 Well, I think that we can probably start, I would like to warmly welcome everyone to what promises to be a very interesting and rich panel discussion today on the fiscal states in Africa. This is a joint event that we are organizing with United Nations University wider in Helsinki and it is co-hosted with the development center of the OECD. We are here a very distinguished set of speakers that my friend Antonio Savoia will introduce later so I just want to welcome introduce them and I would like to say that my name is Federico Bonaglia. I am the deputy director at the OECD Development Center and we are here with a very distinguished set of speakers to discuss one issue which is really central for our understanding of Africa and we would even say the developing world at large can confront and overcome many developing challenges including those that are related to the current pandemic. In particular, the issue that we are going to discuss today is very closely related to the issue of domestic or social mobilization and building effective institutions in states. We know that this is a crucial element for successful development and it is also something that we analyze very deeply at the development center. As you may know we have a number of joint products including our global revenue statistics initiative and several regional initiatives in Africa and these initiatives focus on one fundamental narrative that in Africa the demographic challenge is such that governments need to put in place together with the private sector strategies for job creation but this can only be done through policies that are adequately financed. Therefore, the discussion today is going to be particularly relevant to understand how African countries going forward can strengthen their institution and mobilize greater resources. I would like now to, before giving the floor to Antonio, just share with you some housekeeping rules. We are on a Zoom webinar. We have simultaneous interpretation. If you would like to benefit from this interpretation, you probably know it already but there is a button at the bottom. You can choose the language and in case you are intervening and speaking in one of the two languages, just make sure that you deactivate the interpretation function otherwise there will be problems for others to listen to you. We also will have a chat box where we will be very happy to collect questions and comments and we will, of course, after the speakers open up the session for questions and for debate. Without further ado, let me give the floor to my friend Antonio for his set in the scenes. Antonio, please. Okay. Thank you. Thank you, Federico. My name is Antonio Savoia and I'm mainly based at the University of Manchester Global Development Institute but I'm also a fellow at the World Institute for Development Economics Research at the United Nations University and we are here today with a few colleagues and friends for this panel event. We have a mix from different disciplines, apart from Federico and Alexander Bick, our friends and colleagues at DOECD. We have a professor, UN political scientist and China expert at the University of Michigan, Dr. Rose Guji, Executive Director of the Kenyan Institute for Public Policy Research and Analysis, Professor Mick Moore, a political economist based at the Institute of Development Studies, Sussex and last, Professor Kunal Sen, my long-term co-author and director of Wider and a professor at the University of Manchester Global Development Institute. So we are here today. I want to give you in a few minutes a little bit of a context why we are here today, why we have this panel on the fiscal states in Africa today. This is part of a wider project, a project that I'll share some slides so that this helps me it's part of a project that we have at Wider and this is a web page of the project. So I want to tell you where the idea comes from and originates within this project, which is partly about doing some academic research, so publishing and researching and partly like today, creating a dialogue, sharing ideas and thoughts with the wider development community. How do, what are we trying to do with this project? We are trying to fit into a broader agenda on that revisits the role of states, states and development. This is not the traditional debate on how much states should intervene, what they should do and what they should not do. We are trying, this wider field is trying to look at state effectiveness, when states can get things done. Often you hear the term these days state capacity, that's the wider field where our project on fiscal states fits. And in particular, we see as an ingredient of becoming an effective states. The ability to finance state activities through systematic taxation, through a stream of revenues that comes from reliable basis, from broad-based taxation, that's at the very least what we mean by fiscal states. You can of course include other ways and other sources of financing states, but that's broadly what we mean. Becoming a state that is fiscally developed, it means being able to systematically finance state activities. Now, a lot of research has been on nowadays advanced economies in this area. So how do you become, how do you learn to tax, how do you finance state activities is a lot of what you'll find it's about developing economies. It developed economies but what we know a lot less is how developing economies can become fiscal states. And there is no guarantee when we sat at the workshop for this project with other colleagues. One thing we agreed is that there is no guarantee that developing economies should follow the same trajectory as the nowadays advanced economies. So we are trying to understand a little bit more how developing economies can become strong fiscal states. This is now policy relevant so it's not just the academic debate. SDG Sustainable Development Goals 17 and in particular target one highlights the importance of mobilizing internal revenues. So financing development goals requires now mobilizing in the internal revenues. And to give you a little bit of a now to throw some data into the discussion to give you a little bit more context of what kind of problems we have been looking at. Just some figures here for you. The first one, this is the share of revenues. Total revenues is a share of GDP and it comes from the government revenue data set. So some basic taxation data that gives you an initial understanding of how fiscally developed states are. When you look at this aggregation, the first one, by level of economic development, you see that one of the features of becoming a high income economy is also that you have learned to tax. You tax better. While instead the middle and low income economies touch tax less they have a small share of total revenues. So there seems to be a neat here clear correlation between the stage of economic development and how able you are to tax. That's one of the facts that we see. How does it now comes the African region? How does Sub-Saharan Africa in the next figure here compare with the advanced economies? Here I have the group of OECD economies against Sub-Saharan Africa. The picture looks bleak here because Sub-Saharan Africa over time the last 20 years seems to collect approximately half of the share of revenues compared to OECD economies. So these kinds of gaps that we see between countries, between different stages of development, gaps in taxation, this is what with the fiscal state project we are trying to understand. By the way, and I'll show you the last figure, the African region perhaps is not doing so badly because then when you throw into the picture the rest of regions around the world, you see that actually Sub-Saharan Africa collects the same amount of revenue shares as South Asia, a richer region and almost the same amount, just a few points less compared to Latin American region, Latin American and the Caribbean, which is far richer than Sub-Saharan Africa. So we have looked at these kinds of figures and these prompted us to ask a few questions. Where does this gap in tax share come from? Is it about the functioning of revenue authorities only or is it instead something broader? Is it also about the type of economic, political, historical conditions that different countries or regions have? This was part of what we tried to answer this kind of broad question and you will hear more from the speakers. The second broad question is when you look at these kind of differences in tax share is what are the developmental