On Dec. 16, 2020, the Finance Ministry of the Republic of Indonesia and IBP held a high-level, virtual panel, “Getting it Right: Promoting Equity and Accountability in the COVID-19 Response,” which focused on equity and accountability in emergency public spending and how we can strengthen the role of civil society in monitoring these expenditures. The event garnered international media coverage from major outlets in Indonesia and Kenya and more than 3,300 viewers from across Canada, Ghana, India, Indonesia, Italy, Mexico, Senegal, South Africa, Tajikistan, United Kingdom and the United States.
Moderator Beena Pallical, General Secretary, National Campaign on Dalit Human Rights was joined by Gene Dodaro, Comptroller General, United States of America, Kristalina Georgieva, Managing Director, International Monetary Fund, Sri Mulyani Indrawati, Minister of Finance, Republic of Indonesia and Warren Krafchik, Executive Director, International Budget Partnership for a conversation on the choices governments make while channeling public resources to combat COVID-19 – choices that will determine how many lives are saved and how many people fall into poverty.
On October 26, 2020, Ghanaian civil society organizations took the government to court. They argued that the president had illegally interfered with the work of the Auditor General (AG) – who is tasked with reporting on the government’s operations. As the Auditor was finalizing his 2019 report a few months prior, the president essentially forced him to take accumulated leave, and appointed an “acting” Auditor General in his place. Activists argued that this contravened Ghana’s constitution, which, like many other constitutions, gives independent constitutional offices broad autonomy to carry out their functions. The government argued, by contrast, that the constitution (in article 297) allows anyone who appoints a public officer to also “exercise disciplinary control” over that officer.
This case has of course not been decided yet, but it affords an opportunity to reflect on the extent to which African advocates and courts have helped to reshape the contours of what we mean by democratic, accountable government in recent years. This dispute, which has echoes of a similar conflict over Kenya’s Public Audit Bill in 2014 (when the Kenyan Auditor General argued for independence over human resource management), entails a critical decision about the extent to which formal oversight bodies can act independently. The Ghanaian case will help to set precedence for the way in which we currently understand the working of democratic institutions, the separation of powers and the rule of law.
Groundbreaking examples across Africa
The case draws on and reminds us of another important precedent from Ghana, Occupy Ghana v. Attorney General, decided in 2017. This case concerned the powers of the Auditor General to disallow illegal expenditures and surcharge officials for their actions (or lack of action) in causing public revenue losses – powers which existed on paper but were seldom used. The AG at the time argued that the office’s responsibility was met “simply by auditing and pointing out financial irregularities in the accounts of a public entity” and did not require him to impose surcharges.
Remarkably, the case sought to force the AG to use these powers, arguing that systematic failure to do so was a violation of the constitution. Perhaps even more remarkably, the courts agreed. Arguing that “the tendency where public accounts are considered as a fattened cow to be milked by all and sundry must stop,” the courts ordered the AG to surcharge officers found to have condoned illegal expenditure, and to take steps to ensure that these surcharges were paid. This novel case tested the boundaries of the meaning of accountability in modern states by requiring constitutional offices to rise to their oversight responsibilities. Its singular importance justifies its inclusion in the International Budget Partnership’s (IBP) recent global assessment of oversight systems, published in partnership with the INTOSAI Development Initiative.
Building space for public participation in tax and budget decisions
Groundbreaking cases from Africa related to the nature of modern democracy and accountability are not limited to issues surrounding auditors. For example, the South African courts have blazed new trails in defining public participation. In 2007, the courts elaborated on a theory of the state’s “duty to facilitate public participation” in Doctors for Life International v Speaker of the National Assembly and Others, claiming inadequate participation in the passage of health legislation. A critical aspect of this decision was the burden it placed on the government to provide citizens not only with opportunities to participate, but with the means, including the capacity (developed through education) to participate meaningfully. Attention was particularly drawn to the need to include marginalized voices in legislative decisions that affect them and the courts found that speedy resolution of policy issues was insufficient on its own to justify curtailing participation.
