draining development.pdf - Khazar University

78 Draining Developmenthorizons that shape the perceptions of tax as an investment in the futureprosperity and stability of the state; (5) the potential influence of collectiveaction by taxpayers or other citizen groups to negotiate with politicalleadership; and (6) the rationale for leaders and elites to build thebroad, long-term economic development of their societies, which isinfluenced by noneconomic interests such as traditional ethnic, kinship,and communal ties and patterns of patronage, as well as other factorssuch as international pressures. 18These six political economy factors, in turn, shape citizen understandingof the legitimacy of taxation. 19 Taxpayer attitudes toward thislegitimacy are formed by three more immediate forces, as follows:• Tax morale: taxpayer civic responsibility to support or underminenational goals, that is, the extent to which enforcement is accepted asa legitimate and effective exercise of state power• Capacity: the capacity of tax policy and particularly tax administration,including the effectiveness of political and administrative checksthat limit rent seeking and patronage and the political support for theefficiency of the tax administration, measured by tax effort and thetax compliance costs imposed on taxpayers compared across countriesat similar levels of development 20• Perceived fairness: the perceived fairness and effectiveness of taxes andthe tax authority (based both on experience and the perception of theextent of the compliance of other taxpayers) 21Tax evasion flourishes in poor governance contextsIn light of the above, it is not surprising to find that tax evasion isendemic in contexts of poor governance, for example:• In the Philippines in the mid-1980s, with the collapsing Marcosregime, income tax evasion grew to account for nearly 50 percent ofthe potential yield (Manasan 1988). The restoration of democracyunder President Aquino was only partly successful in delivering politicalstability, a weak legitimacy reflected in corporate tax evasion ondomestic sales tax at between 53 and 63 percent in the early 1990s• (Abinales In Nigeria, and persistent Amoroso political 2005). uncertainty was reflected in the federalgovernment estimation in 2004 that, because of tax evasion, corruption,and weak administration, it had collected only around 10 per-