The Future of Tax Administration?

Low-income states struggle to collect taxes. And with low fiscal capacity comes the inability to spend any money on vital public goods and services. Take Nigeria, Africa’s biggest economy. The country struggles to collect income tax, and heavily relies on revenues from oil (58.1% of revenues in 2018) and indirect taxes. Nigeria also spends precious little on its people. In 2018, general public expenditures added up to a paltry 10.9% of GDP (believe it or not, Nigeria is a libertarian paradise!). In comparison, public expenditures in Kenya amount to about a quarter of GDP. In 2018, income tax accounted for 47.9% of Kenya’s total tax revenue haul.

The demand for public expenditures will only continue to rise as African countries get richer. Overall, government expenditures as a share of GDP tend to rise with income. For instance, in 2017 the expenditures among OECD states ranged from a low of 26% of GDP in Ireland to 56.4% in France. It goes without saying that any future increases in government spending in countries like Nigeria will require ever more efficient means of tax collection. But such moves will likely be hampered by the illegibility of taxpayers.

Enter Russia. According to the FT, Moscow is pioneering real time tax administration:

taxrusStanding in front of a huge video wall, Mikhail Mishustin, head of the tax service, prepares to show off its capabilities. “Where did you stay last night?” he asks. When I reply, his staff zoom in on a map to Hotel Budapest on the screen. “Did you have a coffee?” His staff then click on the food and drink receipts in the hotel from the previous evening. “Look, it sold three cappuccinos, one espresso and a latte. One of those was yours,” Mr Mishustin declares triumphantly. He was right.

This is the future of tax administration — digital, real-time and with no tax returns. The authorities receive the receipts of every transaction in Russia, from St Petersburg to Vladivostok, within 90 seconds. The information has exposed errors, evasion and fraud in the collection of its consumption tax, VAT, which has allowed the government to raise revenues more quickly than general Russian economic performance.

The new system is directed more at shopkeepers than oligarchs. Russia still scores poorly on international league tables of corruption, being ranked only 138 out of 180 on the Transparency International corruption perceptions index, with concerns including cronyism, a lack of independent media and a biased judiciary. But reducing tax evasion among ordinary Russians and highlighting corrupt tax officials have helped raise revenues and clean up the system.

Reasonable people should worry about the potential misuse of these government powers. But remedies to this problem must be tempered with an understanding of the deep structural barriers to poverty alleviation caused by low fiscal capacity (not to mention a weakened fiscal pact between citizens and their governments).

If no taxation without representation is true, then no representation without taxation must also be true.

Finally, as correctly noted in the FT piece, technology cannot fix the problem of tax avoidance by the politically-connected. If Russia’s system catches on in low-income countries, it will most likely be effective in widening the tax base among diffused average taxpayers. The hope then would be that higher levels of tax compliance among average taxpayers will create political pressure for the same from the big fish.

Mosquitoes May Have Killed up to 54 Billion Humans Over 200 Millennia

How about this for perspective:

Mosquitoes are our apex predator, the deadliest hunter of human beings on the planet. A swarming army of 100 trillion or more mosquitoes patrol nearly every inch of the globe, killing about 700,000 people annually. Researchers suggest that mosquitoes may have killed nearly half of the 108 billion humans who have ever lived across our 200,000-year or more existence.

mosquitoThe author of the piece is Timothy C. Winegard, author of the forthcoming book The Mosquito: A Human History of Our Deadliest Predator.

Each year, about 400,000 people die of malaria alone, with another 300,000 dying from other mosquito-borne diseases.

It is worth noting that the failure to eliminate malaria globally is primarily a function of state weakness.

A third of Quakers worldwide are Kenyan

This is in article from 2016:

There are about 300,000 Quakers in the world, and over one-third of them live in Kenya. While the amount of constituents there is growing by the day, numbers in the West (the United Kingdom and United States, in particular) have nosedived in recent years, some 25 percent from 1972 to 2002, according to the Friends World Committee for Consultation.

