Wednesday, 29 May 2013

Digging deeper: what is Democracy?

by Susanne Schirmer*

This blog also appears on the Participation Power and Social Change Team blog.

Recently several of my IDS colleagues and I attended network meeting organised by the Decentralisation, Democratisation and Local Governance Network (DLGN) of the Swiss Development Cooperation (SDC) in Aswan, Egypt. It brought together about 80 practitioners, policy makers and academics working on good governance and decentralisation from SDC and their partner organisations worldwide. The topic for the meeting was based on the quote ‘Democracy is when accountable local leaders promote inclusive participation’.

The meeting was set in the historic location of Elephantine Island in the middle of the river Nile, where excavations show layers upon layers of history from the 5th millennium BC up to colonial buildings from the 20th Century and a still inhabited Nubian village. Each civilisation destroyed, recycled or built upon the previous settlements, therefore leading to about 20m of historic settlements, one on top of the other. To me, the excavation was a good image for development work, showing that it sometimes takes quite a bit of ‘digging down’ to get through the various layers to the heart of an issue.

IDS colleagues from the Governance and the Participation, Power and Social Change teams attended the meeting to present research which did exactly that, i.e. ‘digging down’ into various related topics to explore hidden layers and to stimulate innovative thinking on how to produce improved, inclusive, transparent and sustainable development interventions at the local level. The research was undertaken as part of the DLGN funded project ‘The Governance of Service Delivery’.

Here is a summary of the research my colleagues presented:

Andrés Mejia Acosta and Jethro Pettit: A Combined Approach to Political Economy and Power Analysis

The purpose of political economy and power analyses (PEPA) is to explain power relations and political dynamics in the formulation, adoption and implementation of development initiatives. Despite having different backgrounds and methodologies, both frameworks share the common objective of unpacking the visible, invisible and hidden relationships between key actors involved in producing (or blocking) meaningful changes.

Anuradha Joshi: Context matters: A Casual Chain Approach to Unpacking Social Accountability Interventions

A common premise of development interventions is that context matters for development outcomes, yet there is little understanding of how exactly ‘context’ affects outcomes and which contextual factors matter most. The paper focuses on social accountability interventions, to explore macro and micro contextual factors. On the macro side, accountability processes need to take into account larger histories of citizen state engagement and related political processes. At the micro level, local factors can clearly drive the way certain social accountability interventions unfold and the extent to which they are successful, even within otherwise broadly similar contexts.

Mariz Tadros: Egypt’s Unfinished Transition or Unfinished Revolution? Unruly Politics and Capturing the Pulses on the Street

The paper focuses on Egypt’s transition, and cautions that if external political analysis fails to capture the pulse of the street in Egypt today, a situation much like that at the wake of the uprising of January 2011, where change happens through actors, spaces and mechanisms that are least expected, could come around again.

Rosemary McGee and Jethro Pettit: Outcome Measurement in Local Governance Programmes: A Power Dimension

This paper explores how outcome measurement is understood in several SDC local governance programmes, reviewed in a HELVETAS Learning Project. This critical review assesses the extent to which power issues are recognised, understood and tracked within such programmes and suggests ways to enhance this.

Shandana Khan Mohmand and Snezana Misic Mihajlovic: Connecting Citizens to the State: Informal Local Governance Institutions in the Western Balkans

Informal institutions, that lie wholly or partly outside formal state structures, have tremendous potential to strengthen citizen participation, encourage inclusive decision-making and promote improved service delivery at the local level. The authors discovered that local informal governance institutions are widespread throughout former Yugoslav countries, but empirical research on these models is limited. The paper reviews the existing literature and reported practice in Bosnia and Herzegovina, Croatia, Macedonia and Serbia. The authors’ key question is, ‘how do informal local governance institutions facilitate relations between citizens and the state around service provision and other governance functions’?

Joanna Wheeler: using visual methods

Joanna presented two different projects that use visual methods as part of their process. The first, a digital storytelling project in Mozambique, and the second, a capitalisation project in Bosnia Herzegovina where Joanna Wheeler and Tessa Lewin have been working with OneWorldSEE and MDPi on a project that uses both digital storytelling and participatory video

More research undertaken as part of the SDC funded project can be downloaded from the project page.

*Sue Schirmer is Project Coordinator for the project 'The Governance of Service Delivery'. She is also Communications Coordinator for the Participation, Power and Social Change team at IDS.

