Corruption in Public Financial Management and Procurement
Revenue administration and corruption
Written for U4 by Odd-Helge Fjeldstad - CMI (September 2005)
See also:
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Revenue
Administration and Corruption: What Works? Designing a Taxpayer Baseline Survey in Uganda
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Introduction
The aim of these issue pages is to identify and discuss major challenges, appropriate responses, and relevant tools for addressing corruption in revenue administrations.
How does corruption affect revenue collection, and what are the consequences for development indicators such as growth and poverty? These pages explore the driving forces behind fiscal corruption in order to facilitate a thorough understanding of the problem - a prerequisite for anyone who wants to succede in designing appropriate measures to improve the situation.
The text on these pages draws on available studies and evaluations addressing
the question of corruption in revenue administrations, as well as on the
author's own research. In this text the terms revenue administration and
tax administration are used interchangeably.
Limitations of the present donor approaches
These issue pages emphasise the economic, social, and political dimensions of anti-corruption reforms, and the limitations of some of the 'technocratic' approaches to institutional reforms taken by donors. Donor approaches have often overlooked the fact that reforming a revenue administration - although it has important technical aspects, is also a social and political phenomenon driven by human behaviour and local circumstances. It is often a long and difficult process that requires civil servants and politicians to change the way they regard their jobs and responsibilities, including their tasks and their interaction with citizens.
The text on these pages shows that fighting corruption in revenue administrations requires reformers to look beyond the formal structures of the central state - to the informal networks of patronage and social domination which often determine how political power is actually wielded. There is often an acute disjuncture between the formal rules that define institutional structure and functions, and the 'real politics' of how revenue administrations actually work.
Country specific and thematic knowledge on corruption ought to be combined with operationally relevant knowledge of corruption in revenue administration. Studies of particular countries that have managed to contain problems of systemic corruption, or of specific measures designed to fight fiscal corruption directly, may offer insights that are potentially replicable in other situations. They may also clarify the extent to which the experiences of one country or institution are transferable to others. Additionally, such research may produce evidence on the limitations of universal anti-corruption prescriptions, and also help to identify major constraints facing donor interventions.
What you will not find on these pages
These issue pages focus on corruption in national revenue administrations. This includes the institutions responsible for collecting the bulk of domestic revenues in the form of income taxes, value-added-tax (VAT), national sales taxes, excises, customs duties, etc. In practice, this includes revenue departments either located within ministries of finance or semi-autonomous revenue authorities.
Local government revenue systems are not included here, since this is the theme for a separate issue paper dealing with decentralisation and corruption. Moreover, revenues in the form of various licenses, fees, and fines are not covered by these pages. This effectively excludes (from these pages) licenses collected by various line ministries (e.g. hunting and fishing licenses), fines collected by the police, and tuition fees collected by ministries responsible for education, etc. This does not imply that corruption is not considered a problem in connection with such revenue sources - quite the contrary. However, the fact that these incomes generally do not represent major revenue sources, leads us to focus on national revenue administrations.
Since the focus is on corruption, the issue pages do not contain a complete
account of all the arguments, questions, and debates that concern the
reform and modernisation of revenue administrations. Nor do they go into
detail on issues that are covered elsewhere on the U4 web site. Certain
areas where corruption may play a role, but where there is no evidence
available, are also given limited attention.
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Public Financial
Management and Procurement |
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Budget process |
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Revenue administration |
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Fiscal decentralisation |
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Direct budget support |
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Public Expenditure Tracking |
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Procurement |
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Hannes Hechler
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| RECOMMENDED READING |
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“It is our money. Where is it gone?” is a short documentary, released by the International Budget Partnership, on an initiative, in Mombasa (Kenya) to involve communities directly in monitoring the Constituency Development Fund, a fund managed by Kenyan parliamentarians. Through social audits, communities monitored budgets and held their government accountable for managing the public’s money and meeting the needs of the poor.
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