draining development.pdf - Khazar University

96 Draining Developmentcoverage), (c) the autonomy of the state (the degree of capture, isolation, orembedded autonomy of officials); and (d) the responsiveness of the state to thepopulation (that is, democratic dialogue). See Hobson (1997).20. Virmani (1987) models corruption that creates higher rates of evasion. Thepolitical economy of tackling corruption in the tax administration also involvescorrupt tax policy formulation, especially in tax expenditures, through the discretionarypowers of politicians and tax administrators. There is an interestingprovision in the Lesotho Revenue Authority Act that requires the tax authorityto report on the impact of any concessions or waivers granted during the courseof the reporting year. Thus, if ministers wish to grant a concession to a specificinvestor, they may do so, but the nature and the cost of the decision will bereported in the public domain (Charlie Jenkins, former commissioner of theLesotho Revenue Authority, personal communication, 2009).21. Thus, the Zambia Revenue Authority has declared that it is committed to theobjective of fairness, defined as performing official duties in an impartial manner,free of political, personal, or other bias; this combines with its mission tomaximize and sustain revenue collections through integrated, efficient, costeffective,and transparent systems that are professionally managed to meet theexpectations of all stakeholders. See, for example, the Zambia Revenue Authority’s“Tax Payer Charter,” at http://www.zra.org.zm/charter.php.22. Decreases in the tax-GDP ratio can also arise from other factors, such as anincrease in GDP or in tax avoidance, but the latter reflects weak administrationand taxpayer doubt over policy.23. For instance, “when tax reform enters the political arena, the subtleties of thekey issues are usually lost in the midst of self-serving arguments and misleadingsimplifications” (Slemrod and Bakija 1996, ix).24. The Kenyan Revenue Authority seems to believe that it is higher, over 40 percent(Waweru 2004).25. Tax collections increased from 10.3 to 11.9 percent of GDP between 2003 and2004 and have since stabilized at around 12 percent; see tax system diagnosticsin World Bank (2009b).26. Gehlbach (2008) notes that diversity not only at the national level, but also at thesectoral level was shaped by different political dynamics; the politically powerfulwere able to secure public goods, while also learning that it was often simpler toevade by running up tax arrears than to hide revenue from the tax authorities.27. This is based on purchases reported (Guatemala, Ministry of Public Finance, 1990,“Análisis Evaluativo del Sistema Tributario de Guatemala y Apendice Tecnico:Consultoría para Administración Fiscal,” July, Policy Economics Group; KPMG;and Policy Research Program, Georgia State University, Washington, DC).28. In 2006, VAT evasion was 31.6 percent; this compared favorably with the cases ofMexico (45.7 percent), Argentina (40.4 percent), and Bolivia (39.4 percent), butless favorably with the cases of Colombia (28.0 percent) and Chile (19.7 percent),not least because of persisting legal loopholes (World Bank data of 2007).