A Twist on 'Trade Taxes' in the Rural Space

While there has been extensive efforts to lessen developing countries’ dependence on trade taxes, given economic distortions (Bastiaens & Rudra, 2016; Keen, 2008), it appears that regional ‘export’ and ‘import’ taxes within developing countries (between districts) represent as one of the most efficient forms of revenue mobilization in the rural space. Much of the literature on taxation in developing countries focuses on why countries are not taxing as much, nor often with instruments recommended by best practice and optimal tax theorists. And from a state-building perspective, there is interest in promoting more direct forms of taxation, such as property taxes, which should evoke revenue bargaining between state and citizen (Bahl, Martinez-Vazquez, & Youngman, 2008; Fjeldstad, 2017). I argue that we can understand the strategies of revenue mobilization in a poor state by thinking in terms of administrative and political efficiencies that constrain revenue actors at all levels of administration. I present a Model of Revenue Efficiency based on the degree of political and administrative efficiency of various potential sources of revenue. To investigate these questions and the applicability of my model, I embedded myself for five months in the revenue agencies of Togo; followed a fiscal control mission throughout the country to each of their field offices; and carried out extensive interviews in Benin. Taxes such as property taxes in these contexts are often rendered highly impractical by local circumstances – in part due to citizen demands on the state in exchange. Capturing income from ‘exported’ local produce and ‘imported’ illegal petrol as it crosses districts represents one of the only efficient sources of revenue in rural areas across these two states. This paper presents new perspectives the political and administrative motives driving revenue mobilization efforts.