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Taxation and conflict

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Taxation and conflict Fiscal Policy is often at the heart of conflict generation and resolution Pre-Conflict Incidence of tax and expenditure Sense of Being ... – PowerPoint PPT presentation

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Title: Taxation and conflict


1
Taxation and conflict
  • Fiscal Policy is often at the heart of conflict
    generation and resolution
  • Pre-Conflict Incidence of tax and expenditure
  • Sense of Being Exploited rather than
    neglect
  • Need to know to what the structure of taxation
    may have contributed to conflict
  • Rentier state versus merachnt state
  • Weak fiscal Capacity of state to respond to
    social needs may be causal factor of conflict
  • fluctuations in economic variables may cause
    uncertainty and conflict due to changing status
    and fortunes

2
The Long-term view
  • Focus on both side of the balance sheet
  • problem of crowding out the state by donors
  • Need to reconcile the long-term developmental and
    short-run patronage-political approaches to
    exigencies of peacemaking - Security , political
    reform and building conflict management
    capacities
  • Think of exit option - Both the urgency of needs
    and weakness of the state can lead to high levels
    of dependence that can become entrenched.
    (Marshall Plan)

3
Armed conflict can effects the fiscal accounts
4
Negative side
  • disrupting economic activities by crowding out
    productive investment by state
  • eroding the tax base
  • lowering the efficiency of tax administration
  • and distorting the composition of public
    spending.

5
Positive effect
  • Willingness of citizen to pay tax (the Bellist
    or Charles Tilly argument)
  • Greater Tax effort by state
  • resource mobilization effect
  • Ratchet effect

6
Neglect of Fiscus
  • little awareness among policymakers of the links
    between the states ability to manage public
    resources and its ability to manage conflict.
  • Importance of fiscal pacts as part of
    peace-building (South Africas sunset clauses

7
Importance of bringing Fiscal Policy on the
bargaining table
  • Often the focus on Aid undercuts dialogue on
    mobilisation and allocation of national resources
  • Problems of ability of the state to generate
    consensus around the allocation of scarce public
    resources.

8
Conditionality versus "Fiscal Pacts
  • Temptation to use state weakness for imposing
    policies
  • Overview of The World Banks, operations in El
    Salvador, Bosnia, and Uganda, and an of
    experiences in Cambodia, Eritrea, Haiti, Lebanon,
    Rwanda, and Sri Lanka. concluded that if tax
    effort and the pattern of public expenditures
    have a direct bearing on post-conflict
    reconstruction, as they did in El Salvador, it is
    legitimate to include these parameters in the
    conditionality agenda

9
Importance of Reconstruction and Growth
  • Excessive focus on stabilisation
  • IFI tendency to push the standard package of tax
    reduction even in crisis periods
  • Assumption that good policies are always the
    same, the new argument is that since
    post-confect countries have poor policies, they
    should be given more aid simply because of their
    high

10
Taxation and Representation
  • Higher citizens tax moral and representation
  • Tax effort is often used as proxy for state
    caacity because citizen willingness to pay
    taxes is a measure of state legitimacy and a
    basis for citizens demand accountability.
  • Importance of giving meaningful roles to organs
    of representation

11
What taxes?
  • It depends on structure of economy
  • Broad based rather isolated rents have better
    political economy consequences
  • Tax progressivity and equity along both vertical
    and horizontal lines
  • Trade taxes for ease of collection and political
    assertion of sovereignty
  • Tax aid bonanzas

12
Importance of social policy
  • Build new social contract
  • Budget allocation decisions need to consider
    impact on horizontal inequalities, to avoid
    factionalism and destabilizing winner-take-all
    politics.
  • Reduce immediate suffering and vulnerability but
    for both redistributive and productive arguments
    (human capital)
  • To address some of the grievances that past
    fiscal practices may have generated
  • Marshall Plan and the welfare state
  • American pension scheme for the demobilised
  • South Africas Sunset Clauses
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