Friday, 24 May 2013

The Great Tax Awakening? Three Reservations

By Mick Moore 

Never has there been such extensive popular and political interest in tax reform. Never have so many governments declared that they intend to change the global tax system and ensure that transnational corporations pay their fair share. Never have arcane issues like ‘transfer mispricing’ received so much media coverage. And never have there been so many promising indicators of real policy change. 

Pressures from American and European legislators and tax authorities have cracked open banking secrecy in Switzerland and Luxembourg, and may end it entirely. Other tax havens are facing the same prospect. The European Union is contemplating a major shift toward a form of ‘unitary taxation’ of transnational corporations. Large British companies have lost much of their appetite for battling with Her Majesty’s Revenue and Customs, and are complying in cases that they would have contested only a couple of years ago. The forthcoming G8 and G20 meetings have crystallised concerns that have been building since the 2008 financial crises, and raised hopes of reforms that will benefit rich and poor governments alike, and ordinary people and businesses worldwide. There is still a good chance that these reforms will happen. But we need to watch out on three fronts in particular.

Most pressing (and feasible) tax reforms gradual, procedural and legal

First, the reforms that are needed now in the global systems for taxing transnational corporations and high net worth individuals are not the dramatic ‘stroke of the pen’ changes that we can easily monitor. It may make sense in the long term to move to a completely new system of ‘unitary taxation’ for transnational corporations. But that will be in the long term. Most of the reforms that are feasible and needed at this moment take the form of legal and procedural changes in complex domains accessible mainly to specialist professionals.

We should, for example:
  • greatly extend mechanisms for the automatic exchange of information among national tax authorities; find ways of putting an end to ‘beneficial ownership’ – secrecy about the real ownership of companies, foundations and trusts; 
  • motivate transnational corporations to account for their activities and profits in detail, and in a common format, for each country in which they operate; 
  • create a mechanism to make it possible to revise the thousands of bilateral tax treaties in existence without re-negotiating each one separately; 
  • agree on a common global anti-abuse rule and a way of sharing information among tax authorities about aggressive tax avoidance schemes; 
  • make it easier for tax and police authorities to share the information they need to tackle the inter-related problems of corruption, money laundering and tax evasion. 
It would be easy for governments to make grand declarations, but not do all the follow up work that is needed for effective delivery. How will we know whether they really are are putting their money where their mouths are?

Northern domination the global tax system - who will reforms benefit?

Second, all the changes mentioned above are driven, directly or indirectly, by the urgent needs of most rich country governments to raise more revenue to meet their huge fiscal deficits. Those governments, along with the EU and the OECD, dominate the global tax system. There are reasons to be optimistic that the kinds of reforms they are contemplating will also be of benefit to developing countries. We can be fairly sure that the national tax administrations of the BRICs (Brazil, Russia, India, China and South Africa) and other large, middle income countries like Turkey will welcome and be able to cope with these changes. They have the skilled personnel and the IT systems needed effectively to process the large increases in inflows and outflows of information that the reforms require. But it is far from certain that the same is true of most poorer, smaller developing countries. They are anyway almost unrepresented in the current global debate. Their national tax administrations could be overwhelmed by the outcomes, and find themselves net losers, devoting so many resources to supplying data to the rest of the world that they are unable to take advantage of the wider access to information that they will nominally enjoy.

The extension of the principle of automatic information exchange among tax authorities will anyway have to be carefully calibrated. It cannot be automatic, for all countries, instantaneously. The information that is used to collect taxes can also be employed for purposes of blackmail and extortion. We already see a few governments using Interpol international arrest warrants to harass political opponents rather than to apprehend criminals. Concerns about the possibility of tax information being misused are legitimate – but could also become a pretext for excluding many poor developing countries from international arrangements to exchange tax information. Those that are excluded will be at a real disadvantage.

Can the political momentum be sustained?

Third, the coalition of forces that has helped make tax so prominent on the contemporary political agenda may not endure over the period needed to ensure that reforms are real and sustained. National governments have not generally played leading roles in creating the reform agenda. We owe much more to the combination of (a) a very impressive set of advocacy and campaigning organisations like Action Aid (who have published a report on tax havens today), Christian Aid, Oxfam, Global Witness, Tax Justice Network and UK Uncut and (b) authoritative international organisations like the European Union, the IMF and the OECD. But the two do not always work well together. In particular, some of the advocacy organisations also campaign actively against the international organisations, sometimes on grounds that I would characterise as populist and diversionary – most notably in criticising the extent to which the IMF has been an active proponent of Value-added taxes.

