Capacity for what? Reflections on the possibilities and pitfalls of strengthening the fiscal state

The question of how to tax – i.e. how to generate income for the generation of public goods and welfare – is one of the main subjects of both domestic and international policy debates. The mobilization and effective use of domestic resources is central to the pursuit of sustainable development, and improvement of domestic capacity for revenue collection is key to achieving the UN Sustainable Development Goals SDG (17.1). But, how does taxation play into broader patterns of state capacity and development in the contemporary world? We are witnessing an increased donor-focus on enhancing domestic taxation in partner countries, but there are clear limits to the number of new taxes partner countries can undertake. In this paper, we challenge and critically assess both the concept of a fiscal state and its application in contemporary development debates. Following Jeppesen et al. (2023) we distinguish between fiscal states rentier, non-fiscal, and debt states and argue that most African states cannot be understood as fiscal states. Domestic taxation requires a taxable surplus as without a tax base, there is no fiscal foundation for state-building and development. This conceptualization has implications for domestic revenue generation as well as development policy that are not adequately addressed in contemporary development debates.