In any system, democratic or nondemocratic, taxation is of course always\u00a0and everywhere a contested concept.<\/p>\n
Some pay and some do not. Some pay\u00a0more than others. Some receive compensating services; some do not. Such\u00a0matters are and in democratic states, can be resolved only through political\u00a0channels.<\/p>\n
<\/p>\n
Indeed, history suggests that the need to secure an adequate degree of consensus from the taxed is one of the principal ways in which,\u00a0over the centuries, democratic institutions have spread. No nondictatorial government in this age of information and mobility
can stay in power for long without securing a certain degree of consent\u00a0from the populace, not least in the area of taxation. State legitimacy thus\u00a0rests to a considerable extent on the quasi-voluntary compliance of citizens\u00a0with respect to taxation.<\/p>\n
To secure such compliance, tax\u00a0systems must, over time, in some sense represent the basic values of at least\u00a0a minimum supporting coalition of the population.\u00a0The central problem in many countries, for instance,\u00a0is clearly inequality. On the other hand, the key,\u00a0and related, governance problem in most of the same countries is lack of\u00a0accountability.<\/p>\n
A better tax system is critical to the solution of both problems.
Reforms that link taxes and benefits more tightly, for example, such as\u00a0decentralization and more reliance on user charges, may help accountability,\u00a0if not inequality. Reforms that replace highly regressive and inelastic excises\u00a0by a less regressive and more elastic VAT may reduce inequality especially of\u00a0course if the increased revenues are invested in growth-facilitating activities\u00a0such as education and infrastructure.<\/p>\n
The most important function of the\u00a0tax system in most developing countries is to provide (non-inflationary)\u00a0funding for pro-poor and pro-growth spending programs, particularly in
human capital.<\/p>\n
The best way to achieve this goal in most countries is likely through a broad-based non- distortionary consumption tax such as VAT, as\u00a0has long been recognized.<\/p>\n
What countries actually do is always and inevitably determined in the\u00a0first instance by political and not economic calculations. Countries vary\u00a0enormously in the effectiveness and nature of their political systems. Some\u00a0may be close to failed states\u20ac\u2122 in which institutions are so ineffective that\u00a0it does not matter much what they attempt to do: it will not work. Others\u00a0may be developmentalist and wish to use their fiscal systems as part of
a relatively dirigiste interventionist policy.\u00a0Still others may be of a more\u00a0laissez-faire disposition. Some may be more populist, some more elitist,\u00a0some more predatory.<\/p>\n
The dominant policy ideas in any country (about equity and fairness,\u00a0efficiency, and growth), as do the dominant economic and social interests\u00a0(capital, labor, regional, ethnic, rich, poor), and the key institutions, both\u00a0political (democracy, decentralization, budgetary) and economic (protectionism, macroeconomic policy, market structure), interact in the formulation\u00a0and implementation of a VAT as they do with respect to tax and\u00a0budgetary policy in general.<\/p>\n
Uniform results are unlikely to emerge from\u00a0this constantly boiling cauldron with its different mixes of ingredients in\u00a0each country. The changing interplay of ideas, interests, and institutions\u00a0affects both the level of taxation and its structure, including the role of the\u00a0VAT as well its design and administration.<\/p>\n
Taxation is one of the clearest\u00a0arenas in which to witness the working out of these complex forces.<\/p>\n
Viewed in this sweeping perspective, few developing or transitional countries\u00a0have as yet completed even the earlier parts of the long cycle that produced\u00a0the (more or less) redistributive and (more or less) growth-facilitating\u00a0fiscal states now found in most developed countries the long preparatory\u00a0period during which the idea of the desirability and even necessity of a larger\u00a0state and a more or less progressive fiscal system became established to different\u00a0degrees in different countries.<\/p>\n
Many governments in developing and transitional countries, not just\u00a0those in Balkans, are in dire straits. Even countries that have reached\u00a0relatively safe harbors politically, achieving a certain degree of legitimacy\u00a0and stability, almost always feel often correctly\u00a0 that they are in an economically\u00a0precarious situation.<\/p>\n
The budget is politically and economically\u00a0constrained. Life is difficult. Nothing can be done. All this may be true to\u00a0some extent, but it is also both too much a counsel of despair and too easy\u00a0a way out. Even in the most hopeless situations something usually can be\u00a0done to improve matters. No doubt there will continue in most countries to\u00a0be considerable dispute over what should be done to improve tax systems.<\/p>\n
Indeed, in most developing and transitional countries it would be better if\u00a0there were even more such dispute because unless and until an adequate\u00a0degree of political consensus on what should be done is achieved, no significant\u00a0tax changes are likely to be made.<\/p>\n
Much of the problem is simply that there is no implicit\u00a0social contract between governments and the general population of the\u00a0kind that is embedded in taxation and fiscal principles and practices in\u00a0politically more stable parts of the world.<\/p>\n
History tells us that such principles do not become embedded either\u00a0painlessly or quickly. The specific substantive suggestions could be\u00a0make should aim to improve matters such as better VAT administration\u00a0on a broader base are already the stuff of countless existing reports.<\/p>\n
We agree.<\/p>\n
Most countries should do all (or most of) the good things that\u00a0experts such as we recommend. However, the real question is: Why have\u00a0so many done so little?<\/p>\n
If Balkan\u00a0countries are to improve their tax\u00a0systems, they should improve political institutions in ways that broaden\u00a0and deepen social contracts.<\/p>\n
For example, create more responsive and less\u00a0clientelist political parties, more cohesive and less polarised party systems,\u00a0and improved capacity of civil society to monitor government and participate\u00a0in tax debates.<\/p>\n
In other words, there can be no good taxation without\u00a0good representation. It’s\u00a0right. But is it useful to advise countries they\u00a0should be something other than what they are?<\/p>\n
To return to the more low-level\u00a0tax policy and administrative issues, it can be said even those who may want to do the right\u00a0thing often need some help in finding out just what is right and how it can\u00a0best be done.<\/p>\n
\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"
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