It is a good time to celebrate the progress that is being made in setting the stage for serious global tax reform. But it is not the time to relax, to assume that the interests of the poorer countries will really be taken into account, or to indulge in fractious politics over minor issues.

Mick Moore is CEO of the International Centre for Tax and Development (ICTD) and Research Fellow at IDS.

Other Governance and Development posts on tax:

Wednesday, 22 May 2013

The good and bad news from Pakistan's May 2013 elections

by Shandana Khan Mohmand

The Pakistani election of 11 May 2013 marked many positives in Pakistan’s political development, and just as many negatives.

Tentative steps towards democracy

It has been depicted as the making of history, for the fact that it marked the end of the first ever completed term of a democratically elected government, and the first ever democratic transition of power. This is only partly true. The oft-repeated fact of this being Pakistan’s first ever full 5-year term has been intriguing right from the start. Zulfiqar Ali Bhutto’s government, elected in 1970, completed a full term, albeit after a very shaky start during which the country split into two (with the creation of Bangladesh). Previous elections have also been far more historically significant. The 1970 election marked an incredibly dramatic transition from the 11-year military rule of General Ayub Khan, and brought into power Pakistan’s first ever elected government. The 1988 and 2008 elections were significant for the same reason, and marked the transition to democratic rule from the military dictatorships of Generals Zia-ul-Haq and Pervez Musharraf respectively.

The historical significance of this most recent election lies in the fact of one democratically elected government completing its 5-year term and then peacefully handing over power through an election to another elected government, with the election result and handover being accepted by all concerned parties, barring a few allegations of rigging. That certainly has never happened before. While the three elections mentioned above marked transitions to democracy, this is the first to signal Pakistan’s tentative move towards the consolidation of democracy.

Strong voter turnout despite the threats of violence

Other positives include a phenomenal increase in voter turnout. The average turnout for the 8 elections held between 1977 and 2008 was 40%, with the highest being 47% in the 1977 election (International IDEA). Since then fewer and fewer Pakistani voters have chosen to step out and vote on election day. This time the figure is about 55% (according to some closer to 60%), and this despite the fact that it was an election with the greatest ever threat to the regular voter.

Since about April, the Taliban were reported to have distributed pamphlets in various cities warning people against coming out to vote. There was a strong fear that voters would be targeted as they lined up at polling booths. And yet over 50 million voters lined up on 11th May, earning Pakistan the label “the world’s bravest democracy” from one columnist.

Emergence of a third national party

The turnout has much to do with the emergence of a new party – the ex-cricket captain Imran Khan’s PTI – that ran a strong campaign to get out the vote. Its main incentive for doing so was the perception that its largest vote bank lies within Pakistan’s young voters – 48% of Pakistan’s voters are below the age of 35 – and if they could get this group to vote, the party could get quite close to a majority win.

The irony is that though they managed to get the vote out, not all new voters cast their vote for the PTI, choosing in many cases to vote instead for the country’s older parties. Nevertheless, the larger voter turnout and the emergence of a significant third force in what was fast becoming a two-party competition between the Pakistan People’s Party (PPP) and the Pakistan Muslim League – Nawaz (PML-N), are definite contributions of the PTI.

Lack of a level playing field

There are two main negatives, besides of course the allegations of rigging and the fact that the winning party’s seat tally is beyond many expectations (an expert survey by a leading news magazine, published on the eve of the election, gave the triumphant PML-N an average of 35% of the seats in the National Assembly. It ended up getting 45%, or 125 out of 272 seats).

First, it seems no party except the winning PML-N had a level playing field. The PTI and its supporters believe that they have been cheated out of seats that they had expected to sweep, and have directed these allegations against both the PML-N in Punjab and the MQM in Sindh. More importantly, the incumbent PPP, along with two other secular parties, the ANP and MQM, were unable to run campaigns because of terrorist threats and the targeting and execution of some of their candidates. The impact was clearly reflected in their abysmal seat tallies.

Conservative values supported by the youth vote

Second, the election was won by parties on the right, and revealed the growing number of youth to be particularly right leaning. The major electoral agendas that carried the day were corruption, drone attacks, nationalism and anti-Americanism, and promises of infrastructure development. Poverty reduction, labour issues, minority rights and tax reforms were almost entirely absent from the electoral discourse. The winners are admittedly not religious fundamentalist parties (who received less than 0.05% of seats in the National Assembly), but they are certainly conservative and promise nothing in their agendas that can be considered socially transformative. And this the newly mobilised youth has no issues with.

Shandana will be giving a seminar on the elections at the Institute of Development Studies on 23 May.