Should NGOs be developing tax systems for poor countries?

As my accounting professor used to say, “it depends.” Or perhaps a more accurate answer is that NGOs shouldn’t be doing it all on their own, but they may have a role to play in the process.

Oxfam is talking about income inequality*. A recent briefing paper (discovered through Duncan Green’s From Poverty to Power blog) makes the case that good public services can reduce inequality, as well as progressive tax systems. They cite analysis showing reduced economic inequality after taxes and public services, and note that services have been shown to reduce gender inequality as well. Arguing against austerity, Oxfam challenges governments to use reducing inequality as main policy goal.

In this paper, meant for policy advocacy, all the recommendations are for governments. But what does this suggest about the role of the international development community? Certainly, we’ve been in the business of providing public services in poor countries for a long time. The World Bank, INGOs, and donor agencies are all about getting more kids in school, more women and children surviving childbirth, more villages with access to potable water. Of course, times are changing (or at least goes the talk). Now international aid is increasingly going towards strengthening local systems for providing public services, instead of NGOs just building the schools and wells themselves. (Ok, it’s a slow transition…) Either way, NGOs are doing their part to reduce inequality and promote inclusive access to services, right?

Well, this paper doesn’t suggest there’s more than that, but the way they frame their analysis. It’s not just public services, and nor do taxes stand alone. Taxes, of course, help pay for public services, so a progressive tax system can have a multiplied impact on inequality.

This is an obvious point, but it’s one that is often left out when NGOs start asking how to improve public services in Country X or Y. They will be all over the free education policy and the water system administrator training – and increasingly, the social service workforce system, including stuff like helping build career paths and salary scales. But the sustainable financing of the whole thing – devising and implementing a system of progressive taxation – is pretty far out of non-profits’ areas of expertise, save for a few.

And, so it should be. That’s not where those donations or budget lines need to be going, hiring and training legions of tax experts to invade developing countries. Let the tax experts stay with the IMF and OECD, and a few specialized nonprofits.

But many NGOs are good at one thing that would be very useful in the process of developing / improving a tax system: facilitating citizen participation. Citizens should have a voice in these discussions, and since many NGOs have experience at facilitating citizen participation when it comes to public services, policy advocacy, or indigenous rights, they could bring this expertise to bear on the tax system as well. This could mean: hiring local staff with some knowledge of tax policy and using these staff to develop a clear, feasible advocacy ask that citizen groups could push for; convening national or provincial-level forums where marginalized groups could represent their interests to policymakers; or working closely with government and international agencies to facilitate participatory consultations. Also, NGOs could advocate themselves to governments that reducing inequality be a significant goal of tax policy.

If more people have more ownership of tax policy, there is likely to be a greater sense of ownership over how those taxes are spent – aka public services. NGOs have traditionally been focused on the public services side, but it seems they may be able to effectively influence the financing of those public services too, to ensure it is fair to the poor whose interests they have at the heart of their missions. Maybe some NGOs are doing this already, and I would love to see how this could work in practice!

Just food for thought.

*An aside – good for them! Here in DC, most development orgs act more on their interest to not be seen stirring politically controversial pots…


About developingnathan
I am a reflective person. I am an introvert, a friend, a brother and a son. I appreciate a well-crafted glass of beer, piece of music and turn of phrase. I am a professional of international development, a good pianist and a Green Bay Packers fan.

One Response to Should NGOs be developing tax systems for poor countries?

  1. Pingback: Guide to systems part 2 | developingnathan

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