow missed). Tax systems as indicators, as determiners, as silver bullets.


I'm not sure if anyone really knows how to impel effectiveness in governments. I say we can start by putting money into tax systems and a participatory framework surrounding them.

(I was expecting a response about how gov'ts can abuse people through taxation...)

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