 I'm Kunal Sen, the director of NU WIDER, and welcome to the WIDER webinar, Paving the Wave of Physical Capacity, which is part of the Think WIDER webinar series, New Perspectives on Domestic Revenue Mobilization. This webinar series is targeted to researchers, policymakers and practitioners on sharing our insights on domestic resource mobilization, where we have a very large program in NU WIDER. And in fact, this particular webinar is part of one particular project, physical states, its origins and implications, and we're going to hear a little bit about the findings from that project in a few minutes from one of the panelists. And really that we try to answer in this webinar is the question of how does it, how do we actually see over time in developing countries, the transformation of public finance institutions and the emergence of fiscal states, because we know that's really important for becoming an effective state and state building. And surprisingly, we know very little about developing countries and how that might happen in the countries of Africa and Asia and Latin America. But we know quite a bit about the emergence of fiscal states in Western Europe and the US and so on and the richer countries. We're trying to try to understand, well, how does it happen, how does history matter, how do institutions matter, how does politics matter in the emergence of fiscal states, and what are the policy implications from what we have so far known, limited knowledge we have on the emergence of fiscal states in developing countries. So what we're going to do and try and do in this one webinar, we're going to share some insights on what we know about the origins of fiscal states in developing countries, and their policy implications. Before that, we have an excellent set of panelists, and we'll now introduce them one by one. First, we have Antonio Sauber, who's a reader in developing economics at the University of Manchester's Global Development Institute, and a uni wider non resident senior research fellow. Antonio co leads the project on fiscal states, along with me as part of the uni widers program of research and domestic resource mobilization. The project has looked at determinants of governance institutional performance and how the impeach on developing outcomes and policies. We also very fortunate to have Shanta Davarajan, the professor of practice of international development at Georgetown universities, Edmond A. Walsh School of Foreign Service. Shanta Davarajan also has previously worked at the World Bank, where he was a senior director for the economics, the chief economies in the Middle East and North Africa, Africa and South and South Asia regions, and also the human development network. Welcome, Shanta to this to this webinar. We also have sunshine blackboard. In the lecture the African past Institute probably are the leading institutes attacks in development in a subset Africa. Her work focuses on development and poverty and social economics, and also Shanta science he takes a multidisciplinary understanding of state society relations. We also have, and may take care with the professor of the Department of political science at our university, and my take guide does research in the areas of governance and political economy. She's recently authored a wider working paper, fiscal states in South Africa, customization and empirical trends and she will speak a bit about this paper in her own opening remarks. What I want to do is I want to ask each of the panelists, a couple of questions, one is a question at the beginning to start with, and then perhaps when you have time also following a follow question the q amp a. So I'm going to ask until actually talk a little bit about the fiscal says project. What is the background motivation for this project. What have you learned about this very important question how to build fiscal states in developing countries, and what can we take from this literature, and the knowledge we have, it does a policy implications for the future. So, perhaps first Antonio over to you, and then I will ask Shanta science he and met a questions to follow up later on until if you don't mind so can you speak for 10 minutes. Thank you. Thank you for your kind introduction. Now, let me share the screen. And I have a few slides for us today. I want to take 10 minutes to discuss a little bit more detail that what kind of research we have done on on on the fiscal states, and why matters, have you said. This is, this is on our on the UN wider website that that's the page of the project and what we have done together with a group of multi disciplinary group of economies, political scientists, academics of development studies. And that the role of states, any particular taxation, often as a, our papers papers we have written have been on taxation. So the starting point for this is that the modern states are complex machines, they perform a range of functions which is far greater than what we used to have only 100 years ago, but the question is, how do we find and start. What we were trying to understand this was also reminding us how the other states finance their activities. This is an academic questions sure but not all me it's only it's also policy relevant. SDG 17 one is on a mobilizing domestic revenues and the SDG is a part you know setting this as a policy goal that we also leave an age where other forms of finance such as a that flat have been flat for the last few years so it's a timely question understanding finance their activities. Consider it in our case to see the relevance of this consider taxation. How do, how do different countries around the world do a few facts. Let's look at the these two graphs here they tell us that, in general, our income economies are also those that are more fiscally developed and often often they collect a share of total revenues over GDP that is double compared to low income economies. So that's the kind of gap that you see and it tells you why it's important to learn how to tax. But you will notice looking at the particular the left hand side graph. Is that the gap in tax revenues over GDP is over time is essentially constant. It doesn't tend to reduce. And this tells us that perhaps there are structural conditions that explain why you see this gap between countries that have learned how to tax very well and others that are on the way to do so. When you look on the right hand side at the regional disaggregation, you see that. Yes, largely, the facts there are consistent with what we see on the left hand side