Date post: | 15-Apr-2017 |
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Government & Nonprofit |
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Informal Taxation: What Have We Learned?
SamuelJibao,CentreforEconomicResearchandCapacityBuildingVanessavandenBoogaard,PhDstudent,UniversityofToronto
WilsonPrichard,ICTDandUniversityofToronto
Informal taxation
“Tax-like payments, made to both state andnon-state actors, that are not mandated bylaw.”
Significance
• Livelihoodsandwelfareoftaxpayers• FiscaldecentralizaJonandeffecJvenessoftaxreforms
• Statebuildingandaccountability
Focus of ICTD research
• EmpiricalunderstandingofinformaltaxaJon• PolicyimplicaJonsofinformaltaxaJon
Findings from Sierra Leone
Classifying informal taxes
§ FormalState“Taxes”:Statutorytaxesunderthelaw§ InformalState“Taxes”:Paymentstostateofficialsnotmandatedbylaw
§ InformalTaxestoTradiBonalAuthoriBes:PaymentstotradiJonalauthoriJes,notmandatedbylaw
§ Informal Non-State Taxes: Payments to non-stategroups including armed groups and communitydevelopment associaJons, for services and/orprotecJon
(1) Informal taxes are extensive
Proportion of tax payments per household per annum, by tax type
Formal taxes to state actors
Informal taxes to state actors
Informal taxes to chiefs
Informal taxes to non-state actors
… and regressive
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
TotalTax Formal InformalState TrandiJonalAuthoriJes
Non-State
TaxpaymentsasaproporBonofincome
LowestQuinJle
TopQuinJle
(2) Higher trust in informal than formal
0%
20%
40%
60%
80%
100%
Centralgovernmenttaxes(N=140)
Localgovernment
taxes(N=1436)
Localgovernmentuserfees(N=556)
Informalstatetaxes(N=257)
Chiefdomtaxes(N=558)
Non-statetaxes(N=1618)
MeanproporBonoftaxpayersbelievingthatthetaxingactorusestaxrevenuestobenefitthecommunitymost,someornoneoftheBme
MostoftheJme
SomeoftheJme
NoneoftheJme
Findings from elsewhere
Implications
• Informal taxaJon should be considered inassessmentsoflivelihoods/poverty
• The“informal”iscriJcaltothinkingaboutreformoftheformal
• Informal tax may meet ciJzen needs, implyingdesirability toexplore “secondbest”or “hybrid”structures
Remaining questions
• PracJcalviabilityof“hybrid”models• Meaning of relaJvely greater trust in informaltaxaJon
• RelaJonship between informal taxaJon andstate-society relaJons, compliance with formaltaxsystems