Kenyan Quakers are just getting started. They’ve seen their yearly meetings grow with the help of evangelism, new churches and services that appeal to a younger, more mainstream Christian crowd. Churches have brought in bands, adopted praise and worship, experimented with vestment and even started evangelizing on the radio and in the street. “We question how things were done traditionally and try to look at things from an African perspective,” says Pastor Khaemba.

The religion has a long history in Kenya. Three American Quakers first arrived on the coast of the country in 1903 before taking the train to Kisumu, a town along the shores of Lake Victoria in the West. Thanks to a good entente with the British government who gave them land and a stable political environment, the Quaker community thrived and began to spread, setting up a number of centers in Nairobi. According to a number of pastors, the reasons for its success lay in an approach that focused on economic development and education, rather than evangelism. Today, there are more Quakers in Kenya than in any other country in the world.

And even within Kenya, Quakers tend to be concentrated in the west of the country on account of the fact that the first missions were established there.

According to this paper, the mission in Kaimosi (Vihiga County) was actually established in 1902:

friendsThe Friends African Mission (FAM) of Quakers, which established a station at Kaimosi in 1902, was quite different from most of the other early missions in Kenya; it was founded and maintained by Americans. The American Friends are evangelical Quakers (they do not follow the silent worship of British or East Coast American Friends) from the mid-west ‘bible belt’, from a background of rural small farmers with strong precepts of self-sufficiency and practicality. From its establishment on 1000 acres of freehold forest land in the reserve, it had an ‘Industrial Mission’ that sought to inculcate the values and practices of the prairie homesteader among its trainees. These values were essentially anti-urban and anti-modernization, but with a strong element of racial superiority, as suggested by Willis Hotchkiss, one of the founders of the Kaimosi mission:

Generally speaking it does not take long sojourn in a town to spoil any Native …. They have added to their original sin a lot of organised sins, not crude savage sins, but cultivated civilised sins …. The general demoralisation is accelerated by the beer hall and the dance parlour …. In the heated atmosphere of these foul dens, so far removed from the open air environments of his savage games, his life is cankered to the core …. Added to all these devastating effects which have suddenly crashed into his life there is the moving picture show. Hollywood has poured a lecherous stream of filth into the world, and these child races have been quick to appreciate it. [Hotchkiss was writing in 1937].

The paper documents the manner in which Quaker missionaries (despite their abhorrent views of their congregants) were pioneers of technical education in Kenya. The anti-urban posture, coupled with their lukewarm approach to regular education, might explain the American Quakers’ limited success at conversion in the wider Lake Basin region (at least in comparison with the Catholics in Yala or the Church Mission Society in Maseno).

A good read on potential US responses to ever-deepening Africa-China relations

This is from Aubrey Hruby, one of the sharpest minds on Africa-US business relations:

For American companies to compete properly in African markets, the administration needs to take a broader look at capital flows into African markets and the diversifying forms of Chinese commercial engagement. This report argues for a broadening of the competitive lens beyond infrastructure and seeks to provide a more comprehensive framework for examining China’s commercial interests in Africa. It presents two models through which policy makers can understand recent developments in the region. The first describes the G2G nature of Chinese infrastructure financing, summarizing the mechanisms by which Chinese state-owned enterprises typically secure contracts, and contrasts it with the government-to-business (G2B) structure of US development finance. Secondly, the brief analyzes US investment in African markets across capital flows, and notes the rising competition from Chinese firms in each category.

Read the whole thing here.

Here is Hruby talking with Eric & Cobus on The China in Africa Podcast.

Nigeria’s President Buhari sets himself up for failure in second term

This summary of Nigerian president Muhammadu Buhari ‘s cabinet picks says it all:

With an extra five members, stuffed with party loyalists and an average age of 60, President Muhammadu Buhari‘s new ministerial team cannot be accused of exuding dynamism or imagination. Announced two days after about a dozen people were killed in the capital when Shiite protestors clashed with armed police, the composition of the new government reinforced the sense of a lack of executive urgency as the country’s national security crisis was spiraling out of control.