consequences? So two broad questions that with the fiscal state project we try to answer. We don't have the answer to everything but we've done some research and we have some thoughts on this and today is the opportunity to create a dialogue, share some of these ideas with you with the wider community and learn from each other. I always learn a lot from these events. The project continues. There will be a special issue in our academic journal, the Journal of Institutional Economics and there will be also hopefully when we have completed this more on the policy side, so some of the policy implications. Today it's a first step. I think I've exhausted the minutes assigned for my introduction. So over to Federico again and I look forward to this discussion. Thank you. Thank you Antonio. Thank you for setting the scene and recording us some very important elements to inform the discussion, which is first that taxation is certainly a very important component of building fiscal states but it's not the only one. Second that when we look at one of the indicators of tax capacity, which is tax revenues or GDP, we see an average which seems to portray a kind of ranking where high income, middle income, low income very differently but when we look in a more granular way at count experiences we see that the picture is much more complex than that. And third and the thing that this will lead into the first question to Kunal, that taxation is of course a part of a contract. I pay taxes because the state gives me back some kind of services. This is part of a kind of social contract and of course tax compliance is an indicator that we can measure to assess to what extent on one end citizens are willing to pay taxes, something that we can also look in terms of tax morale. But on the other hand also as an indicator of how effective and how efficient tax administration and tax systems in general, both domestic and international are, in taxing those that should be taxed. And so my question to you Kunal is exactly on tax compliance. What are from the analysis that you and colleagues have been conducting in the framework of this project? What are the main findings about the drivers of tax compliance? What are the prerequisites for governments to be able to induce citizens to comply but also to what extent can maybe some behavioral elements push citizens to better comply with tax compliance? So on one end what are the drivers and prerequisites for greater tax compliance? And on the other hand, what are the measures that can be put in place to foster tax compliance when it is locked? Please Kunal, the floor is yours. Thanks Federico. First of all, let me just say that we are delighted at the UNEYDA to collaborate with OECD Development Center on this policy panel and on a very important topic. Both OECD Development Center and UNEYDA have a very shared agenda on understanding domestic resources mobilization especially in Africa and finding policies, policy solutions. It's really great that we can work together on this policy panel. Don't you have your questions? What are the three political requisites for tax compliance and how can we foster the things we need, the conditions we need for tax compliance or for the development of the fiscal state? I would say the first political requisite we need is the development of institutions that can provide checks and balances on executive power. In our research as part of the wider fiscal state project, this is work that I'm doing Antonio Savva and Abraham Stagham who is based in OECD WIDER, we find that such checks and balances can positively affect the ability of governments to increase tax revenues. And by doing so, checks and balances in the executive increase the pressures and governments become accountable to their citizens, needing to hire tax compliance. There's a kind of a two-way relationship which is very important to understand. Now, what are the examples of executive constraints on the executive power, checks and balances on executive power? Well, this could be constitutional constraints on executive power in themselves, separation of powers between the legislatures and executive, electoral rules, independent judiciary, very important, pre-media and other contributing mechanisms for state leadership. So this could be a variety of different checks and balances and obviously take different shapes and forms depending on the country in question, the political institutions there and so on and so forth. So these are really a wide variety of checks and balances and one should not assume that this not necessarily means democracy, it doesn't. Now, just as another example of how this can happen, so imagine an effective parliament. An effective parliament can regularly oversee the state budget, including authority over taxation, the right to audit previous government spending, the right to veto new expenditures, and so on. And you can see clearly the cause of mechanism why checks and balances on the executive can increase tax revenues and also make governments accountable, thereby including tax compliance. So that's fairly clear in this example why it's important. The second political prerequisite for tax compliance is, as you mentioned, a fiscal contract with the state as it is. This involves an exchange of tax revenues for goods and services that are valued by citizens. And examples could be universal health care, primary high quality education that's excellent for everyone, could be, again, many other examples where you can imagine citizens value this and they're willing to pay taxes to obtain this public goods. And this is the two-way relationship between the state and the citizen. Now, this is particularly important if the government wants to raise revenue from broad-based taxes, such as income taxes, rather than narrow-based taxes. The fiscal contract really bites, really comes into effect when we talk about broad-based taxes, rather narrow-based taxes. In the African context, with such an adjustment that has happened in the 1980s, it's very difficult to raise taxes because tariffs have been lowered or almost zero in many countries. Therefore, it's even more important for the government to raise revenues from broad-based taxes, such as income tax. And this is why it's even more important, perhaps, in the African context to have a well-functioning fiscal contract. And that's something definitely is very important there for the tax compliance. The third political prerequisite, in my view, for tax compliance or to develop a fiscal state in Africa is political commitment to invest in state capacity, particularly related to tax administration that is seen as impartial as well as effective. Impartial and effective tax administrations from previous research that I have also done with Antonio is more likely to increase tax compliance. So it's really important that political leaders invest in state capacity linked to state tax and administration that is seen as transparent and effective. And obviously, this is quite challenging in many African countries where there's a lot of reliance on resource taxes. Many African countries we know are resource rich economies because resource taxes are very easy to collect when there's a resource when it falls, that's when we discover oil or, for example, when it's a commodified school. But we also have found in recent papers, we published Antonio and I, myself, in the anniversary of resource economics, that there's nothing preordent about this. There's nothing obvious that resource rich economies will not invest in tax administration or fiscal state capacity. And in fact, we find quite wide variation in investment by resource rich economies, in particular, in tax administration. So I think it's important to keep in mind there's nothing preordent about the fact that it is more difficult to invest in tax administration in a situation when you have resource rich economies. Now, on fixes, on how do we actually bring about, what are the, how do we bring about those political conditions? Well, they are no quick fixes. That's the first thing. Because what we do see are processes that take time, are historically driven, and we've seen this more clearly in the countries of Western democracies. So therefore, learning lessons of what we see in Western democracies, we should be careful and not expect technical solutions. We need to understand that these things take time. And in fact, the most important thing is political leaders in countries of Africa slowly making the effort to develop