As I have noted in this space before, Kenyan courts, drawing on local and international jurisprudence, have breathed further life into legal requirements for public participation. They have in part drawn on South African cases like Doctors for Life when tackling participation in public finance matters. For example, in 2013, the courts found that the enactment of a county tax law (the Kiambu County Finance Act) was unconstitutional, as the county had failed to undertake meaningful public participation prior to its enactment. In this case, the court held that the County Assembly had a duty to “exhort its constituents to participate in the process of the enactment of such legislation by making use of as many fora as possible such as churches, mosques, temples, public barazas national and vernacular radio broadcasting stations.”
The South African and Kenyan courts’ interpretation of the meaning of participation—that the people’s representatives have a duty to “exhort” them to participate in tax legislation, among other policy areas—is quite novel, and certainly at odds with a more traditional pluralist view, which assumes that the problem of democracy is how legislators can manage the contradictory pressures emanating from participation. As in South Africa, these cases emphasize the state’s special duty to encourage participation for a broader public that has traditionally been excluded from decision-making.
The Kenyan courts have gone further still in permitting public interest legislation that has overturned tax policies. I have previously discussed Tax Justice Network Africa’s (TJNA) case against the Double Taxation Agreement with Mauritius in this space. That case was decided on narrow grounds that did not substantially expand the meaning of modern democracy, but it did show that civil society could establish standing in tax policy cases. This opened the door to more substantive petitions, including a more recent lawsuit by TJNA against the Government of Kenya over ten tax treaties on both procedural and substantive grounds. A 2020 case in Zambia confirms that African revenue authorities are increasingly able to confront multinational corporations over tax evasion related to transfer pricing; thus the courts are not only increasing the power of ordinary citizen influence over policy, they are also limiting the extraordinary power of corporate interests.
Returning to Kenya, in 2017, activists successfully sued the government over an increase in excise tax on beverages. The Kenyan courts invalidated the tax increase, holding that there was inadequate public participation to inform it. They specifically found that “[t]axation or any legislation or policy that creates a financial burden upon citizens must as of necessity be subjected to adequate public participation wide enough to cover a reasonably high percentage of population in the country.” It is not enough to “to rely on attendance sheets for two meetings attended by a few persons with no supporting minutes” held in the capital, on an issue affecting most Kenyans.
This establishes a fairly high bar for what participation requires. Moreover, the same case found that, in the case of water taxation, the government had a constitutional obligation to justify this tax as reasonable, taking into account the potential impact on the constitutional right to both water and property. The government, should it wish to reintroduce this tax with proper participation, would still need to provide this justification. The South African, Zambian and Kenyan cases discussed here demonstrate that traditional areas of executive privilege around treaty-making and taxation are not immune from modern demands for greater public participation in democratic settings.
Redefining accountable democratic governance
Taken together, this emerging body of law across Africa has altered our understanding of what accountable democratic government means. African courts have pushed the boundaries of our understanding of oversight and participation, normalizing participatory democracy above and beyond representative democracy, and demanding that public officials clear a higher bar in making decisions without public oversight. There is of course much more work to be done, but this is a narrative that deserves wider recognition.
During the summer of 2020, the International Budget Partnership (IBP) and the International Centre for Tax and Development (ICTD) worked collaboratively to conduct a broad scan of civil society organizations (CSOs) working in the taxation space with a specific interest in domestic taxation. Our objective was to create a comprehensive picture of the emerging field, understand its general features, the challenges faced by CSOs and to provide a resource for others, including CSOs, governments and donor agencies. This scan coincided with the emergence of IBP’s Tax Equity Initiative, which “works to promote citizen engagement with budget policies and processes to make them more equitable and inclusive”. The ICTD has continued to deepen its work in this field, launching a Tax and Civil Society research programme earlier this year.