graph that the richer regions of the world that tend to collect more revenues, but there is also something in it's interesting happening in Sub-Saharan Africa. Sub-Saharan Africa doesn't do too bad actually. It collects more or less the same amount of revenues as richer South Asia and is not too far away from much richer Latin America. So this is the bigger picture. Why is this important for at least three reasons. So learning how to tax so becoming fiscally developed gives you access to more sophisticated instruments for taxation and spending. You have a better chance of implementing programs that can reduce property. Progressive tax system, sophisticated forms of taxation like income tax, they also give you a much greater opportunity to reduce poverty. Apart from that, forms that states that have learned how to tax are also states that tend to spend a lot more on health and education and this is one of the graphs that we have in our paper that Kunal and I have written on this. And you see that richer regions of the world are also those that spend a lot more on education in this case. The other the third reason why this is important is that learning how to tax is also transformative in another sense. We say brings a governance dividend. Once you start paying taxes, you tend to make your government more accountable. But when you actually see this in terms of in terms of what happened to accountability in low income countries we see that the lack not learning how to taxes left these gap in terms of voice and accountability with the richer countries essentially constant over time. What we do about this. We've done eight papers we have written eight papers and we have produced a special issue in the journal of institutional economics. This is open access we believe in making research accessible to everyone and it's a we have used a variety of methodologies from standard quantitative economic work to case studies and more. We find and it's difficult to do justice to to the whole special issue. What we find is that the three factors essentially contribute to developing taxation and developing fiscal institutions in the long term, political determinants understanding about tax taxation, how you build a contract between a fiscal contract between states and citizens. And in this, having a system of constraints on the executive power can be important. We have also learned that the institutions matter in this the ability to develop at the same time appropriate right system, for example, that in itself and contributed to raise tax base is important. We also learned that history matters historical conditions sometimes going to back to pre colonial times shape taxation and taxation norms to these days. I'll give you the academic part but are there any policy lessons were coming from this. I'll give you for in the three minutes I have, I have left so I make sure I finish on time and then I'll be happy to elaborate more if there are any questions from the audience. Essentially, this research reminds us. And the first message is that Rome wasn't built in a day, if we may say so. So we have to be aware that donors and policymakers have to be aware that the learning out the tax and building fiscal states transforming public finance institutions in general, it's a long term process. So what this means is that in a way you've got to be patient, stay the course. And at the same time, acknowledge that the financing state activities has to go alongside with the other forms of finance loans. We need as well resource natural resort revenues coming from natural resources, and at the same time, while you finance state activities with more traditional forms of finance you develop the taxation. The second message we have is that history matters, as I was saying before, what this matters matters, the policy message here is that it gives a recognizing the role of history makes us understand why. Public finance reforms work or do not work in some context so we have to be aware of that while designing reforms. Three politics matters. In this case, our research tells us the policy lesson on this is that understanding the politics of taxation is as important as the focus on technological solutions. Often in public finance research we see for good reasons, focus on more short term solutions, day to day taxation and new IT solutions, new ways to communicate with taxpayers. That's absolutely correct and it's all fine. But understanding also why citizens pay taxes and what kind of institutions can facilitate that like institutions that keep the ruler accountable. It's not just to build a fiscal contract between states and citizens, and he posters the conditions for a taxation to emerge. And the fourth and final message on this is that we also find that the complementarities matter. If you don't look at taxation in isolation, you may need at the same time other types of institutions to develop them at the same time like a property rights system that can increase the tax base or develop the statistical capacity of states the ability to gather information at the same time. So complementarities matter. And I think I've exhausted my 10 minutes as promised I'll stop here and I look forward to receiving questions. Thank you very much Antony actually absolutely on time. I should have mentioned in my opening remarks that we're going to try and keep about 30 minutes or so for Q&A so I'm really looking, we're looking forward to getting questions from the audience we have a very large audience here on an audience. And so certainly we'll try to make sure that we have some questions we get some questions from the audience and responses. So now I'm going to move on to Shantha Devarajan. Shantha this what Antony presented leads very nicely to the question I was going to ask you which is that we saw that among the regions in the developing world, substance Africa doesn't do too badly but you also notice in the graph that Antony presented that tax of GDP has been realized has not really improved for the last 10-15 years. So in other words though, there's been a bit of a catch up in terms of Africa on tax of GDP. We really haven't seen much improvement in the last 10-15 years in a period when we had reasonably good economic growth, at least till the pandemic. So that kind of leads me to this question which is very relevant and I know Shantha you've been done so much work on this that. So I think that the interventions can make a difference if we wanted to enhance physical capacity subs in Africa, not just a short term solutions