accountable political institutions. And finally, just to say that effective accountable and transparent institutions is SDG-16. And WTO mobilization is essentially part of SDG-17, which shows why these two SDGs, 16 and 17, are so interlinked. I need to go ahead with that. Let me stop here. Thanks. Thank you. Thank you, Kunal, also for being very to the point and very disciplined in terms of your time. I'm sure this will give us an opportunity to have a debate afterwards and a second round of questions with all the panelists. Let me now turn to Marina, Marina Nistoskaya. I hope that I pronounced correctly your family name Marina. And you have been investigating into fiscal capacity of sub-Saharan African states. And one of the arguments that you have been making, one of the hypotheses that we have been researching, is about the different dimensions that may affect the development of fiscal capacity. For example, you have been looking at issues such as the enforcement of property rights, the statistical capacity of African institutions. And you have been trying to assess whether there is some kind of correlation or causation between the different dimensions that we mentioned and the development of fiscal capacity. So if I understand correctly your idea here, you are putting fiscal capacity as one of the capacity of a state to perform effectively and that we cannot look at fiscal capacity in isolation without looking at investing into other dimensions. So if I understand correctly, maybe you will tell me that I didn't understand what you were arguing. But what are on the basis of your analysis the three most important dimensions that different set of stakeholders, domestic, for example, policy makers, civil society, advocacy groups, but also external to African states, for example, the donor community. What are the three most important dimensions that they should be focusing on in addition or complementing to efforts to strengthen tax policy and administration? Marina? Yes, thank you very much. And yeah, I think your understanding is quite correct. So what we argue in our paper is that we are not so much argue about fiscal capacity because we can argue, and I already hear a little bit your understanding of what is fiscal capacity like, for example, that this is relationship between tax income to GDP. I would think that this is tax outcome and tax capacity is all the things that make this happen, including, for example, the strength of tax administration. But I also think that in the core that is the interpretation of our argument is correct. We argue that strengthening only capacities of the state that go directly to extracting taxes, so to say, is not enough. And interestingly enough, our starting point, I think it's important to understand our starting point is very close to assumption that Kunal was saying, and this is the argument, we anchor our argument in the theory of fiscal contract theory. And the fiscal contract theory basically in a nutshell that it underscores that the preference for the public goods provision is the reason why people begin paying taxes. They cannot achieve public goods individually. That is why they provide an entity, the state, with some of their contributions. And this entity provides them with the public goods. And public goods, it can be peace or freedom from external invasion, internal order. In concrete examples, one of the first historical public good provision was corn storages by the state. But what we are also thinking that this picture isn't complete because there is state also can provide assumption, individuals with some public private good, not public good, but private good assumption what states do and should routinely do, which is not necessarily related with the tax revenue can help to improve this, if you wish, willingness to pay taxes. And what we specifically talking about is anything that relates to the activities of the state that relate to the regulation of property rights. And we are not first here. Bechely and Persian call this legal capacity. And so basically the argument that for the, if the state provides the, if the help, of course the end product of the highest aim of any state activity with regard to regulation of property rights is secure property rights. But we need to begin somewhere. And the beginning of this process is a good regulation of the assignment of the property rights, describing property rights or formalization of property rights. This is the very beginning. And when the formalization of property rights would provide individuals with a meaningful opportunity to improve their economic standing. So for example, instead of standing a family member or an employee to guard the borders of their land asset, I don't know, an economic agent can channel this activity, this energy, this labor into something more productive and then improve that would improve his or her position, economic position. So that is what we call public, private good, this incentive to this clear opportunity to improve one's economic standing. And I think in exchange for this individuals will be more likely. They will be, first of all, they will be in a more direct contact with the state. And then they will be more likely to ascent to pay in taxes. So the question is what are those critical elements of this legal infrastructure that should be developed in addition to fiscal capacities. So and we spent a lot of time myself and my colleague Michelle Darcy, that my co-author on studying cadastral records. And cadastral records is the documents that are related to the registration of boundaries of land assets. So through cadastral survey. And this is the first thing that should be done. It should be complete. The surveying of land boundaries, the description of land boundaries, their properties, their size, their features. And the second thing, this is not a bet. The land surveying is happening and it's happening in many South African countries, Sub-Saharan countries. It is happening. What is not happening, and this is crucial and important, that there is this cadastral records, description of land boundaries, and there is this land register. This is like who have what kind of interests in land. These two registers, these two types of documents, state documents are not linked. And what we explicitly paying attention in this paper is that this, there should be the cadastral records, the descriptions of land assets, the boundary size and features, should be land with registers, which are records of interest in lands, where lands are ownership, user rights, obligations, etc. So we need to match people with assets. And this is what we call formalization of property rights. These are two things. So to complete this cadastral survey, link these two documents into one record and maybe also where they exist to digitalize them, so to accelerate this process. And this will be a significant step forward in internal revenue mobilization, in taxing individuals through income tax, to bringing individuals from informal sector to more formal sector to assumption that hasn't happened so far in many of the Sub-Saharan countries. Thank you. Well, thank you. Thank you, Marina, also for providing a very concrete example from the question of land in Sub-Saharan Africa that remains one of the probably major constraints also to broaden the type of taxation, because as Antonio Charles depicted, if there is indeed a correlation between the level of taxation over GDP and if we resort to income taxation, lower level of income may explain also why you have low level of tax revenues, and therefore taxing other assets, including land and property, remains a challenge. And so the point that you are making seems to me particularly relevant also in terms of the narrower definition of business capacity, which is not only the tax outcome, but also tax revenue over GDP. This allows me to move to Mick Moore and to bring him into the conversation from also an historical perspective, because Mick has been analyzing a long series of historical data and this analysis has allowed him to look at varieties of fiscal states. We heard from the very beginning that there is no single trajectory, that there are different types of fiscal states, and that we do not necessarily need to replicate or emulate what other countries have done in the past in terms of developing their fiscal state. So Mick, in terms of the analysis that you have done on the variety of fiscal states, what could you tell us in terms of what are these varieties across Africa in