The global CSO scan
The CSO scan database presents 171 organizations working across 66 countries and 7 regions, and provides a comprehensive overview of what each organization does, the types of work they are engaged in, how they approach their work (theory of change), the types of taxes they focus on (both domestic and international), whether they are part of any international networks and lists their primary publications on tax from recent years.
Insights from the scan, complemented by findings from an online survey and in-depth interviews conducted with select organizations, are summarized in IBP’s new paper “Of Citizens and Taxes: A global scan of civil society work on taxation.” While the paper provides a comprehensive look at the characteristics of the organizations, this blog highlights trends from low- and middle-income countries and provides some ideas for how CSOs and others in this space can use the scan in their work.
International and regional networks
The CSO scan revealed that strong regional and international (both South-South and North-South) civil society coalitions exist in this space. Networks such as Tax Justice Network Africa, Latindadd and Tax and Fiscal Justice Asia have contributed to an environment in which civil society groups have been able to enter into tax work, receive support, and build capacity around issues of taxation, enabling greater engagement in international and domestic debates around tax policy, tax reforms, and tax administration. A few key findings emerge within each of the regions:
The Asian CSOs, compared to other organizations in the sample, are the most heterogeneous in terms of aims, ideologies and practice. This is unsurprising given the continent’s size and varying socioeconomic and cultural contexts. There is however noticeably less coordination and fewer networks and linkages between the listed organizations.
The sub-Saharan Africa sample is also diverse in terms of the type of work organizations are undertaking. Across the region, there is a general dependence on large aid bodies, charities, and state aid organizations with fewer fully independent or locally funded CSOs. While Asian CSOs tend to have links with trade unions and labor organizations, this is less apparent in sub-Saharan Africa. Nevertheless, there is a growing number of national-level CSOs increasingly involved in issues around domestic revenue mobilisation, likely due to encouragement from organizations like TJN-A, which has robust membership on the continent.
In the Middle East and North Africa, organizations tend to have a more consistent focus on domestic tax policy, civil society participation, and fiscal transparency. These issues are often addressed in connection with broader social issues such as democratic participation, civil rights, and gender disparities. The Arab NGO Network for Development (ANND) plays a central role by facilitating and publishing most of the research and reports produced in the region.
In Latin America, Latindadd is a crucial network and is an example of a pioneer in South-South cooperation, illustrated by its extensive collaborations with the Africa Forum and Network on Debt and Development. The existence of these networks is important as they provide a space for collaboration and sharing of best practices, especially given the relatively new tax policy practice arena in many lower-income countries.
What does this mean for civil society work going forward?
The CSO scan is a useful tool for organizations in lower-income countries, which are becoming increasingly prominent in the taxation space, thanks largely to the work done by regional and international networks. The work that for example Latindadd is undertaking to foster South-South cooperation can be facilitated through this scan. Organizations can search for partners within and across countries which are doing similar work and form linkages to either collaborate on mutual areas of interest or learn from each other. Where such linkages may exist at the regional level, not all CSOs in the scan are part of a network. This scan additionally provides an avenue for inter-regional learning amongst CSOs. The focus on domestic taxation is important, as this has largely been a neglected area of work in these regions.
For IBP and other large (I)NGOs, the scan can be used to scope out interesting CSO partners to support in countries of interest. It can also be used to connect existing in-country CSO partners (that for IBP, work on budget issues) to CSOs that are working on tax, specifically. Organizations like the ICTD can use the scan to align research work with policy interest areas. For example, the scan shows that many organizations are interested in – and work on – tax expenditures, but evidence on their effectiveness as policy tools is scant at best. Accordingly, there is scope for research on the impacts of tax expenditures that might help both civil society and governments do a better job at identifying policy priorities and targeting interventions. There are also some regional gaps in CSO activity, the key one being in Asia, and this is an opportunity for donors, international NGOs, and large regional CSOs to foster and support more tax work in this area. These actors can also play a role in addressing CSO constraints, particularly in funding and capacity (technical and human resources) which would go a long way in shifting the locus of influence and power from regional networks to national and grassroots CSOs.
