Thursday, January 07, 2010

Taxes quell wars, and other findings

Drawing out brief points from the paper we just blogged, it's also worth highlighting a couple of other matters. Take this, for example:

"The tax/GDP ratio is strongly and negatively associated with the incidence of conflict; as taxation increases as a share of national economic output, conflict becomes less likely."

Read more about that here. Then there's this:

"there is much to suggest that tax-raising is a good proxy indicator of overall governance capability."

Read more about this here, for example. There is also this section, which makes a different point:

Higher aid levels appear to be associated with declines in the quality of governance and tax revenues as a share of GDP in African countries. The link between dependence on domestic tax revenues and quality of governance has been demonstrated; for example, in Tanzania and Zambia, where local governments apparently produce more public services as their budgets’ share of taxes, rather than grants from the centre, increases. The converse was also true: the revenue that local governments receive from sources outside – transfers from the central government and foreign assistance – increases the share of local budgets consumed by employee benefits and administrative costs (Hoffman and Gibson, 2005).

The whole report is worth reading, of course. And finally, one for the quotations page:

"I have made revenue collection a frontline institution because it is the one which can emancipate us from begging, from disturbing friends... if we can get about 22 percent of GDP we should not need to disturb anybody by asking for aid....instead of coming here to bother you, give me this, give me this, I shall come here to greet you, to trade with you.”

-Yoweri Museveni, President of Uganda (which collects 11% of GDP in taxes and receives a further 11% of GDP in aid), Washington DC, September 21, 2005.


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