the first place? And second, are there specific priorities for governments that are aiming at increasing the narrow definition of fiscal capacity, meaning tax to GDP? What do you want to share with us Mick, please? Okay, thank you Federico. Let me start by saying that I normally use the term fiscal states in what I think is the conventional sense, which is a state which has such an effective and robust system for raising revenue that it can go to private capital markets and borrow large amounts of money fairly reliably at reasonable rates of interest. And before COVID it was quite marked that quite a number of African states who were not borrowing on commercial markets 10 years before were beginning to do that. So we had a very positive effervescence of fiscal states in that sense, but it's not yet clear how COVID is going to affect that. On the slightly broader perspective, one point made, and Kunal has already made this, but let me extend it historically, compared to other poor regions of the world, sub-Saharan African tax collectors do not perform badly. In some respects they actually perform quite well. And this has quite a deep history. It is not a recent invention. Governments of sub-Saharan Africa, both colonial and post-colonial, have been collecting quite a lot of revenue for quite a long time. So there's nothing kind of new about tax collection in Africa. But the average picture is fairly positive. The range is absolutely enormous. We have revenue systems like Kenya, South Africa in particular, which look extremely modern in one sense of the term. They would not be quite at home in Europe. They look very similar. They do similar things. And then we have, at the other end, a number of governments that actually rule, but they probably collect very little revenue. We don't know how much they collect, but I've seen, if you take, for example, the states of Nigeria, DRC, Democratic Republic of Congo, and Somaliland, I've seen the figures seven percent of GDP as recent estimates of how much tax revenue they raise. So we have an enormous range. And the systems also vary enormously from the relatively modern and sophisticated and digitalized to something which is far back beyond that. Now, in terms of what to do about this, I mean the first point to make, and again I'll underline what Kunal said, as far as we can tell from very poor statistics, the ratio of tax to GDP in Sub-Saharan Africa on average is not increasing. It is pretty much stable. And the statistics are so poor that we might eventually find that's not quite true. But so while we've got a fairly good history, the current trajectory is actually not particularly encouraging. Why is that? And what can be done about it? Well, different people approach this in different ways, and I don't think there's any one way to approach it. Some people will say, look, it's all politics. And it obviously is very political because governments are trying to take money away from people. And that certainly gets people quite exercised and quite organized. So it's certainly very political and we'd be very unwise if we were to talk about increasing revenue without recognizing the central political nature of it. But having said that, many people have tried to work out what is the key to effective tax reform? What are the politics of effective tax reform? And so far, in my reading of what I've come up, we have a whole lot of generalizations that are on the whole pretty obvious. You need good political leadership. Yes, you need some good allies. You need to understand the technical side of what you're doing. You need excellent PR to try and sell this to the public, et cetera. All true, but on the whole, not enormously insightful over tax. So that's a political view. Some people say, no, the problem's really more centrally tax administration. And we need to improve that. There is not actually such a different position from the first one as it sounds because I think, again, there's a pretty good rule of thumb that if governments want a more effective tax administration, they can create one. It's up to them. It's their decision to give the resources. And more importantly, to give tax administrations political cover so they can do their jobs. So if you have a bad tax administration, in some degree, you'll say, actually, the government really doesn't give this priority. So the two are not completely separate. Or again, you could look at this from a much more technical point of view and say, well, what are the kind of big tax gaps? Where can we collect the money, or it's not collected? I mean, these are variable for many countries. But with colleagues, I have identified, well, let's say six, which I think are fairly high priority for most African governments. And I'll just run through them very quickly. The first one is the tax avoidance by transnational corporations, by profit shifting, et cetera, which you at OECD know a great deal about, and which on the whole you've given priority to in the past, which remains a very problematic area. We could talk a bit about what to do about that. But there are no easy solutions. I would just say on that when we talk about tax compliance in Africa, the tax compliance problem is dominantly a problem of companies, not of individuals. Or if it's of individuals, it's of rich people, not poor people. And the one thing that is often said about tax in Africa that is just wrong is that somehow, if we could find a way of taxing the so-called informal sector, that would solve the tax problem. I mean, we don't know what people mean by the informal sector. It's a word people use to pick us other people use it. But many people, when they talk about the informal sector, they basically mean, you know, very small scale operations and poor people. And, you know, if you want to raise more revenue, Africa, and you focus on that sector, you are on a hiding to nothing for reasons that I could explain later. So, briefly, so companies, secondly, and specifically, we know that Africa depends very heavily for exports on oil, gas and mineral mining commodities. These are grossly undertaxed, especially mining commodities, for a whole range of reasons. But that's probably the biggest single tax gap, but also one of the most challenging tax gaps. Thirdly, tobacco in particular is undertaxed in Africa, not only partly in terms of revenue potential, but partly because it is such a poisonous dangerous thing that does so much harm and consumption of commercial tobacco is going up in Africa. So more tax of tobacco and to some extent alcohol would be good. Fourthly, like most governs in the world, African governments give unjustified tax exemptions to investors. Not all tax exemptions are unjustified, but the unjustified ones are big. So if they could give fewer of those, they'd have more revenue. Value added tax is now the dominant single source of revenue in Africa. It's been increasing very fast, but perversely, it is collected very inefficiently in Africa relative to potential more than in any other country. If African governments could collect their VAT more effectively and efficiently, this is really going to a great source of revenue. As I've implicitly said, taxing rich people through various sources, even basic income tax, is an enormous problem and it goes way back to independence. It's not a new problem, but wealthy people in Africa do not pay their share of taxes and the tax systems are not really set up to tax them. And finally, and Marina talked about this property taxation of various kinds, I would say the real priority here is real estate in bigger cities, residential, commercial, industrial property in big cities, which is again, greatly undertaxed. So the short answer, if we start looking for the gaps, we suddenly feel almost rich in revenue. But as with all these things, it's all been tried and no one's yet found the sort of magic bullet for tapping any single one of these sources in a very kind of abundant way. Well, this was a heroic tour de force of what to do if you want to fill some of the gaps and you started off from a very operational definition of fiscal state and also put it into a very clear political context that in the end politics is what also drives the willingness of doing reforms and improving tax administration. And we are very lucky because the next speaker, Rose Nguji, has done extensive work on the country that you actually mentioned first, Kenya, and that is for many reasons considered as what a modern tax system. So I would like to ask to Rose to what