While the CSO scan tells us a lot about what the field broadly looks like at the present moment, there are large opportunities for future research and work. In exploring these new avenues, the ICTD and IBP intend to continue collaborating and engaging with each other to support CSO capacity building and research targeting key topics and capabilities. These include topics such as: the effectiveness of CSO engagement in tax policy-making; how broad popular support can be encouraged for progressive tax policy agendas; or even what the impact of Covid-19 has been on progressive tax policy advocacy.
*Ruvimbo Chidziva is pursuing a master’s degree from the Munk School of Global Affairs and Public Policy at the University of Toronto and is a Research Assistant at the International Centre for Tax and Development. Fariya Mohuiddin is a Senior Program Officer for the Tax Equity Program at the International Budget Partnership.
This blog was co-authored with the International Centre for Tax and Development (ICTD) and can be found on their website here.
On November 17-19, members of the Addis Tax Initiative (ATI) will gather virtually for their Global Assembly. The ATI was set up in 2015 at the Third International Conference on Financing for Development in Addis Ababa, Ethiopia, as a multi-stakeholder partnership that aims to enhance domestic revenue mobilization (DRM) in developing countries. Its members include donor countries interested in supporting tax reforms, developing country governments committed to enhancing revenue collection and improving tax administration systems, and supporting organizations, including multilateral organizations, regional tax administration bodies, private philanthropic foundations, and international civil society groups.
As of October 2020, IBP has formally joined the initiative as a supporting organization, as part of its efforts to strengthen the role of civil society in promoting more equitable taxation in developing countries. IBP’s own Tax Equity Initiative has started working in three areas: (a) creating a better knowledge base to build the field of CSO tax work; (b) fostering tax transparency and participation; and (c) supporting CSO engagement with domestic tax reforms in developing countries through training, technical assistance, peer learning and more. ATI provides an important venue for discussion and coordination efforts in all of these areas.
We are honored to be formally joining the effort as the ATI adopts its new 2025 Declaration, which innovates and pushes the DRM agenda. It explicitly recognizes that it is not enough for governments to raise additional revenue, they need to do it in a more equitable way. Second, it supports the important role that “accountability stakeholders”—including legislators, the media, the public, and civil society groups—can and should play in ensuring that tax policy and administration are equitable and effective. It also highlights the importance of promoting transparency and accountability around tax expenditures, something that IBP has been working on through a regional project with a number of Latin American CSOs.
In coming years, we plan to contribute to ATI and its mission, bringing to bear our rich experience in working with civil society groups, governments and other actors in promoting more general reforms in budget policies and processes. We will support CSO tax work at country level, continuing our engagement on tax expenditures in Latin America and launching a new program to support civil society engagement with tax reforms in Africa. And we will work with the Global Initiative for Fiscal Transparency in promoting more transparency and citizen participation in tax policies and processes.
Most of our initial efforts, have focused on building a better knowledge base for the work that civil society organizations can do to promote more equitable taxation.
A few weeks ago, we published a comprehensive literature review of the political economy of domestic tax reforms, and a companion piece offering “reflection points,” or questions and suggestions for civic actors to consider as they plan work around tax reform.
Today, we are publishing the results of a global scan that aims to map, globally, civil society engagement with domestic taxation issues. This scan resulted in both a paper and an online dataset.
The dataset contains information on 171 civil society organizations working on domestic tax issues across 66 countries. It was populated mostly by drawing on IBP’s own partner network and the networks of other international NGOs such as Oxfam, Christian Aid, ActionAid International and the Global Alliance for Tax Justice. The dataset, based on information drawn from the websites of these organizations, describes broadly for each organization what types of tax issues they work on, what types of activities/work they are engaged in, a description of their approach, memberships in international or regional networks, and their main publications on tax from recent years.
