The Hunt for Revenues in a Poor State

The poorest states have minimal resources to carry out their fiscal mandate. They also are dealing with a socio-political and economic environment where the majority of taxpayers are inaccessible – physically, or lacking ‘tax handles’ and ‘legible’ economic activity which the government can identify, register, and tax. When revenue actors do not have sufficient resources to carry out their fiscal mandate, or the mandate is simply not feasible vis-à-vis contextual political realities, what strategies does the revenue authority develop and how do they choose where to dedicate their limited resources to carry out this mandate?

The purpose of this sub-project is to understand what shapes and motivates revenue mobilisation strategies in a low-income state.

Using the perspective of the revenue actor, I develop a model of revenue efficiency. My theory in summary is the idea that revenue actors in a poor state treat revenue sources according to how much the potential revenue sources exacts of their administration and how politically sensitive it would be to enforce this imposition of taxes on a particular group. As such, I classify revenues in a 2x2 model with administratively efficiency on one axis and political efficiency on the other. I expect that revenue authorities would focus on revenues that are the most efficient on both dimensions, regardless of their fiscal mandate.

To examine strategies of revenue mobilisation and what motivates and drives decision-making of where and what to prioritise of the fiscal mandate, I spent five months embedded with the Togolese revenue authority (Office Togolais de Recettes), including participation and observation on a 2-week fiscal control unit’s mission to all of their branches and outposts throughout the country. I carried out similar but more limited research approaches in Benin, with central and local revenue actors. I also analysed the fiscal codes, operational plans, and strategy documents of both countries, and relevant news related to the political climate and maneuverings related to revenue mobilisation strategies in both countries.

In Togo, despite high levels of political and administrative inefficiencies of attempting to mobilise revenues from rural economic actors, it appears that the semi-autonomous revenue agency (established three years ago) has embarked on a newly invigorated effort to mobilise revenues from some of the most inefficient sources – such as the rural, informal economy. This contradicts my expectations. More interesting, at each level of the revenue authority, I find some differences of motivation of why they are investing significant efforts to target this group. At the senior management level, the motivation is a form of revenue bargaining – a strategy of signaling to the largest taxpayers (les grandes entreprises in the capital) that the system is now fairer, by demonstrating that they are trying to include all citizens in the taxpayer net. The hope is that by improving the fairness of the system, regardless of revenues mobilised (sometimes it seems to cost more to mobilise among the poorest than the amounts generated), their hope is that the main revenue contributors will remain compliant and not exit the system.

The dissertation was defended on December 9, 2018 and can be found here.