How much and how states tax make a huge differences to how well their populations live

The book “Taxation and state-building in developing countries: capacity and consent,” published in 2008 by Cambridge University Press, has the following message:

“There is a widespread concern that, in some parts of the world, governments are unable to exercise effective authority. When governments fail, more sinister forces thrive: warlords, arms smugglers, narcotics enterprises, kidnap gangs, terrorist networks, armed militias. Why do governments fail? The book explores an old idea that has returned to prominence: that authority, effectiveness, accountability and responsiveness is closely related to the ways in which governments are financed. It matters that governments tax their citizens rather than live from oil revenues and foreign aid, and it matters how they tax them. Taxation stimulates demands for representation, and an effective revenue authority is the central pillar of state capacity. Using case studies from Africa, Asia, Eastern Europe and Latin America, this book presents and evaluates these arguments, updates theories derived from European history in the light of conditions in contemporary poorer countries, and draws conclusions for policy-makers.”

The book is edited by Deborah Bräutigam, Odd-Helge Fjeldstad and Mick Moore.

A chapter in the book, “Mass-taxation and state-society relations is East Africa,” is written by Odd-Helge Fjeldstad and Ole Therkildsen. It concludes:

“Coercion often seems to be an important feature of taxation of peasant economies. As experiences from contemporary China also indicate, the financial burdens imposed on the rural population have become a major source of discontent in many poor, smallholder societies and a source of political and social instability. Underlying the issue of peasant tax burdens are the relations between state and society and hence the issue of democracy. The study of poll taxes in Tanzania and Uganda offers a glimpse of the direction in which the democratic reforms in these countries are evolving. Over the last hundred years, there have been remarkable shifts in the collection of poll taxes in both countries. Coercion has become less uniformly used and is driven more by locally specific conditions and practices. Poll taxes were abolished in Tanzania in 2003 and in Uganda in 2005. This was a direct result of increased political competition in local, national and presidential elections. People use their voting power to get rid of an oppressive and highly unpopular tax.

It may be argued that this illustrates an unwillingness of an electorate in a democratising African country to vote in favour of taxation. Its preference is for 'representation without taxation'. But this view does not take adequate account of the way in which poll taxes are actually collected. Collection methods hit many poor people randomly, violently and destructively. The competitive political systems that are now emerging provide people with the means to push politicians to make poll tax changes directly (by lowering rates, or even by abolishing the tax) or indirectly (by encouraging less coercive collection methods). We have seen these processes at work in Uganda and Tanzania. As Adam Smith wrote long ago: "in countries where the ease of comfort and security of the inferior ranks of people are little attended to, capitation taxes are very common". Now the hinterland is striking back. This time it is against an oppressive, regressive and unfair tax.”