Informal taxation in sierra leone
This research evolved out of an understanding that in low-income and post-conflict areas, and particularly rural areas, citizens pay a wide range of “taxes” that often differ substantially than what may be statutorily mandated. These non-statutory payments, whether paid to state or non-state actors, are referred to here as informal taxes. Informal state taxes can take a range of forms, including bribes, extortions and goodwill payments. Informal non-state taxes are generally conceived as being either coercive or voluntary in nature, or existing somewhere along coercive-quasi-voluntary spectrum. On the quasi-voluntary end of this spectrum, informal taxes can take the form of community levies, with payments made to community groups, self-help groups, traditional or chiefly institutions or other autonomous governing structures with the aim of providing public services. On the coercive end of the spectrum, informal taxes may take more obviously exploitative forms, including payments made to insurgent groups, warlords or vigilante groups in exchange for security or “protection.” While we differentiate between these different types of payments, we have intentionally left the definition of informal tax broad enough in order to fully capture the range of taxes and payments made by citizens, which will help us to better understand the basis of post-conflict taxation, service delivery, and governance in these areas. These informal taxes, while often making up a substantial proportion of the taxes paid by individuals and households, are frequently overlooked in policy and academic analyses of taxation and public service delivery. We see this as problematic. Focusing only on “formal” taxation can lead to misunderstanding of effective local tax burdens, and their impact on livelihoods and the fairness of distribution, as well as of public goods provision and local governance more broadly. Accordingly, at its most basic level, our research aims simply to capture the prevalence of both formal and informal taxes in these post-conflict areas, and how they’re perceived by citizen-taxpayers. In so doing, we aim to capture the real, rather than idealized, systems of tax and governance that define post-conflict service delivery, and that are deeply linked to distributive justice and equality in post-conflict areas. The three primary objective
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Informal taxation in sierra leone
- 1. Informal taxation and service delivery in post-conflict Sierra Leone Samuel Jibao Director, Centre for Economic Research and Capacity Building Wilson Prichard Research Director, International Centre for Tax and Development and Assistant Professor, University of Toronto Vanessa van den Boogaard Research Officer, International Centre for Tax and Development and PhD Candidate, University of Toronto 2 September 2014, Colombo CEPA and SLRC 13th Annual Symposium on Post-war Development in Asia and Africa
- 2. Outline Methods Findings Implications
- 3. Research methods Methods Findings Implications
- 4. Research methods • 1129 taxpayer survey • +/-10% confidence interval • 95% confidence level • In-depth interviews • Focus group discussions
- 6. Background
- 7. Key Findings Methods Findings Implications
- 8. 1. Prevalence of informal taxation Proportion of households paying each tax in the previous 0% 20% 40% 60% 80% 100% User fees schools/clinics Local tax Market dues Business licenses Sales tax Informal taxes to army/police Labour services to chief Informal payments to chief Payments to religious groups Payments to trade associations Payments to secret societies Informal user fees to schools Taxes to CBOs Private development taxes year
- 9. 1. Prevalence of informal taxation 0% 20% 40% 60% 80% 100% Mean annual tax expenditure (USD) Mean number of taxes paid annually Formal state taxes Informal state taxes Chiefdom taxes Non-state taxes
- 10. 2a. Taxpayer perceptions: Fairness 100% 80% 60% 40% 20% 0% Mean proportion of respondents believing that… Formal state taxes Informal state taxes Chiefdom taxes Non-state taxes …the tax rate is reasonable/would be willing to pay a higher rate …the tax is fairly applied and collected …everyone pays their fair share of the tax that should do so
- 11. 2b. Taxpayer perceptions: Transparency 100% 80% 60% 40% 20% 0% Mean proportion of respondents reporting that… Formal state taxes Informal state taxes Chiefdom taxes Non-state taxes …they understand how the tax rate is set …it is easy to find out how revenues from this tax are used
- 12. 2c. Taxpayer perceptions: Fiscal exchange 100% 80% 60% 40% 20% 0% What is the primary good/service you get in return for Formal state taxes Informal state taxes making this payment? Chiefdom taxes Non-state taxes Don't know Security Financing of legitimate salaries and general activites of government/ actor/organization, but not specific services A specific service/good in the community Avoidance of harassment/stress/ hassle No service
- 13. 2d. Taxpayer perceptions: Accountability 100% 80% 60% 40% 20% 0% Do you think that the actor collecting this tax uses it to benefit the community most, some or none of the time? Formal state taxes Informal state taxes Chiefdom taxes Non-state taxes Don't know Most of the time Some of the time None of the time
- 14. Implications Methods Findings Implications
- 15. Implications and areas for further research • Thinking about informality • Tax and service delivery methods • Role of chiefs in tax and service delivery • Taxpayer confidence in formal tax system
- 16. Thank you! Discussion and questions Methods Findings Implications