perhaps as Antony has talked about which is to try and reform tax systems and drink up tax reforms, but the more longer term solutions, the longer term kind of things that we can try and do in the continent. So I'm very keen to hear your views on this. And if you don't mind within seven minutes. Thank you. Thank you very much. It's a pleasure to be here and also a pleasure to follow from Antony was very nice introduction because many of the themes that he mentioned are going to be echoed in what I have to say. I think you're right to focus on Sub-Saharan Africa, because there are two things that distinguish Sub-Saharan Africa from many other regions in the world. One is that it has a large number of resource rich countries, you know countries like Nigeria Angola Gabon Equatorial Guinea. And the second is that there are many countries in Africa that receive large amounts of foreign aid. And I think both of these actually have an effect on the continent's ability to raise taxes. Let's take natural resources for first. See the difference between natural resource revenues and taxes is that the resource revenues go directly from say the oil company to the government without passing through the hands of the citizens. So that gives the government a lot more discretion in how to spend it. And we've seen the effects of that, which is that these resource rich countries do a horrible job of spending oil revenues to the benefit of the people. I mean, we see countries like Gabon Equatorial Guinea, which are high income or upper middle income countries that have rates of poverty that are 30 to 40%. This is unjustifiable, except that basically it's prima facie evidence that the government is not being accountable to the people. Now the problem is made worse as a result of this because if the government is not doing a good job in spending its oil revenues, then the people are reluctant to pay taxes because it won't do any good. This is what we call tax morale. So we're in this situation, it's a low level equilibrium where governments don't want to raise taxes because they don't want to be held accountable. And citizens don't want to pay taxes because they don't think government will actually do anything with that. And that's why it's so difficult to get the tax-to-revenue GDP ratio up in countries in Africa because you can't do that with incremental tax reform, these sort of short-term measures that Antonio was talking about. You need really a radical change in the system and let me say that the thing I've been proposing for a long time now is that instead of the government actually spending the oil revenues, they should actually transfer it as cash transfers to the citizens, equal amounts, and then tax them. So even though this is simply giving with one hand and taking with the other, it fundamentally shifts the accountability mechanism. And the usual question that is asked is why would a government do that? But I would add that in my most recent paper, which is the one I presented at the GDN network, what I show is that there might be political reasons why governments would want to do that, especially if they have high expenditures coming up for which they actually need tax revenues. So they're going to need to get citizens to pay taxes. Then let me turn to the second part, which is foreign aid, and this is a bit more controversial. But there is a classic paper by P.T. Bauer back in the 1950s, I think, that says, when will developing countries learn how to tax? And that was a paper about foreign aid. Foreign aid actually doesn't raise incentives for governments to levy taxes. Now, I think we are seeing this play out in Africa, in sub-Saharan Africa, and the example I always like to use is Kenya, because Kenya, as you may know, has the highest tax to GDP ratio in Africa. How did that happen? Well, back in 1992, the donors collectively decided they were going to cut off aid to Kenya because of the high levels of corruption. And when that happened, they actually, then that happened, Kenya lost all this aid money, they raised taxes, and they got their tax to GDP ratio up to about 22% of GDP. And that, to me, is prima facie evidence how aid actually takes away from incentives to raise taxes. Now, what can we do about that? Well, coming from, building on the suggestion on resource revenues, why not consider distributing aid resources as cash transfers to citizens and then have the governments tax them if they need money for public goods. This is, again, a way of making enabling citizens to hold their governments accountable. And I think that's the key for all of these, but it's not going to happen with incremental changes because, as I said in the beginning, these are low level equilibrium, equilibria, that we cannot break by tinkering at the margin. Thanks. And I think that is really important the points that you made both of what cash transfers is a way to increase tax morale just kind of very unusual we're looking at it but I can see the argument there. Because you're giving one hand we're trying to also take in revenue and the other, the other point about foreign aid and the distortion effect it might have. And I do think that it was also an argument and on on conflict affected states and how that might also work out in those kind of regimes too. And again, we can come back to that I know you need to leave for a lecture very soon but we'll go back to that and over our discussion later on. Let me now move to sunset blackboard and sunset this is again very nice they springboard from what Shanta said to your what I wanted to ask you because Shanta talked about the region as a whole something Africa, but now you want to zoom into one particular country, the country South Africa. And the reason we go zoom in on South Africa is because South Africa is also done pretty well on taxable GDP ratios it's again one of the higher ratios in that in the African continent. And yet we simply seeing a situation where the fiscal or the social contract is unraveling in South Africa. So why is that and what can that tell us a little bit about other countries in the region, who have happened yet had the kind of tax capacity that South Africa has had. So something over to you. Thank you very much. You know, I'm also going to just try and share a few slides with you. Thank you. Thank you very much for the question. Another is is of course an interesting and perhaps an unusual case in the Sub-Saharan context, in the sense that of course we are fiscally well capacitated constitutional democracy. Yet our