State and Democracy Public Finance and Administrative Reform

Taxes and culture – Tax Reforms for Sustainable Development Fiscal Studies No. 5

PPuubblliicc FFiinnaannccee aanndd AAddmmiinniissttrraattiivvee

RReeffoorrmm SSttuuddiieess

Published by: Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH Dag-Hammarskjöld-Weg 1-5 65760 Eschborn IT +49 61 96 79-0 F +49 61 96 79-11 15 E info@gtz.de II www.gtz.de/public-finance Division: State and Democracy Public Finance and Administrative Reform, OE 4222 E public-finance@gtz.de Contacts: Dr. Matthias Witt, Head of Public Finance and Administrative Reform Dr. David Nguyen-Thanh, Team member Public Finance and Administrative Reform Person responsible: Bernd Hoffmann, Director of Division State and Democracy, GTZ Editor: Dr. Matthias Witt Authors: Prof. Dr. Herbert Edling (FH Osnabrück) and Dr. David Nguyen-Thanh In cooperation with: Isolde Bielek, David Lahl, Dr. Birger Nerré (IWH), Philipp Schattenmann The authors thank following persons for their helpful comments: Heike Backofen-Warnecke (BMZ), Dr. Bernhard Trautner (BMZ), Dr. Lothar Bublitz (FA Hamburg-Altona), Bernd Friedrich, Udo Lautenbacher (FA Hof) as well as following GTZ colleagues: Dr Albrecht Stockmayer, Katrin Schneider, Ruth Bigalke, Hannes Hechler. Eschborn, August 2006

AAbbssttrraacctt

Taxes and culture: both concepts are attracting greater interest in discussions on development policy. This study investigates the connection between the two phenomena having regard to current discussions on the cultural relevance of development cooperation on the one hand and the role that tax reforms play in sustainable development in the wake of the Paris Declaration on Aid Effectiveness on the other. It has been motivated by increasing criticism of the approach adopted in development policy towards taxation, namely, that expert advice provided to developing countries fails to reflect cultural framework conditions. The study identifies cultural factors which influence tax policy and administration, taxpayers as well as the interrelationships between these actors. It reveals a complex interrelationship between culture and taxation in which political culture plays a central role: the prevailing form of governance and perception of the government influence tax morale and the possibility of tax reforms, whereby the latter affect the way citizens relate to the state.

In conclusion, the study presents a number of recommendations for political actors involved in the provision of development and technical cooperation. One important recommendation is that, owing to the importance of state revenues for the attainment of MDGs and sustainability of programme-based approaches (PBA), German development cooperation should pay increased attention to the subject of “tax reforms” in political dialogue between donors and donees within the framework of good financial governance. It is argued that donor and partner countries should be able to estimate the possibilities and boundaries of culturally sensitive tax reforms in order to agree upon a common approach to programmes in accordance with the Paris Declaration. In future, therefore, the approach to providing expert advice in taxation should be scrutinized to ensure that it takes sufficient account of culturally-relevant aspects.

CCoonntteennttss

1. Introduction....................................................................................................................3

2. Classification for Purposes of Development Policy ..................................................4

2.1 Tax reforms in Development cooperation..............................................................4

2.2 Culture and Development ......................................................................................7

3. Culture and Taxes: Defining Terminology and Problems .........................................9

3.1 Concerning the Term Culture ................................................................................9

3.2 Culture in Terms of Taxation ...............................................................................10

3.3 Taxation and the Form of Government................................................................13

3.4 The Perception of Government and Taxation......................................................15 3.4.1 Sense of Justice.....................................................................................15 3.4.2 Efficiency of State Action .......................................................................17 3.4.3 Legitimation of State Action ...................................................................17 3.4.4 Reliability of State Action .......................................................................17

3.5 Culture, Corruption, Taxation...............................................................................19

3.6 Networks, Religion, Solidarity ..............................................................................21

4. Culture and Tax Policy................................................................................................24

4.1 Cultural Factors Determining Tax Policy .............................................................24

4.2 Culturally-Aware Reform of Tax Policy: Reference Points for Development Policy .............................................................................................26