The paper summarizes the key findings from the dataset, and goes a few steps further, drawing on results from an online survey and a series of in-depth interviews with well-established CSOs in this field, to provide a clearer picture of the main characteristics and challenges of CSO work on domestic taxation. In the paper, we identify key entry points for organizations entering this work and the key constraints that they face. It is a snapshot of the current moment in an evolving and expanding field, and by looking at where it is and where it has come from, we look at where it could move, and what needs to change to make that happen.
ATI members can use these publications in shaping their future work with civil society actors. By getting to know better what the field looks like, they can identify potential partners in the countries, regions and policy areas of their interest. And by recognizing how far CSO tax work has come in the past two decades, they can realize how important it is for ATI’s own mission, and support it in ways that address capacity constraints and strengthen the field.
In the coming weeks we will also be releasing the first set of in-depth case studies on how civic actors have engaged in tax policies, covering eight cases of CSO-led tax reform campaigns in Latin America, Africa and Asia. A synthesis of these cases, and short summaries of each, will be available soon. In addition to showing how CSOs can contribute to more effective and equitable taxation, this project will generate lessons for other civic actors interested in engaging with tax reforms.
We hope that ATI members—and many others interested in DRM and related areas—will benefit from these publications, and we invite everyone to engage in discussions and in action on how civil society can help promote more equitable taxation across the world.
Global discussions about domestic tax policy are increasingly dominated by one conceptual framework: tax as part of a “social contract,” or “fiscal social contract.” Moore, Prichard and Fjeldstad describe the rise of this idea in their 2018 book:
Arguments in favour of the expansion of taxation are often linked to a belief in the potential of such an expansion to contribute to state-building and increased government accountability. A particular narrative about these links has become relatively widespread in recent years…expansion of taxation may prompt processes of ‘tax bargaining’ and the construction of new ‘fiscal social contracts’ as tax payers resist taxation, make demands for reciprocity and enter into constructive interaction with governments. This narrative is grounded in the history of taxation and state-building in early modern Europe, but appears to be supported by the results of recent research in Africa and elsewhere in the developing world.
The notion of a contract also aligns well with the modern idea that effective taxation is not mainly about coercion, but must involve a considerable degree of quasi-voluntary compliance, where norms of behavior encourage taxpaying even when the risk of sanction is small. The motivating force for such compliance is that there is an underlying contract: I pay taxes in exchange for needed public services, so I do not need to be actively strong-armed.
As a framework that accurately describes the history of taxation, the social contract has much to commend it. For this reason, the concept has begun to appear in various fora as a desideratum of capacity building and advocacy around tax. For example, Oxfam describes their fiscal justice work as rooted in the social contract: “Tax systems, the budget cycle and public spending are the most visible and tangible expression of the social contract between citizens and state.”
We at the International Budget Partnership (IBP) also use the term regularly in our tax work. Even academic work, mainly focused on empirical assessments of how tax systems work, makes the case for social contracts as an end, not only an historical means. As the abstract of one article on tax in Nigeria states: “An important part of every country’s development process is the building of a social contract in which citizens pay tax and, in turn, receive public goods and services.”
But there are risks when we treat this positive concept (that is, a concept that describes how the world is) as a normative concept (that is, as a guide to how the world should be). Among the most important is that the central conceit of bargaining means that there is a direct link between what people are giving up in exchange for what they are getting. This ineluctably leads to the conclusion that those who have more to give can expect to receive more.
Understood in this way, a social contract approach does not appear to provide a solid foundation for progressive or redistributive taxation. If tax is about putting resources into the pot in exchange for services, poor and lower income groups with less to give are also not able to get very much out. At the same time, the rich can justify demanding policies that benefit them in exchange for their larger contributions. Some research suggests this is exactly what happens in modern states: states that tax lower income residents more tend to provide more social services, while those that rely more heavily on taxing the rich provide more property protection. New research also finds that in some contexts, poor citizens operating in the informal sector pay very little if any tax, which would seem to preclude them from participating in the “fiscal social contract.” Emphasizing a social contract approach to tax, then, seems to undercut the policy positions of many advocates for equitable taxation.