fiscal capacity does not translate into development outcomes. So I would like to respond to to your question within a framework that was proposed by by Professor Wilson Pritchard and from Sussex University suggesting that the state's reliance on taxation may offer tax payers a handle to demand accountability. Now as a brief background, I'm sure most people know this but South Africa of course democratized in 1994, introducing the age of Mediba but also a complete redesign of our fiscal contract. So inclusion of the of the US while excluded majority was was of course priority, and there was brought by in into a massive tax and transfer project to fund the social wage. And which of course we knew would also require a balancing act to also at the same time, maintain our tax base. So we of course know that some valuable democratic gains were made, but from 2009 onwards, basically with the introduction of the zoomer administration. Those gains were mostly reversed. And unfortunately that also introduced the era of of state capture. So many complex facets to the state capture scenario. And if one has to single out a central contributor it would have to be the role of our state owned enterprises. Before the state owned enterprises were instrumental in our progress through the construction of essential infrastructure, but they have now become the main vehicles for logical leakage of our public funds, and remain unable to plug these leakages through the conventional checking mechanisms for a variety of reasons that would take but too long to discuss here. I would like to quickly sharing slides and I've got some several questions being asked about whether you're sharing I don't think you need to slide but just in case. I am sharing. I was under the impression that they are actually being shared it and try again sorry criminal. Do I don't necessarily think that you need to slide because you're very clear and what you're saying. Right, let me try and share them again. Apologies about that. Yes, they can. Thank you so much for alluding me to that so. Okay, so I think well I've mentioned that our state owned enterprises are quite instrumental or have become the main vehicle for for the state captain the leakage of public funds that we've been unable to plug so far. And of course, he among these failures of our state owned enterprises of course would be our state monopoly electricity supplier. So live in South Africa has become extremely difficult with daily long hours of electricity outages which of course also shuts down the water supply which which is supplied through electric pumps and connectivity and so on. And businesses especially small businesses are fighting rapidly. It's just cost us about 2% of economic growth and we are now facing a recession having registered negative growth for the last quarter, and this of course comes on the back of the very tough COVID years that we've had. So they now talks of a failed state and even a mafia state. The question is given that taxpayers money is used to facilitate the state capital project to taxpayers perhaps have a role or a mechanism to demand accountability from a government that have successfully alluded accountability in its vertical and its horizontal forms. So I'm going to just give you a few of the statistics that we would need to explore this question. Firstly, as a bit of background, our population is just over 16 million and 34 million so it's just over half 55 and a half percent according to World Bank estimations of the 16 million or poor. Approximately 27 million of our population have to survive off state grants fewer than 16 million are employed so unemployment numbers at 33% or 43 if we include the discouraged work seekers. And as I've mentioned, we now in negative growth territory, possibly heading for a recession and then some tax info. So our tax to GDP ratio would suggest high fiscal capacity so we are between 25 and 29% over the past few years for our tax to GDP ratio. Now tax constitutes 98% of total government revenue so we do meet the wealth and preachers requirement that the state is heavily reliant on tax revenue. And that our personal income tax, 36 to 39% of all tax revenue but that's raised off 5.5 million individuals that are assessed after 5.5 million fewer than 1 million so I'm talking about 980,000 4908,000 450 individuals base 73% of the PIT so that translates to 26% of all tax revenue. So we pay this just to get an idea of scale with the contribution of our broad based VAC system, which is, which comes in at 25% of tax revenue. And I guess one should also then compare the 5.5 million assessed and the 980,000 individuals that contribute to to PIT with the fact that 27 million of our population are actually grant recipients. The company income tax 20.7% of tax revenue comes from our CIT it used to be higher but it has declined on the back of the decline of profitability of our business sector. So of our companies that pay or that contribute to CIT 770 companies by 62% of CIT and that translates into 13% of all tax revenue so if one adds the 770 companies with the 980,000 individuals one arrives at the number of nearly 40% 39% to be precise of all of our tax revenue. There are fewer than one million individuals and fewer than 1000 companies so we are dealing with a very narrow concentrated tax base just after our recent budget that was read in February one of the analysts actually remarked that we are fast running out of taxpayers. The numbers of course are quite an indictment on the 1994 undertaking to pursue inclusivity for the majority of our population. The majority actually remain poor unemployed and dependent on very small welfare grants. Now in this context one should also remember that the information regarding state capture, including the fact that the perpetrators remain unpunished. In the public domain, there was an official commission and the report has been published. So knowledge of the billions that it continues to cost us along with the lived experience of the long daily power outages means that of course tax morale is really low. As a result, coercive tax enforcement rules like for instance a section 62 of our tax administration act, which allows warrantless search and seizure. Now this raises questions of course about constitutionality but those are the kinds of measures really draconian measures that we have to rely on to collect our taxes. Currently, there's not much scope to demand accountability to the quid pro quo nature of the fiscal contract. And the notion of tax bargaining