5. Culture and Tax Administration .................................................................................27

5.1 Cultural Factors Determining Tax Administration ................................................27

5.2 Culturally-Aware Reform of Tax Administration: Reference Points for Development Policy ............................................................................................28

6. Conclusions and Recommendations for Development cooperation .....................30

6.1 Conclusions .........................................................................................................30

6.2 General Recommendations for Development cooperation..................................31

6.3 Recommendations for Technical cooperation .....................................................31 6.3.1 General Recommendations for Technical cooperation..........................31 6.3.2 Further Questions ..................................................................................32

6.4 Outlook ................................................................................................................33

Notes ..................................................................................................................................... XI

Bibliography ............................................................................................................................I

DDiiaaggrraammss aanndd TTaabblleess

Diag.1: Major Actors in Taxation .....................................................................................12 Table 1: Tax and Customs Revenues in Developing Countries according to Region .........5

BBooxxeess

Box 1: The Introduction of Value-Added Tax in Ghana ....................................................6 Box 2: Non-Monetary Tax Payments in Russia ................................................................7 Box 3: Introduction of VAT in Japan – the Role of Culturally-Aware Reforms ..................8 Box 4: Voluntary Tax Compliance...................................................................................11 Box 5: Islam and Taxation ..............................................................................................16 Box 6: Russia – the State as a Partner in Negotiations ..................................................18 Box 7: The Role of the Chief in Ghana ...........................................................................22 Box 8: The Russian Orthodox Church and Taxation ......................................................22 Box 9: Burial Tax in Burkina Faso...................................................................................25

3

“Efficiency may matter – but only if a culture conducive to payment already exists. If that culture does not exist among tax payers, then technical efficiency measures may have no effect. And it is also possible that, if increased technical efficiency is not based on an accurate understanding of the culture among tax payers, it may have no effect – or it may reduce the effectiveness of tax collection.” (Friedman, 2003)

11.. IInnttrroodduuccttiioonn

The increasing importance attributed to sustainable state financing as the driving force behind development has meant that donor and partner countries are taking a closer interest in developing more effective approaches towards taxation. However, developing countries are rarely successful at increasing levels of self-finance and improving governance in public finances. The main criticism of existing approaches is that, despite being excellently prepared in theory, they are wholly or partly impossible to implement. The explanation for this situation is often that concepts of reform are not designed according to the needs of the country in question and inadequately reflect cultural conditions on location.

The aim of this study is to isolate culturally relevant factors in taxation within the context of development cooperation. This will enable implementation organizations to provide more effective support to the process of tax reform in developing and transformation countries.(1) The study intends to promote international discussion on ways of improving development cooperation in the field of taxation and on the approach (if identifiable) to adopt within the framework of sustainable state reform. The scope of this study does not include taxation of the cultural sector and cultural-economic questions.

The second chapter classifies taxes and culture in terms of development-policy. It explains the relevancy of tax for development policy and explains why existing approaches have failed.

The third chapter forms the core of the study. Using the general meaning of ‘culture’ as a basis, the chapter begins by defining what, for the purposes of this study, ‘culture’ actually means in terms of taxation. It reveals that there is a complex interrelationship between culture and taxation. It is argued that important manifestations of political culture, particularly the form and predominant perception of government, are central to development policy. This is explained by the fact that the web of relationships between citizens (as taxpayers), and the state (including bureaucracy) is a crucial factor of taxation because it can influence taxation morale and, as a rule, the possibility of tax reforms. On the other hand, the perception of the tax-collecting state affects the way that citizens relate to the state in general. Further sections of the chapter examine themes dealing with the relationship between culture, corruption and taxation because, according to one hypothesis, awareness of the cultural context can improve the effectiveness of anti-corruption measures. They also examine the importance of networks and religion.

Chapters four and five examine the influential cultural factors so far identified in relation to key areas of tax policy and administration. They outline starting points for development cooperation. The final chapter presents the conclusions of the study and puts forward recommendations for development cooperation.