The list reinforces the view that President Buhari’s second term will blike his first: tortuously slow decision-making, a reluctance to sanction bad performance in the security services or in the ministries, personal loyalty trumping competence and a tolerance for politicians facing serial corruption charges.

…. The youngest nominee at 46 – five years older than France’s current president – is Ali Isa Ibrahim Pantami (Gombe), a world class technology expert and trained Imam who has led the National Information Technology Development Agency since 2016.

The median age in Nigeria is 17.9 years (which is not to say that cabinet ministers should be in their twenties).

The problem with having such an old cabinet is that ministers are likely to employ equally old lieutenants, with the outcome being that everyone in government ends up being either too tired to put in the much needed work or too busy with their personal “businesses”.

The trouble with Nigeria is simply and squarely one of leadership.

Boris Johnson in his own words

This rather openly racist guy is now Prime Minister of the United Kingdom:

What a relief it must be for Blair to get out of England. It is said that the Queen has come to love the Commonwealth, partly because it supplies her with regular cheering crowds of flag-waving piccaninnies; and one can imagine that Blair, twice victor abroad but enmired at home, is similarly seduced by foreign politeness.

They say he is shortly off to the Congo.

No doubt the AK47s will fall silent, and the pangas will stop their hacking of human flesh, and the tribal warriors will all break out in watermelon smiles to see the big white chief touch down in his big white British taxpayer-funded bird. Like Zeus, back there in the Iliad, he has turned his shining eyes away, far over the lands of the Hippemolgoi, the drinkers of mares’ milk. He has forgotten domestic affairs, and here, as it happens, in this modest little country that elected him, hell has broken loose.

It’s hard to not conclude that the average quality of human capital at Number 10 declined a notch today.

We need to pay more attention to subnational variation

This is from Marshall Burke and Apoorva Lal:

Using these data across all African countries, we calculate that 43% of the overall variation in asset wealth is  countries, and nearly a quarter is  states within countries. This number is even higher if we focus on just sub-Saharan Africa — 65%. Similar numbers have been found for other outcomes, including child health. These within-country differences are starkly apparent in the corresponding map, which shows how wealth estimates change when country-level averages are disaggregated down to the state and then district level.subnational

 

Do Gulf States have too much influence in Eastern Africa’s capitals?

That is the question that   and  ask over at Foreign Affairs. Here’s an excerpt:

Faced with expanding Iranian influence, the destabilizing precedent of the Arab Spring, and a shrinking American security umbrella, Crown Princes Mohammed Bin Zayed and Mohammed Bin Salman have sought to radically transform their countries’ relationships with their neighbors across the Red Sea. In 2015, the UAE established a military base in Eritrea, from which the Saudi-Emirati alliance has waged war in Yemen—often relying on Sudanese troops and paramilitaries for ground operations. The UAE is now building a second military base in Somaliland’s port of Berbera while the Saudis are planning their own military facility in neighboring Djibouti. Both countries have also expanded their commercial ties to the Horn, and provided large cash infusions to Sudan and Ethiopia. A major goal of these efforts is to align the Horn states with the Saudi-Emirati axis against Iran, Qatar, and Turkey. To that end, Riyadh and Abu Dhabi find it useful to protect the region’s autocratic regimes, because the Gulf states’ interests don’t always align with popular opinion in the Horn. In Sudan, for example, the government has supported the Saudi-Emirati intervention in Yemen despite vocal criticism from across the Sudanese political spectrum.

The Horn’s two most important African-led bodies have quietly but persistently set themselves against the region’s emerging Gulf-led order. The African Union and an East African regional bloc known as the Intergovernmental Authority on Development, or IGAD, seek to craft a regional order that rests on the sovereignty and collective security of African states. The commitment to democracy within these institutions remains weak, as evidenced by the many authoritarian leaders in their ranks, but the organizations do embrace norms of constitutional governance and civilian supremacy in politics far more than the leaders of the Gulf states.

Read the whole thing.