is also not readily entertained. It is viewed as a tax revolt by the wealthy, who are resisting the tax and transfer obligations, rather than a challenge to the ongoing accountability of government. And this of course is understandable these fears, given our history and of course the persisting extreme inequality. So there are fears that the social transformation agenda may be hijacked by a few wealthy taxpayers. It's true that there's a negative incentive for a state wishing to remain unaccountable to engage in tax bargaining. So it would serve the purpose of an unaccountable state where tax bargaining may in fact be most useful to taxpayers to rather resort to draconian enforcement. Now there is quite an asymmetry between the bargaining going on on the expenditure side and the pressures and leakages on the expenditure side. But I think in the interest of time, you know, I will cut my story short here, and perhaps address those if there are any questions that that arise from that. Actually, again, I mean, what's really interesting here is how structural conditions matter and understanding what's happening in South Africa. Obviously, when you have high unemployment, low economic growth, at least the situation where you have a very narrow tax base as you mentioned about both personal and corporate contracts. And of course how politics comes into the picture on around this state capture period. So this are exactly telling us even though South Africa at the initial period after 1994 brought in very important tax and transfer regimes to finance the social wage as you mentioned, there is also how important is also think about such conditions conditions if those are not addressed, then you have a situation as you've seen right now South Africa very very narrow tax base and of course problems of state enterprises that might also play out in the future. So it's a very important thing about and come back to this issues in the Q&A. Thank you, Sansya. Let's now move on to Mehta and Mehta thank you so much for joining us. And we also, I mean, this goes back now back again to the region. So we went from Shanta's discussing South Africa to South Africa, back to the region once again of South Africa. And the questions I want to ask you are first, what are the preconditions of a fiscal state? We talked about the fiscal state being very important and Antonio made the point that this is very important in many different ways, not only for providing public goods but also for governance, the government is different. So first, what are the preconditions of a fiscal state. And of course, link to that then of course the question about the region are all substance substance are on African states or countries, fiscal states, if not, why not. But over to you. Thank you so much. Thank you so much. And also for the invitation to take part in the special issue and in this, this webinar. Can everyone, can you hear me okay. That's good. At some point I will have two slides to share and but I'll stick to my seven minutes I think but, of course, obviously me and my co-authors who are Matilda Jefferson and Anna Carolina back. We found these questions extremely relevant. For at least two reasons. And I'm going to turn them around so I'm going to talk about the last question first so to speak if that's okay. But the two reasons I mean firstly, as was said, there's an increased focus on on increasing, you know, domestic revenue mobilization in the international development community. And that focus seems to come with an assumption that all African states are fiscal states or at least that they have the possibility or the potential to become one if their fiscal capacity is enhanced. So, programs to support taxation are typically formulated based on, you could say an implicit assumption that the prerequisite or preconditions as you called it in your question for building or in advancing fiscal states that they exist in low income countries and in sub-Saharan Africa. Yet, you can you can argue that if such assumptions are mistakenly made, effective tax policy implementation and fruitful years are very unlikely, regardless of any political will to tax more or will to learn how to tax if you will. So, so and I guess that relates also to your introductory observation about the revenue take not having changed much during the last 15 years. So recognizing the absence or presence of fiscal states is definitely a first step towards explaining why significant efforts reform efforts to tech to improve the tax system. For example, implementation of VAT has not really substantially increased a tax revenue in many African countries lately and of course this has been observed by scholars such as fielstadt and mcmoor and possible and boa and so on. Okay, so the other reason why it's such a relevant question or two relevant questions is that the literature does not really offer sufficient help in recognizing fiscal states, we argue, simply because there's a lack of clear conceptualization so this is where we begin so essentially our pieces very much a conceptual one. The term fiscal state used to be a prerogative of industrialized nation states, but within the past two decades, this has changed, and mentions of the fiscal state in scholarly work have increased across disciplines. The term is now applied in works on state building globally, and here proper conceptualization is key. So we arguably need a fresh look at the concept of fiscal states to avoid conflating cause and concept and effect. Because if we have not clearly defined the fiscal state, how can we recognize it when we see it, or be certain that we are able to separate its potential preconditions from its defining attributes. And offer that matter to from its effects as well. So to explore how understandings of the fiscal state differ across fields and empirical context, we carried out this systematic literature review in our article in the special issue. And, and we examine the diverse understandings and applications of this concept with a view to kind of settling on a, on a, on a simple and concise definition. And let me, let me just try to share here. Can you see it. Yeah, we can hear us you can probably use slideshow made that will make it more visible. Yes. Let's see if I can find the slideshow. I think so. Yes. So, in reviewing the literature we found that most definitions of the fiscal state. We have not so much in common but they do all, most of them apply Schumpeter's simple understanding of the tax state as reliance, mainly on income from Texas, and