Harford: better taxes make better government
"From Daniel Berger, a PhD student at New York University: the 7° 10’ line of latitude that runs through Nigeria is geographically unremarkable and has had no administrative significance for 96 years. Nevertheless, villages just to the north of this line on a map enjoy more competent government than those just to the south."
"Berger argues that the 7° 10’ line of latitude in Nigeria is important because different systems of taxation once prevailed on either side of it. To the south, officials relied on customs duties and other taxes on trade through Nigeria’s ports. North of the line, taxes were levied on people – which meant somebody had to arrange a census and keep proper accounts. The difference in bureaucratic capability has persisted for a century."
We'd add more - it's not just the bureaucratic capability: this book has a much broader perspective, containing this:
"Taxation is the new frontier for those concerned with state-building in developing countries.
The political importance of taxation extends beyond the raising of revenue. We argue in this book that taxation may play the central (their emphasis) role in building and sustaining the power of states, and shaping their ties to society. The state-building role of taxation can be seen in two principal areas: the rise of a social contract based on bargaining around tax, and the institution-building stimulus provided by the revenue imperative. Progress in the first area may foster representative democracy. Progress in the second area strengthens state capacity. Both have the potential to bolster the legitimacy of the state and enhance accountability between the state and its citizens."
Read the rest of the Tim Harford article - it's short, but fascinating - including an argument in a similar vein (but with somewhat less of a tax justice angle) about old silver mines in Bolivia.