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January 25, 2021

How Civil Society can Make Tax Systems More Equitable

Invest in Minnesota-Minnesota Budget Project
Photo: Invest in Minnesota/Minnesota Budget Project
Posted by Paolo de Renzio, Jason Lakin and Fariya Mohiuddin[1]

Domestic revenue mobilization (DRM) is fundamental to governments’ strategies to finance essential development goals. Yet, if taxation is not equitable, intensifying domestic revenue collection can undermine efforts to tackle poverty and inequality. Without a strong grass-roots voice in tax, progressive tax reform may falter.  Civic actors are critical stakeholders in building broad support for social bargains in which governments supply citizens with quality services in exchange for tax compliance.  The same actors can also provide muscle to help take on powerful interests that oppose redistributive tax policy.

As part of a new Tax Equity Initiative, the International Budget Partnership recently developed several resources to help civic actors get involved with tax reform and learn from each other:

  1. A review of the academic literature on the political economy of domestic tax reform in low- and middle-income countries looks at the main players involved, the way in which the substance of tax reform shapes political forces, and the process by which taxes are eventually reformed. This effort resulted in two publications: an extensive literature review  and a much shorter guide for civic actors to reflect on their strategies.
  1. A global scan of the civil society tax field catalogued the major civil society organizations (CSOs) around the globe that are working on tax, the issues they tackle, their approaches and constraints, significant publications and more. A summary paper presents a broad overview of the findings and an online database lists 171 CSOs working on tax across 66 countries and seven regions of the world.
  1. A synthesis paper and summaries of in-depth case studies describe tax reform campaigns promoted by civic actors in seven countries, including: the Yellow Vests movement in France; tax administration reforms in Guatemala; the invalidation of a double taxation agreement between Kenya and Mauritius; the fight against opacity of tax amnesties in Mexico; an increase of “sin taxes” and oil excise taxes in the Philippines; opposition to new taxes on mobile money transfers and social media in Uganda; and advocacy towards increasing income taxes on wealthy individuals in three U.S. states.

Civil society engagement in tax reform can make tax systems fairer and more equitable while generating revenues to finance important public services. Our case studies help us to understand the types of strategies and tactics that very different organizations and movements use to engage with very different types of tax reform, including:

Narratives. Tax reform is a battle of ideas. The primary narrative used by these campaigns is about promoting fairness and equity. Another narrative focuses on the need for sufficient resources to adequately fund public services, either through direct earmarking or through an increase in general revenue collection. A third narrative emphasizes the need for more transparency and for clear anti-corruption measures in tax administration. Often used together, these narratives help CSOs frame issues to win the policy argument and galvanize supporters.

Choosing the right strategy. Civic actors enter a wide array of venues for advocacy, from working directly with the executive, to lobbying legislators, to trying to influence public opinion through organizing events and working with the media, to taking governments to court. Successful cases seem to deploy a mix of “insider” and “outsider” strategies, supporting and lobbying governments directly on reforms, but also applying external pressure on them through mobilization, protest, lawsuits, and media campaigns.

Building effective coalitions. A critical strategic consideration in tax reform is to identify both allies and opponents and to build powerful coalitions. To confront reform resistance—coming mostly from within governments and from the business sector—civic actors in our cases built coalitions with a wide range of actors. Some nurtured relationships with parts of government or business, taking advantage of splits within these realms. Others appealed to civic actors or movements that were not specifically interested in tax policy but were mobilized around a broader vision of government and public services.

Capacity. Engaging in tax reform debates often requires high levels of technical capacity—both in the economic and legal spheres. However, civil society groups also need political capacity to understand the incentives of various actors within and outside government, and communications capacity to effectively disseminate research findings and reform proposals, and to craft forceful narratives and relay key messages to target audiences. And a capacity to learn and adapt is as important as other kinds of capacity, especially given the long-term nature of reform.

Political opportunities. Advances in policy reform often occur at specific points in time—e.g., in the wake of elections or when corruption scandals hit the headlines or during the COVID-19 crisis—when unanticipated changes shift the balance of power, alter public perceptions and affect government priorities. When these opportunities arise, civil society must be prepared, or risk having to wait a considerable time for another window to open. This means working over the longer-term to build capacity, media networks and potential coalition partnerships that can be mobilized at opportune moments.

In a world where inequality continues to grow, while the wealthy often pay little in taxes, the role that civil society can and should play in pushing for more equitable tax systems and better funded public services cannot be overstated.

 

[1] International Budget Partnership.

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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