extent the experience that she has observed in Kenya, but also in other parts of Africa in terms of reforming national revenue authorities and modernizing national revenue authorities has been a driving force for the development of fiscal states in the continent. And looking at these experiences, maybe, Rose, you can also share with us some lessons learned or takeaways in terms of what could domestic and international actors do to support positive reform and modernization. Rose, the floor is yours. Thank you very much Federico. It's nice to be in this forum. I'm learning a lot and I have maybe something else to give. Maybe I'll give more questions than answers, maybe put more problems than respond to too much because understand this is a project that is ongoing and probably my assumption is that as they get issues that we are raising, then they will be able to redefinerize the project and give us a very concrete direction on several things. So when I got this question, the first thing I asked myself is what has been happening as far as the trends in tax revenue is concerned and how would one even relate it from the one angle of discussing the capacity in relationship to the GDP? And I had a small slide but I think it's a problem with it so I can discuss. And what I found from data from IMF is that there seem to be over time, since 2004, a decline on the ratio of government revenue to GDP and at the same time a kind of a slowing growth over time. So we have a slowing growth and you also have government revenue over GDP is also coming down and to me this is a key issue that one needs to think of whether the revenue is not growing because GDP is actually not growing and therefore where is it that one would be looking for for additional capacity for really taxation and then when you look at it also you notice that there is a tendency for the government expenditure of a GDP again to you know it's rising a little bit it shows that it's rising and then that raises the question what is happening as far as the government and the financing of the same is concerned what is this that is giving governments in the region opportunities to really go out and finance these expenditures. Next slide. So that's the first question I'm trying to put across. The second one I'm looking at is what has been happening and there's one presenter I think it's Korsakunal who has brought it is that since the times of the start adjustment program we've seen several of our African countries really coming up with this national and I want to underline the word national, national revenue authorities whether you're talking about Angola you're talking about Botswana you're talking about Nigeria you're talking about Mauritius, Kenya and the like this has been happening but as this is happening I give the example of Kenya. So you are bringing together various departments that are looking at domestic revenue say corporate tax you're looking at customs duty excise tax sales tax and they're bringing them together but then when you look at a devolved system of government you start seeing asking yourself what is this what scope should a national revenue authority take in Kenya you notice that the revenue on source revenue for counties is just about maybe four percent of their source revenue very very small one element that is brought out is that from the positional point of view they are only there to collect about two taxes the one that is on entertainment on the property but the rest of the revenue should come from fees that are that are being paid and the like but they're not stable actually to bring all that together so recently for example Nairobi county has approached the hair a to facilitate them in collecting even the revenue collection we are waiting to see what will come out of it but they are there seem to be good news that the fact that national revenue authority has capacity has technology has stopping maybe could help county governments really and energize themselves as far as own source revenue is concerned but then what do you do do you then change the law so that you now widen the scope that the national revenue authorities should cap into not just the taxes but also other revenues that that need to be mobilized so that's the first thing I'm trying to bring in the second thing that you've seen and I think has been brought up again is the issue of micro and small enterprises and for me being informal is one is one element but the fact that many of them tend to trade among themselves means that to a large extent there is no opportunity ahead to get to the transition point in addition they tend to be localized in the sense that they are not trading they are not even exporting and then tapping into them again becomes an issue but some of them that tend to trade with their large large firms what you'll notice is that they must they must demonstrate that they have a pin number they must demonstrate they have a VAT element and the like which means that they are able actually to be formalized if I need to use that word into into the into the process so the other thing is that they employ over 80 percent of the jobs that are created in as much as they put 20 percent in the GDP but they are employing 80 percent it means that there could be actually an element of income tax that we are not able to deal with but their their nature of even not clear physical addresses makes it very difficult for for one to tap into them and then the other element which is also growing is this issue of regional integration take for example the Africa free trade area that is coming up and one of the things that carry for example is worried about is when you go to the negotiations table and you are negotiating on the tariff which one to which one to come down and for what products they are worried if that happens and they are not in the table it means that there could be implications on the revenues that we get from import tariffs yet they they may not have an alternative of where to get that revenue from a local production and then when one looks at the national authorities on the other hand they themselves and how they are operating then you notice that yes they have moved in with the technology they are trying to ease the filing they are trying to you know check on how to detect inconsistencies and the like but they are still at the very at the very beginning yeah we are still not yet not yet there and probably when these things are done it may also ease the aspect of you know disputes that come up and going to court actually it's into into the revenue element and time element yeah so yes they are moving with the technology but they are yet to get there and it's also very extensive to talk about it on the expanding go to the next next slide on to expanding the taxes when you try to think about so what do you do I'm happy that one of the presenters has said there is need for harmonization as far as the property rights for you even to tap into property tax is concerned it's an issue that for example even our government is dealing with and I think there is something to learn and probably will come out from this research on how then do you really ensure that there is that harmonization of people and property and they be able to talk into that the other element I'm thinking about is what is the scope of tax policy and tax administration reforms we've been having these reforms over and over and all the time over and over so what is it that we have not done as much and recently what for example Kenya has done is to say by the way we've been doing our tax element but we don't have a tax policy so they're not trying to put together a tax policy which would guide in terms of how you define that action that the government is taking up yes you have been having laws whatever is defining income tax and the like but the policy itself is the time that is being put together and probably that will define then what is the scope that one is looking at as far as the reforms are concerned and then finally is the aspect of institutional strengthening one of the key things that Kipra and Karei has been talking about is given that the target given by the national treasury is it realistic because each time they are not meeting the target so who is not bringing out very clearly what should be the target and then you find that yes the capacity itself even to do forecasting to see the potential for tax revenue itself is also a bit weak so I know like now we are working with them to come up with a clear framework