4

22.. CCllaassssiiffiiccaattiioonn ffoorr PPuurrppoosseess ooff DDeevveellooppmmeenntt PPoolliiccyy

Taxes and culture, i.e. the reciprocal influence of cultural factors on a country’s tax system and, vice-versa, the effect of taxation on the perception of government and culture, is a relatively unknown theme in academia and practice. However, both terms are attracting increased attention in development policy circles. Following Monterrey and, in particular, the Paris Declaration on Aid Effectiveness, the international community now recognizes that public finances and the mobilization of domestic resources are central to a more effective form of development cooperation. At the same time, the theme ‘culture and development’ is becoming more important for tax reforms within the context of development cooperation.

2.1 Tax Reforms in Development Cooperation

The relevance of efficient revenue systems to development policy and reform initiatives to improve them recently became evident at discussions following the Paris Agenda. New forms of development cooperation, particularly programme-based approaches (PBA), place additional demands on the public finances of budget support countries. Tax reforms to improve ploughback capacities now form an important element of comprehensive PBA strategies: as a result, PBA is not only capable of acting as a crucially important lever for the modernization of taxation systems. Rather, it works both ways: i.e., devising a system of taxation focused on poverty and growth will increase a PBA’s chances of success.(2)

In general, tax reforms affect the degree of ploughback(3) and economic development of partner countries.(4) Increasing the degree of ploughback is an important condition for more sustainable state financing because it facilitates the reduction of state debt and/or the financing of investment which promotes growth. Regarded in this light, taxes represent the most fundamental contribution to sustainable state reforms.(5) They can improve the willingness of citizens to participate and act as a lever for greater domestic accountability, thereby contributing to good governance. In addition, higher levels of plough-back can finance an expenditure policy focused on poverty and gender equality.(6) These reasons have persuaded the Federal Government to gear its own development policy towards the improved use of a state’s own resources. (7)

Besides this fiscal objective, taxes in advanced political economies also serve diverse non-fiscal aims. Accordingly, tax incentives are used in an attempt to drive policies aimed at anti-cyclical stabilisation and growth.(8) Furthermore, instruments of tax policy are often used to correct the distribution of income(9) and distributive market failure arising in the market process (e.g. negative external effects in the form of environmental pollution caused by production). Targeted tax policy measures can also be used to attain desired social aims: e.g. a gendered tax system can promote political efforts at gender equality. (10)

Taxation includes tax policy and tax administration. The latter plays a crucial role as an “intermediary” between the government and taxpayers.(11) Development projects which provide expert advice on taxation help to reform the design of individual taxes or the whole tax system under specific, defined aspects. Methodical, technical, institutional and organizational improvements together with qualified personnel enable financial administrations to design effective and efficient taxation procedures thereby promoting transparency, the rule of law and equality. Particularly in relation to the operative area, this satisfies the preconditions for effective anti-corruption measures and thereby constitutes a direct contribution to good financial governance. (12)

5

An improved, more equal and equitable application of tax procedures can lead to greater acceptance by taxpayers and, possibly, increase the “voluntary” payment of taxes (‘quasi voluntary compliance’). It can also increase citizens’ control over politicians and bureaucrats. Equal opportunities for taxpayers with respect to treatment by tax officials can be improved (justice in the sense of fairness) and the willingness to participate increased (citizens increasingly express their preferences). As a result, the government and bureaucracy perceive a greater need to justify their actions (strengthening democracy and good governance). (13)

In the long-term, taxation probably plays a more important role in attempts by development policy to strengthen democracy and improve governance than other forms of financing such as loans or budget support. It is precisely the importance of taxation which makes it unsurprising that the approach to development policy, the practical contents of expert advice and the services offered by expert advisors are now being subjected to increasingly attentive and critical observation. (14)

Table 1: Tax and Customs Revenues in Developing Countries according to Region (in % of the BIP) Tax Revenues Customs Revenues Import Duties Export Duties early early early early early early Country Sub-division) 1990er 2000er 1990er 2000er 1990er 2000er America Sub-Saharan Africa Central and Eastern Europe and BRO2) North Africa and the Middle East Asia and the Pacific Small Islands Developing Countries3)