then they add the element of borrowing. But beyond this common ground understandings of the concept, very in terms of intention as we indicate here in the figure. So extension refers to a concepts defining attributes, but also it's extension so the empirical cases to which a concept applies. So, our well after the South African states fiscal states for instance. So to accommodate the challenges that we identify in the literature review. We find that a parsimonious definition should have like should live up to three features first of all the concept should not include the size and composition of public expenditure, because it would kind of not separate it probably not enough from its effects. So public expenditure can itself be explained by the nature of the fiscal state. Second, it should be clearly distinguishable from other effects, such as welfare governance and inequality. And thirdly, it should be distinguishable from its preconditions, such as for instance, the level of commercialization of the economy. So, drawing on make more work and also Bonnie's work more historical work. We offer a definition which we believe lives up to these requirements, which are that we define the fiscal state as a state whose public revenue base is dominated by tax revenue and loans, and where the relationship between taxation and external and domestic borrowing is balanced, and thereby sustainable and characterized by interdependence. Okay, some contributions in the literature reviewed would say that all modern states are fiscal states, simply because they have the ability to raise revenue. So our definition implies that not all sub-Saharan African states are fiscal states. Many do not live up to the criteria of tax dominance. For instance, in rentier states, as there are, the Shanta de Raira's point was also that there, you know, in states depending on natural resource balance or foreign aid, the revenue base may not be dominated by tax, but by rents from extractive industries, or states may not live up to the criteria of a balance between taxation and loans in debt states, which is a different type of state than a fiscal state. Loans are dominant and not taxes. And in others, again, the balance may not be sustainable. So we try to indicate it in this typology here, that there are different kinds of states and the mere fact that there are different types, and these are, of course, ideal types, will be an answer, you lead to an answer that no, not all states, or indeed states in sub-Saharan African states are fiscal states. All right, I'll end the slide. Yeah, we could just keep it in the typology because I don't think we'd see it at the last slide, I think. You didn't see it? No, it couldn't. That's very strange because it's, you know, well, anyways, you can look at the article, but we have a typology that kind of goes on the level of taxation, balanced with the level of borrowing, and then we place tax states, rentier states, fiscal states, and debt states in it. Right. So the answer to the first question, are all states, fiscal states, would then be no. And very briefly, in the end here, and this is because we argue that directly related to your second question, or first question on the preconditions. They often do not exist. So most contributions would highlight a diversified economy and agricultural transformation as preconditions. For example, in his 2013 piece, he argues that, and I quote, the emergence of a modern fiscal state is dependent on the level of commercial development in the economy. For which reason, the modern fiscal state is unlikely to appear in an agrarian economy. The lack of agricultural transformation is an important precondition, but one that is often not discussed other than in very generic terms, we believe such as the need to tax the informal sector or to improve agricultural taxation. And I think we need to be reminded what David Booth wrote in an excellent recent working paper. We need to be reminded that the lack of real world transformation in Africa is important, not just for economic reasons to do with jobs and the youth bulge. It is also a problem from the point of view of the chances of consolidating effective liberal and democratic states. And so that you could add fiscal states. The fact that many Sub-Saharan African states are not fiscal states can to a large extent be explained by the absence of economic preconditions. Taxing more requires first and foremost, a taxable surplus, and this requires economic transformation and diversification. Without such a tax base, loans are acquired on other and more vulnerable foundations. In a way, that was your answer to the first question on preconditions. And we think that this conclusion has important implications for subsequent policy recommendations, which tend to focus overwhelmingly on on on merely increasing domestic taxation. And again, I think the point you're making is very, very closely linked to what we heard from Antonia and also Shanta and Sancia that ultimately we have to think about the precondition and the economic days, the more deeper factors we wish, deep fundamental of fiscal capacity. And sometimes one worries that the focus just reforming tax systems as we often see from donors may not be the best to think about how a fiscal state will be created. We'll come back to that again later on. I can see there's some questions. I think there's one question for Antonio here. I don't know if you can see the question. That's come for you from follow the renziro. He wants to know he wants to know what the policy implications are and let me see if I can be more clear about exactly. So yeah, the question really is a you mentioned about roaming not built in a day talks about politics and so on. It seems that some are more significant than others from what you said, and so what can you what kind of policy advice can you give among the factors you mentioned which are very specific particularly in low income countries that are ready for policy for policy makers. What would you pick out as the most important factor. Thank you, Paolo, it's Paolo the renziro who asked the question and thank you for putting the question to me in a way rephrasing it so that has even more pregnancy. Complex the answer is not is not a straightforward one and intellectual honesty also suggests that we don't, you know, make too much of our of our claims and in particular over lessons to and for that the history matters and complement are these matters so let me say this at the start. But nonetheless, Paolo has asked a very