that they would put to the table when they are talking with the national treasury and say we can mobilize one billion probably but not 1.5 billion but at the moment they actually don't have anything that we can put to the table and talk about and then the other thing that I have talked about is that informal sector tends to be everywhere no clear address and the like at the moment there is an aspect of what I would call supportive structures whereby there is an attempt to do national addressing system such that even when you have something that is a COVID it was very difficult to support the MSCs because you don't even know where to get them and it's the same thing like now that if you wanted them to target them where actually do you target them because they are very fluid they can move from one point to the other I think I want to stop there at the moment yeah thank you thank you thank you rose for a very rich and interesting presentation that I think compliments very nicely what we have heard before I will I will I've been a bad time keeper so apologies for that but the the the issues that you were presenting were so interesting that I felt that I shouldn't interrupt but I would like now to to move to Yuan Yuan Ang who has been investigating creation of institution building with a specific focus on the people of the public of China and Yuan Yuan has put forward some very interesting ideas I find and maybe some of those ideas can be relevant for the debate that we're having now on on sub-Saharan Africa experimentation institutional experimentation different types of accountability from what we from the western world could consider to be accountability different types of corruption and not having necessarily the same impact on growth and and and the state formation so building on your very rich analysis of the of the China development experience Yuan Yuan what kind of suggestions what kind of lessons learned could you share with us that could be relevant for the debate that we're having now on sub-Saharan African fiscal states please well thank you very much for having me it's a real pleasure to join this panel I am going to highlight a few findings for from my paper which is titled textless physical states and I know that sounds paradoxical but in fact textless forms of finance have historically always been a precursor to modern physical states so first of all let me emphasize that the physical history in contemporary China is actually not unique to China and you can find striking parallels in 17 and 18th century England and in 19th century United States it's just that this history has been obscured by the conventional wisdom arguing that democracy and limits on power in Europe led to capitalist success right so let me just briefly summarize the conventional wisdom the favorite case in point is the is the glorious revolution of 1688 in England which has been cited in seminar literature and the story is roughly that in European economies there was a process of political centralization and then democratic institutions were introduced it led to secure property rights and subsequently the industrial revolution and physical capacity so this is the conventional wisdom about how the West rose and became modern physical states however if you look at the literature by historians historians have actually abundantly criticized this conventional narrative and one essay that I would highly recommend is by professor Hodgson it is called 1688 and all that I won't go through all of it because his critique is detailed and comprehensive but I'll just highlight two important points so he makes the point that the glorious revolution did change the balance of power between parliament and crown but the effect was not what we normally think it actually led to a government that was more polarized and even more unstable than before he also emphasized that the issue in England was not that property rights were not secure enough but that they were too secure so land in England was not tradable because of the feudal system so his argument is that the rise of British capitalism was actually contingent on land reforms on breaking up the feudal system so that land can be transacted and can be used as a collateral for borrowing now why is that relevant to China because almost everything that professor Hodgson describes in British capitalism in the 17 and 18th century is what we see in 21st century China and they are very similar one of the commonalities that cuts across the three cases that are examined is that all of these capitalist economies relied on taxless finance i.e financing public infrastructure through means other than taxation especially at early stages of development the term taxless finance was first coined by John Wallace in his study of US history it is not the same as the IMF's definition of non-tax revenue which includes items such as fees, levies and rental income taxless finance is simply a residual category anything other than taxes that includes debt, land proceeds, collateralization of land and monetization of state power for example using land grants to finance public projects and giving out corporate charges which are basically monopoly rights to operate in lucrative businesses these are the common set of tools that were employed in China, England and the US so if we now turn into the details of the Chinese case we'll find that China's experience of taxless finance actually mirrors the western experience taxless finance in China took off after 1994 a little bit of background is that in the period from 1978 which is when market reform began to 1993 China practiced a system known as physical contracting and you can think of that as tax farming except the tax farmers were not private actors but rather subnational governments tax farming created a powerful incentives for local governments to engage in industrial promotion but it also led to the central government losing a lot of revenue to local authorities so in 1994 China introduced a tax sharing reform that effectively centralized tax revenue so the balance the ratio of taxes between central and local governments drastically changed after 1994 now because local governments suddenly lost a lot of tax revenue the central local authorities struck what is known as a grand bargain and this is a term coined by political scientist Jean Hoye the central government as part of this grand bargain allowed local governments to sell land and keep most of the proceeds so it was from that point onward that we begin to see this phenomenal surge of land sales in China where local governments lease the outland for limited periods of time 50 to 70 years for example for large amounts of money to developers and companies and land sales eventually became actually the majority of local revenue this was then accompanied by growing local government debt because local governments then used the land as collateral to borrow more so the combination of land sales and credit allowed China to finance an infrastructure boom in the 2000s so the impressive infrastructure that we see in China today is actually not an early product it's actually fairly recent and only began in the 2000s as a result of this financial revolution but this financial innovation came with serious problems and costs as it did in the case of the united states in the 19th century and the downsides of this process in China today are mounting financial risk which we see today manifesting in the Evergrande crisis it's an expression of excessive risk taking and excessive debt both in the public and private sector okay and again not a unique history we can find parallels in the last century in the united states and even earlier on in england so i'd like to end with two policy takeaways for the audience and for those who work on development and fiscal state building in africa so the first lesson i'd like to offer is that we must take history seriously by that i mean we must critically question and revisit accepted narratives about how european economies became modern if chinese english and american history is any guide alternative financing mechanisms are not only feasible in africa but they're also necessary now this doesn't mean that taxation isn't important obviously taxation is necessary for funding current expenditure for example paying public salaries operating schools and hospitals but we should keep in mind that large infrastructure and capitalist takeoff is largely dependent on land and credit like so these elements cannot be ignored when we are