In the United States, there is a common adage that goes like this: The only things that are certain in life are birth, death, and taxes. And for most people in stable states this is a truism.
In fragile and failed states, taxes are not at all certain. In a few cases – such as Nigeria and Equatorial Guinea – the vast majority of government revenues are derived from natural resources “rents.” The free bounty of nature – in this case rich petroleum reserves – provides royalties and tax revenue paid mostly by non-citizen foreigners. In other cases – such as Afghanistan and Somalia – central governments collect very little revenue from any sources. Tax codes exist, calling for different mixes of sales taxes (value added taxes), income levies, or property taxes, but collection capabilities are quite limited. And tax evasion is the norm and not the exception.
Tax collection in developing countries is not a flashy topic. It is understandable but unfortunate that journalists devote scant attention to taxes. It is unfortunate because compliance with and competence in tax collection are a hallmark of a well-functioning state. Even if statutory rates of taxation are low, lack of collection is indicative of a deep rupture in the social contract between rulers and ruled. And lack of revenue obviously makes effective governance extremely difficult.
In some cases, modern states have never developed much tax collecting capacity. This mundane fact is one of the strongest pieces of evidence to argue that these states have not failed so much as they have never really been constituted at all.
*** Did you like what you read here? You might be interested in the new book by this blog’s author, Failed States: Realities, Risks, and Responses.