good question. The way I interpret this, if I may, is we talked about historical conditions that may facilitate or not. Building a tax tax system and a fiscal state in general, and we talked about complementarities, but what is the sequence there so that the question really boils down to what kind of sequencing policy terms you should take when you, when you imagine steps. We don't go that that far so we haven't got in what in our research a clear sequencing, but we do see that by acknowledging that Rome wasn't built in a day and that the history matters. We see that as at least as a first step to understand that reforms in certain contexts are more likely to succeed than others so that that's something that when it comes to institutional design. If you are a donor or a policymaker in general is something that you can keep into account when, for example, you assess risks and opportunities of a certain reform that you may want to undertake. To what we have actually done with Merima Lee and Odeca for just that they've done when you think about our paper in the special issue on Uganda. Different regions of the country have different norms of tax compliance why it goes back to pre colonial times and this is still matters today. So this is perhaps an example that I can bring all this on complementarities and I don't want to go on for too long on complementarities is something that we see is that we don't see some complementarities that matters more than another but we do see that like Marina Nistoskaya and Michelle Darcy in that paper of special issue argue you at the same time to develop some legal capacity as well as fiscal capacity. So having a tax system, sorry having a property right system that can expand the tax base can at the same time gives you facilitate the development of a tax system. Similarly, we find that in the Latin American context in particular Argentina and Chile case studies by El Elsoy for Matias and Jose Perez Cagia. We find that information capacity there matters so the ability of Latin American states to gather information to collect revenues so if at the same time you have that you are in a better position. So if each of these complementarities matters more. We don't know, we don't know yet, but I guess a policy question is telling us to do more research of this. If I, if I can, if I can think about the next steps for our project. I hope this gives an answer and I'll stop here because I don't want to go on for too long. Thank you so much, you know, we've got two more questions and maybe do you want to come into on the policy implications. Just a brief comment. So, well, I think it's also important to take seriously that, I mean, there may be a reason. And then said, well, African, what could you and so on your African South African states aren't really doing that badly. I mean, it has raised and then it has stagnated but maybe that's because they're at the optimum, given the structural preconditions. And then I think a policy and important policy recommendation would be that there might be certain kinds of taxes that it would be better to abstain from in the short run because it could also lead to obsessive registration as Mick Moore has recently said or it could lead to, you know, excessive coercion, which is not really, you know, promoting a good fiscal contract. If there's time I would very much like to ask Sancia that whether you know you think that the South Africa has gone from being a fiscal state to maybe changing towards, you know, increasing indebtedness or that it, you know, that it's becoming a different kind of no longer be called a fiscal state. I don't know. It was just a thought that I got when I heard your excellent presentation. Thank you. In fact, as I think this is the next question is probably perhaps Sancia for Sancia to also think about the question from Armin von Schiller, which argues that, you know, in fact, as Mette said, taxing by itself is not really not the most important thing is what you spend the money on the tax revenue song. And the point that you know, Shanta made at the beginning, which is another excellent point of this low level income trap. But governments really don't want to tax, because they don't want to be held accountable, as citizens want to pay taxes because they feel whatever they pay taxes are not going to be used in a proper way. So my question then is that how do we get out this low low level income traffic, I think it seems to be in South Africa, even though it still has high tax on GDP, it's not still as high as it could be, and or perhaps even potentially not even going to stay at that level. So how can South Africa get out of what you seem to be suggesting is a low level income trap, and then lead to the question that Mette also asked you. Hello, I think, as some of the other speakers, you know, as also emphasize, you know, the devil's always the details and in our case, I think our concern well obviously on the revenue side the tax base is a huge concern. And, but on the, you know, the bigger concern I think is on the expenditure side. And if one, you know, the tax base were in a position to renegotiate the fiscal contract if there was sort of a possibility of tax bargaining. I think that would be it would not so much be the level of tax that's been levied but it would be the way in which it is, is being spent. So, given the large imperative to spend on the social wage, you know, so we still continue to do that in sort of absolute amount so about 62% of our expenditure still goes towards the social wage but whatever was supposed to go to towards economic development to the maintenance and the building of the tax base that just goes missing. So the infrastructure is crumbled and that of course has undermined the potential to to maintain the tax base. But then of course as far as you know the social wage is concerned we spend a large amount, the largest amount, you know, looking at the functional classification does go towards education 24.3%. In quantitative terms, a really high percentage, I think, especially in the context of Sub-Saharan Africa, a huge percentage is spent on our education, but there's a huge quality problem there, you know, looking at the international tests, you know, many of our kids are almost functionally illiterate at levels when they were supposed to be reading well and to be, you know, quite quantitatively literate. And then of course a large amount goes to our social grants that's also spending rising quite fast, but the big problem is that the third largest