trying to understand the development process and fiscal capacity building and the second takeaway i'd like to offer everyone is that we should take a portfolio mindset when we think about physical management so for example if we look at the wealth of a person we don't just look at how much money he has in the bank now that's an important indicator of course if you want to buy a house you do need to make a down payment and you pay it out from your bank account but we also want to look at what assets this person has whether these assets can be monetized we want to look at his credit score we also want to look at his ability to turn credit into bigger value which will generate more income that he can put in his bank right so we when we think about evaluating a person's wealth we take a portfolio approach so similarly when we evaluate countries and their fiscal capacity we also must take this portfolio approach this means that managing land and credit should be considered side by side with taxation they're all important but they're very different because they serve different purposes and land and credit in particular presents a different set of opportunities and risk so i'm often for an instance asked to speak on conferences about the belt and road initiative which is a major and new source of infrastructure finance from china for africa but those types of conversations will be completely separate from that of taxation so we are carrying out important conversations in silos and i would urge the audience to go beyond the silo and really think from a systems and holistic approach about how different financial resources are all relevant how they're connected and how we need to manage them holistically including in africa thank you well thank you you and went for a very rich and interesting comparative perspective both historically and across country experiences i think that we we have had here a very nice set of interventions and we have about 20 let's say 15 20 minutes before closing so i would like to to ask my colleague alex uh are you with us alex yep you you have been monitoring uh possible questions from the audience or you may have yourself some questions to to bring to the floor for our panelists so um since we are opening up with here the debate i don't know if you if you have any question that you spot from participants or some observation and questions you want to throw to our panelists thank you very much Federico and thank you very much to the panelists that was wonderful i i had there's one question uh that has come in uh through the q and a function that mick has already spotted and would like to uh to respond to uh it's about the we there's been a lot of statistics quoted in uh during this panel discussion but there's a the quality of tax data emerging and other statistics as well from different african countries isn't always as good as from other regions and so mick would just like to respond to what that means for the analysis presented in this in this discussion so mick can i hand the floor to you yeah i wasn't sure i volunteered to answer that but if i did alex and i can um okay i mean i absolutely agree with the questioner um but i'm not sure many of us here actually disagree that much i mean we know that the tax to gdp and much has been written about this the problems of the tax to gdp ratio and particularly because gdp figures are not very good and occasionally get revalued um i mean those problems are gradually declining over time and the quality of tax data is gradually increasing over time in fact quite markedly so um yeah i don't think that's the the suggestion is particularly contentious and provided we don't try and take those tax to gdp figures as you know somehow absolutely true um and i think i mentioned that when i said it's actually hard to tell the trajectory of uh tax collection in africa because the the figures are so uncertain that you cannot really do robust statistical analysis that will give you a very clear trend let me just add that um my own paper was actually based on a different set of historical tax statistics on africa collected by lund university in sweden which are actually very interesting and essentially what they do is collect data on um how much money governments collect and what is the prevailing wage rate in rural areas for unskilled labor and can calculate for a hundred years how much revenue governments are raising measured in terms of how many uh days of unskilled labor in their economies they can purchase and again there are a lot of problems but actually it gives us from a point of view of you know the big picture historical story it gives us a very interesting story and it's quite an advance i think in uh tax statistics generally thank you thank you i i i will take my privilege as a moderator to to throw a question uh to all of you um building on what you and you and but also marina uh from the complementary or different perspectives you want uh suggested which which is the the importance of broadening uh the picture um and and looking of course at taxation but also looking at other assets uh non-tax uh sources of financing uh the capacity to borrow which as mic said at the beginning in the end is the litmus test of whether a fiscal state is in place whether markets are ready to lend you money thinking that you will have the capacity to tax and then reverse and so on the base of what you and you and said these two takeaways in particular the second one the need of a portfolio approach and looking at the broader set of assets that the credit history if we want to assess properly the capacity of the state the fiscal capacity and what marina also said of the need of looking at a broad set of capacities uh rule of law uh property rights statistical capacities etc what would you and they start with the other panels maybe kunal and um uh rose if she's still connected but of course then also um Antonio marina you even what is your takeaway on this uh is the the the research um adequately responding to this need are we looking at the broad set of issues and if it is the case what kind of um uh recommendation would we have in terms of practical reform agenda and for countries that are struggling to respond to the current crisis where fiscal capacities are basically destroyed um i don't know maybe kunal would you like to to give some talk to this i think i'd like to give the quote to antonio perhaps antonio would you like to answer with yeah the the thank you i mean it's not the easiest question to answer you know these are really big questions but it's worth trying i can uh you know i can give initial thoughts based on um on what we have done in the last year or so together with colleagues here today in the in the panel and and more more widely um so yes i mean i i guess colleagues who works working on this project on fiscal fiscal states we we all agree that is not just that the revenue authority so it's not just that the contemporaneous factors that make a fiscal state it's of course important to have a competent revenue authorities and for example mic has a has written a nice papers for us on africa telling us as he's done today how important this has been and you know and you know if i can go back to the figures i've showed before you see there that the picture is not bleak for for the african region so uh contemporaneous factors like focusing on improving the the revenue collection site the the practical side of revenue election with revenue authorities that has come up but it also has come up in the project that the other factors we have discussed here that are deeper more structural that is also something important to be aware of it's um political institutions like kunald was trying to argue so the fact that you have a political institutions offering checks and balances on the executive it's the historical conditions as uh un un was highlighting and it's also about tax less forms of finance not necessarily only the institutionalized taxation hopefully that is broad based there are other dimensions of being a fiscal state that are important so did un un as i like it that and the historical side of it marina uh similarly i think it was telling us that also the interaction between important functions of the state so the the ability to secure property rights on assets so that the legal capacity of states then can interact with the ability to to raise revenues so that there are complementarities there um and i could continue let's say more on this but this is just why i like to