The surprising thing about this conclusion is that it is at odds with a powerful tradition in moral and political philosophy that emphasizes social contracts as a foundation for justice. Contract theory in political philosophy dates back to Thomas Hobbes and John Locke. They notoriously came to divergent conclusions about the nature of the contract, but their core idea, and indeed the core principle for all social contract theorists, is that the basis of a just system is consent of the governed to political institutions.
In the last century, contract theory was further developed by John Rawls in A Theory of Justice. Rawls used the social contract, and this same notion of consent, to derive highly egalitarian principles that justified significant redistribution. Other “contractualist” moral philosophers, such as T.M. Scanlon, have built on this framework, arguing that it provides special consideration for those who are worst off under any social arrangement.
Why does this Rawlsian social contract differ from the kind of bargaining that is at the heart of the modern tax framework? Why does it appear to invite progressive taxation while the “fiscal social contract” seems to undercut it?
The normative project that Rawls undertook with his social contract was not meant to describe the rise of modern states, as the “fiscal social contract” framework in tax scholarship is meant to do. The differences between these two ideas about social contracts emerge in the first instance from the use of the same term to describe both what is and what should be. History is dominated by “might makes right” bargains among powerful interests, but our vision of the world going forward is one in which the social contract should be based on ideas of equality and fairness.
This relates to the second and more important difference between these “contracts.” In the long tradition of moral and political philosophy that leads up to A Theory of Justice (and beyond), the social contract is not between citizens and the state. It is rather among citizens to create the state. In other words, the very nature of the contract is one between free persons in some “state of nature,” before the state exists, and not between an existing institution and “taxpayers.”
What we owe to each other as free persons is inherently a different matter from what we owe the state. In this conception of the social contract, the contract is truly social (between people) and the state is the executor of that contract.
This is a fundamental distinction. The principal question is one of collective action: what can we do together in what Rawls called a “fair system of cooperation” to live our lives well? It seems clear that this question cannot resolved by simply asking some form of free trade question: what will you give me if I give you X? We want to know instead what constraints we might put on our individual liberties in order to live together and prosper.
Because we are free and equal people coming together to make this decision, and because a social contract is something we consent to (otherwise it is not a contract), the terms must be such that they can be justified to everyone as fair and reasonable. Or, as Scanlon would put it, we must come to a set of principles that no one could reasonably reject. It follows that many people, and particularly those people who are less well off, will not reasonably give up any of their own rights or claims to others without something in return. As a pact between free and equal citizens in a moral sense (regardless of their power and influence in material terms), it lays the groundwork for straightforward bargaining, but also for redistributive claims that ensure a degree of equality in material terms. Redistribution is warranted by our moral duty to ensure that all enjoy at least the minimal material well-being necessary to be full participants in society.
In summary, there are two different sorts of object at play here that go by the same name. One is a positive construct that describes how states and citizens interact, characterizing this interplay as a bargain over access to resources. The other is a normative construct that describes how citizens should bargain with each other, and how they ought to create a society and state institutions to implement their agreements. The first of these is a useful guide to how the world is, but it is less useful as a frame for how we want the world to be. The second is more fertile ground for progressive taxation to take root.
What is to be done about this conceptual confusion? One possibility is that we refer to the “fiscal social contract” rather as a “state-citizen contract,” reserving the term “social contract” for the idea of a contract among members of the public. This might help. Perhaps a better option is to focus on two subsidiary concepts: “tax bargaining,” which is the central mechanism (e.g., tax for services) at work in the fiscal social contract, and “social justice” or “fiscal justice” which is the more relevant concept (e.g., agreeing to terms for fair cooperation) for the social contract.
Ultimately, advocates for fair and equitable taxation must construct a broader narrative around the social contract, one that spells out more clearly the social and normative commitments they have in mind: the social contract as a fair agreement among free and equal people that can be justified to all who pledge to uphold it. Only when we have made this position clear will we be able to build effective coalitions for tax justice that explicitly endorse redistribution through the tax system.