component on our expenditure side goes towards debt servicing. And of course our public debt stock is rising really fast, given the economic growth that we don't have to service that. So debt service cost is definitely a big problem and especially in the context of repeated, you know, downgrades by rating agencies given the state-owned enterprises per economic performance. And many people say that, you know, given the debt service cost that's rising so fast, we are fast approaching a fiscal cliff, you know, so our debt service cost comes in at 15.8% in the latest budget. So our health budget, which should service 82% of our population, gets only 13.8% of the expenditure, which is highly problematic and apart from that still being in quantitative terms rather a large amount, qualitatively, you know, the health care is failing the population. So in terms of quality on the expenditure side and then of course the rising, the debt cost and the fact that what should have gone to infrastructure expenditure just goes through, you know, it's like a leaking on the SOE side. So the tax base is not maintained. So in that regard, it's a problem. So made it to come back to your remarks. So I think looking at the expenditure side as a fiscal state we definitely underperforming quite badly. Whereas if you look at the, you know, on the tax side, we perhaps not doing that poorly. If one could forget for a moment the fact that much of that is really goes of enforcement and there is increasingly I think pushback from compliant tax base, you know, complaining that they are being bullied by by, you know, a very, very well fanged tax administration. So in a sense here, it's really very interesting observations, but you know what it has a program in South Africa where we talk so have a work stream on taxation that's really good for us to sort of think about these issues. I'm going to ask the last question to the media media. This is a question really for you. What is it also about optimal fiscal capacity in a, if there was an optimal capacity. We talked about tax and loans, and balancing the two. So, is there a kind of optimal balance is it like, I mean 50% each in which each, or something, something different. So what is it that the, what is the balancing here that one needs in creating fiscal states between tax and loans as you argue. And also how does one get there, what kind of policies can one think about to balance this, this two sides of the fiscal capacity story tax and loans. So over to you. Last question. And a very, very difficult one. So, so because I think, and, and, and you could also say that this is a weak point in our piece actually because what is a balanced relationship between, between taxes and loans we give and we gave some illustrative examples here, where we talk about Senegal Senegal is along with Kenya one of the, the countries in Africa that know how that tax. You know, reasonably reasonably well Senegal not as much as Kenya but still, and there's a high proportion of personal income taxes as well. Plus, there is a sort of a sense of a quid pro pro between population and, and, and state it seems. It's a pretty low level equilibrium where you know state services are still lacking and so on. So, even if it's a balanced relationship also it's not a very highly indebted really state. But even if it's a balanced relationship, it might be at a not at an optimal level, you know it might be at a lower level, because you know there's still a lack of public expenditure there's still a lack of income and so on. So, I mean even if it's balanced, it may not be optimal. So, so I might my best take would be that that it's very contextual. It's not a very satisfactory answer. But I think it is very contextual what is optimal given the, the particular economy. So, that will be the brief answer and I think for policy recommendations. I definitely think there should be more consideration of the tax base and the production that's going on and whether it's taxable or not. And it seems to me that there's only so far you can get with like technical fixes or digitalizing taxation or whatever if, if the type of production is mainly agrarian which is all it also is in in in Senegal. So of course that speaks to what Antonio says about room not being built in one day. I absolutely agree in fact, you know in the public feel like literature we talk about optimal tax rate, but the view that perhaps we might have specially those who are is the politics of taxation that there isn't anything called optimal tax rate optimal physical capacity. It depends on institutions, history, conditions, all of this kind of makes it very counter specific. So it's not that you can say that 10% or 20% 25% is the optimal tax of GDP ratios. This would depend very much on exactly economic preconditions on structural factors on history historical factors institutions. And also the other point I think it's important that I think came up very many times here just taxing by itself is not good enough. You what you're going to use the taxes for is very important. If you're going to use it to finance loss making PSUs. That's not the point of taxation. So you're going to use it for profligate programs you don't really help the poor as Shanta mentioned about countries which are actually up a million come but have a high poverty rates. That's also not good enough. So it's not just about raising tax of GDP. Also, what do you do with the taxes I think that's important to keep in mind, because sometimes it's a fetish about just increasing tax of GDP, and perhaps not worrying about what the tax is being used for. So let's stop here because we are out of time. Excellent discussion really good presentations really good questions from the audience and a very large participation for the audience large numbers of colleagues who participated in this and not among the in the in the audience. So I want to remind everyone that there is a special issue coming out the journey to show economics not too far away the June issue, which would have all this excellent papers on which we discussed today, by met and by Antonio, and where we also have a editorial that summarizing the key policy messages that have come out of this, out of this, out of the papers and special issue. So just a few months away, and hopefully we will all you'll all get to hear about this special issue when it's published from my colleagues here in the communication side of univider. And thank you so much for being here in the webinar. Goodbye everyone. Take care. Bye. Thank you.