Making the pie bigger and sharing it better: the case for integrating tax justice and social accountability
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Photo Source: Wealth Management

Ensuring quality and inclusive public services to citizens requires tackling a number of questions that pertain to dividing the “pie” of public resources. These include: how should national and regional budgets be allocated in order to meet competing needs and address evolving challenges? How should goods and services be procured so as to maximise value for money? How should services be delivered in a way that is effective and accountable? How can corruption be prevented at every step of the chain?

While these questions are indeed imperative, one key question that is often neglected by actors in the transparency and accountability field is: how can we make the pie bigger?

Many organisations working in transparency and accountability are, broadly speaking, involved in making sure the pie is shared and used better. They focus, for example, on improving how budgets are allocated and monitoring spending and delivery. Organisations engaged in tax justice, on the other hand,  seek to make the pie bigger and are focused on the equitable mobilisation of sufficient domestic resources through better domestic tax policy and a fairer international approach to taxation.

Both of these strands of work are important but, despite their complementarity, too often they are tackled separately. That should change. Without a doubt collaboration between the two would result in an outcome that is “more than the sum of its parts”.

Against this background, Tax Justice Network Africa and Integrity Action have been looking at how tax justice and social accountability could be brought together in practical, meaningful ways.

Getting to the root of systemic problems

Firstly, let’s take the social accountability perspective. When citizens seek to hold public service providers to account – by giving feedback, identifying problems, and collaborating with the service providers to find solutions – they sometimes encounter problems that just can’t be solved, despite great willingness on the part of the service provider. Many of these problems are connected to a lack of financial resources.

Take teacher absenteeism. There are many reasons why it happens, but one of the most important is insufficient funding reaching schools, leading to insufficient (or non-existent) salary payments to teachers. It’s easy to blame frontline workers for problems like these, but often the reality is more complex.

So how to fix this kind of problem? Perhaps there should be increases in local or national budgets? This is an important goal, and it’s vital that social accountability engages in discussions like these rather than preoccupying itself with the local level. But there is a limit to how far a budget can go. Will increasing the allocation for, say, education, result in a corresponding reduction for something important, but with a weaker constituency behind it, like social protection?

What about reducing corruption and other leakages? It’s another important goal and should be pursued at all levels. However if we take the African context, even if we made great strides in this, at least some countries would struggle to provide decent public services with the domestic resources they have. 

When these systemic problems remain unsolved, it can lead to frustration and disillusionment for the citizens who raise them. But can tax justice provide a new frame for such problems? Can citizens be engaged not only in service delivery accountability, but also one of the key policy issues determining how much money is available in the first place? Could it help to build trust – by promoting a better understanding of the challenges public servants face, all the way along the chain? Can we engage the public servants themselves in this – many of whom are just as frustrated as citizens at the quality of services they are able to deliver? And can it provide a tangible, visible way of engaging more citizens in the critical area of tax policy?

Strengthening the “demand side” of tax justice

This last question is an important one. Tax may seem like an abstract area of policy but it has a huge bearing on the lives of citizens. It is vital to engage citizens in tax policy, and to find ways to link it to people’s lives, so they can engage in these demands.

What are the key demands? At the domestic level, it’s about fair tax systems where revenues are raised and distributed equitably, and where taxation is progressive, meaning “those who earn the most pay the most”. Unfortunately in many developing countries, citizens contribute more to government revenues than corporates. This is often due to various tax incentives and tax holidays that governments give to corporates, as well as various tax planning measures that these companies undertake, resulting in them shifting their revenues outside of their country of operation. There is also a lack of taxes targeted at wealthy elites, such as inheritance taxes and property taxes. As a result, there is a greater reliance on consumption taxes – such as value-added tax – which constitute a higher proportion of budgets in low-income households compared to high-income households.

At the global level, citizens and civil society are a valuable part of the global campaign for tax justice, and can support demands for fairer rules, as well as an equal representation of voices. It is imperative that governments from outside the club of OECD countries have an equal say in the discussions pertaining to the global tax system.

To achieve this, there are specific things citizens can demand such as calling for the contracts governments sign with companies to be transparent, calling on members of parliament to enact legislation that closes tax avoidance loopholes, and calling for governments to produce tax expenditure reports, which reveal the amounts of money “lost” to corporate-friendly tax policies.

Photo Source: News 24

Social accountability might contribute in two broad ways. Firstly, by providing the link between poor public services and unfair tax policy and mobilising a diverse constituency of citizens around these issues. Secondly, by offering up its own experiences of “citizens making demands of government”, and the processes by which such demands can be converted into action, such as citizen-led monitoring, sharing evidence and stories, trust-building and collaborative problem-solving.

Fixing the social contract

As well as strengthening each other, there is also something that tax justice and social accountability could make a joint contribution towards: fixing a broken social contract.

In many African countries, there are high levels of tax non-compliance by citizens. This is driven by citizens’ disillusionment with their governments’ ability to provide adequate public social services. Researchers have characterised this tax non-compliance as more of a “’tax boycott’, arising from taxpayers’ frustration with the fiscal social contract of governance.”

So how can societies begin to escape a broken social contract? Actors from the worlds of tax justice and social accountability are in a good position to jointly apply their knowledge of tax systems, perceptions of tax, the realities of service delivery, as well as citizen-state relationships (or lack thereof).

Is it only a significant and lasting improvement to the quality of services and public infrastructure that would mend a broken social contract? Or, before that is achieved, are there other ways to start rebuilding it? Would citizens be more likely to contribute if there are higher levels of trust between them and the state? Who exactly do they need to trust – and how is this related to the way in which their taxes are used? What about if they had greater confidence that the tax system is designed fairly?

Is a new kind of social contract needed, where listening to citizens and acting on their feedback is as important – at least in the initial stages – as providing basic services?

In conclusion, there is a whole range of ways in which tax justice and social accountability might productively work together. And it isn’t just theoretical – some of the practical measures we are interested to explore include: supporting citizens and communities to identify and link service delivery problems to budgetary root causes and the tax policy underpinning them; increasing citizens engagement with parliamentarians on issues related to progressive taxation and illicit financial flows; community groups asking for and monitoring contract transparency so they know what tax incentives and tax holidays are being offered to multinational enterprises; and establishing platforms consisting of various social justice organisations and beginning joined-up advocacy and campaigns on service delivery and tax justice.

It has always been a challenge to connect citizens meaningfully with the policy processes that so heavily affect their lives. But this approach would help us to “power up” those policy processes with the experiences and energy of citizens, not to mention the duty-bearers involved in service delivery, so that we can bake a larger pie, and share it better.