you know to not to answer your question for the legal is yes you know it's emerging that it's not just the contemporaneous factors explaining fiscal states and most of the findings we have in the project are papers on africa that's why also we have the panel today so not all the colleagues working on this are here but it comes to my mind now that the potel get adjusted and merima ali have a nice paper on the importance of colonial history in sub-saharan africa james robinson similarly as a paper on rwanda so this is emerging that it's not just what happens in the short term but it's also about the deeper structural factors so perhaps you know if you want to push it but it's a stretch at this stage we should the same policy terms it's not only what you can do with your revenue authorities look also at the structural conditions and what is there in these terms in your economy because that could explain why the gap in tax revenues is so persistent over time and there is no sense that the the advanced economies are converging with the developing economies so i can say it's important to be aware of this at this stage i think i would push it as far as this and i'll stop here thank you tonio also and i don't want to to quote anyone by surprise but the the argument that we're we're put forward but many of you were so interesting that they wanted to push a little bit and thank you for accepting the challenge i don't know if anyone else from the panelists would like to to chip in very shortly maybe in one minute before we wrap up and conclude i see you and you and you would like please thank you very much federico you always ask the most thought-provoking questions i wanted to very quickly respond to your question by first emphasizing that taxation of course relevant very important and we should continue this work but i want to emphasize first that we need to situate taxation in a big holistic picture of the whole portfolio and number two we need to strike the right balance so if we think about how many papers have we produced on physical extraction and compliance probably thousands or even tens of thousands by contrast how how often have you heard about taxless finance and the role of land and credit in fiscal capacity building virtually never right so we we have an imbalance in the amount of attention that we are paying to the whole portfolio if i had a chance to advise say a leader in a country in africa do you think his priority is extracting say five dollars from a street vendor i don't think so i think his top priority is how will his country mobilize taxless finance to build large infrastructure projects which in turn will create the centralized formal economy that makes tax extraction conducive right so i think that in terms of placing our attention we need to have the right balance we need to focus on what is most important to leaders in africa and and and then structure and allocate our attention proportionate to what are the most important things in the whole portfolio thank you thank you thank you you and you and i think that this is a very interesting suggestion also for the research agenda where maybe tax revenues will increase through a process of structural transformation of the economy that may require some push in terms of investment maybe ignoring if not treating informality as the problem but as a symptom of the situation and so looking at increasing tax revenue in a more dynamic way something that will happen once the economy is transformed at the same time as you say tax reform and taxes remain remains very important i think that here i will then conclude by by deriving some messages from the the various interventions starting from mic because mic laid out six key areas that that seem to be quite urgent to to feel to plug the hole in in the in tax revenues so extractively industries tobacco and alcohol taxation of multinational fixing the v it these are not easy to do but certainly very important to do a type of reforms and here at usd we have seen that even with modest investment we have a project called tax inspector without borders that else undertaking audit of multinational corporations this can have a tremendous effect if my memory is right i think that the the project of the tax inspector without borders raising more than one billion additional tax revenue in africa over the few years that this initiative has been in existence so taxation remain important there are certain priorities to be tackled there are also some relatively quick wins that could be undertaken but as rose told us when you look at the experience of the establishment of revenues authorities of decentralization of the tax system of the modernization tax systems there are also many complexities that remain unsolved and that have to do also with the nature with the structural factors of many african economies issues related to local economy decentralization the large informal economy in microns more enterprises and the challenges that come from trade and regional integration in terms of revenue collection this brings us probably to the other point that Kunal was was mentioning that in the end if you want to increase tax compliance it's all about politics i mean it's largely about politics and checks and balances but it's also about changing behaviors and putting in place effective mechanisms to match multinational individuals and and smith was saying rich individuals especially to pay and comply with the tax system this brings me to the message that marina shared with us that is about the fiscal contract and the need of looking at the at the fiscal contract with reference to both private and public goods and the importance of improving a broader set of frameworks and institutional capacities beyond taxation if we want to unlock the potential of taxation and she gave a very pertinent example with calisthenics and land registration as an important tool to increase property taxation with all of this i i'm sure that i didn't do i haven't done justice to the richness of your points i just wanted to summarize and before coming to a close i would like to share a word of thanks first of all to our panelists you have been fantastic super interesting second to our partners here united nation university wider and Manchester university thank you punal thank you and tonio for being such great partners and also to all those people that work behind the scenes that were not on screen here that made this event possible on one end the broad range of researchers and scholars that are participating in the project but that were not on screen today and on the other hand the support technical staff that made this possible in particular iva yuta ruby julia laura at the development center that really went the extra mile to make this event possible and a success i would like to encourage everyone to look at the website of u and u wider where you can find the whole set of papers related to the fiscal state project but we'll also do a little bit of advertisement for our own product we are about to launch on the 15 of december our revenue statistics in africa that we produced together with the african union and ataf and before closing the meeting i would like to ask maybe punal and antonio if you want to say a word of a final word um punal levy well thanks very much for the rica actually summarized everything so well i just want to say thanks to everyone who participated in this panel make marina un and rose antonio pederico alexander and of course all of those who actually made this thing that really happened as pederica said we are slowly getting the papers for our project and our website on our web page for this project so maybe they are not all there yet but they are slowly appearing we have mixed papers mixed papers that un's paper should be there shortly and so on but they are slowly appearing so within a month or so almost all the papers should be there so to keep up keep on looking at our web page for this project over the next month or so and you'll see the papers coming there are lots of very interesting papers and as well as you could say not all the papers obviously could not be presented today but they are quite sure quite a remarkable diversity of work is happening on this very important question of how to develop fiscal states in developing countries thanks thank you very much kunal and so this seems to me to be the the end of our beautiful two hours event thank you again thank you to all those who watched and participated and stay tuned more to come goodbye