14.9 16.3 27.3 15.1 13.6 25.5

17.9

16.3 15.9 23.4 17.1 13.2 24.5

17.6

2.5 4.9 1.4 3.6 3.2 13.5

3.9

1.9 3.5 0.9 3.0 1.9 9.7

2.7

0.2 1.0 0.8 0.1 0.3 0.3

0.5

0.0 0.4 0.4 0.1 0.2 0.0

0.2

Source: Gupta et al. (2006) 1) Sub-groups are limited to developing countries 2) Baltics, Russia and Other Countries of the Former Soviet Union 3) Unweighted Average of Low- and Middle-Income Countries

However, as far as the existing expert advice provided by bilateral and/or multilateral donor organizations is concerned, the results are disappointing. Advances in reform efforts often lag behind expectations and planned objectives. In last decade, partner countries have failed to increase the level of ploughback. A comparison of the early 1990s and the early 2000s in Table 1 reveals that, in a large number of developing countries, the contribution made by tax and customs revenues to the gross domestic product stagnated. In Sub-Saharan Africa, the share of taxation even fell from 16.3 to 15.9 percent – demonstrating that independent financing of sustainable, poverty-reducing development cannot be guaranteed in the foreseeable future. In addition, many new tax systems do not even satisfy widely accepted formal requirements for a “good” tax system such as neutrality, fairness/justice and administrative simplicity. Where such requirements appear satisfied, it turns out they have not been implemented or enforced. There is hardly any pursuit of a systematic strategy of tax policy which is attuned to national development priorities, processes of reducing poverty (PRSP) or a medium-term expenditure framework (MTEF).

6

There are many reasons for these experiences and developments, including political and conceptual deficits. The introduction of value-added tax in Ghana during the 1990s illustrates the important role that good (i.e. country-specific) reform management plays in the success of tax reforms (see Box. 1). Accordingly, development initiatives relating to taxation often lack political support and the institutions involved lack the motivation to implement them. In some cases, the donor community is more interested in quickly committing funds, sometimes at the expense of promoting the mobilization of internal resources. (15) In addition, experience of development cooperation and research findings suggest that the increasing flow of donor funds in the form of grants prevents a state from fully exploiting its own tax potential.(16)

Box 1: The Introduction of Value-Added Tax in Ghana Value-added tax (VAT) was introduced in many African countries as part of efforts to modernize tax systems. It replaced the old sales tax procedures which were not very productive because the basis for calculating taxes was very narrowly defined. They were also a source of injustice and the incentives they offered were flawed. Despite this, several planned reforms ran into stiff opposition – sometimes in the form of violent protests by the population. In Ghana, the introduction of this tax in the 1990s had to be repealed after just three months. A second attempt at introduction proved successful – but only years later. The failure of the reform was primarily due to “technical errors”. On the one hand, the tax rate (which was set upon the introduction of the VAT) was significantly higher than the one which applied for sales tax. On the other hand, the introduction of VAT was badly timed because inflationary tendencies (which existed at this time in any event) were aggravated by an above-average rate of crop failures. Furthermore, the introduction of VAT was inadequately prepared. Parliament had only passed the legislation three months beforehand with the result that it was impossible to properly prepare the consumers and traders for the information campaign. Arguments between the customs authorities previously responsible for sales tax and the newly-created VAT Service (an independent tax authority for the VAT with a newly established computer system) complicated its introduction. Finally, there were also some technical difficulties including the choice of a turnover threshold which was too low for the VAT duty and which placed additional strain on the administrative capacities of the VAT Service. That said, resistance might also have been due to a general impression that the reforms were only being carried out at the behest of international donors. After all, the government and donor countries had failed to involve important local figures such as the trade unions and employers’ associations when planning the introduction of VAT. On the second attempt in 1998, these mistakes were avoided. Parliament passed the VAT legislation ten months before the introduction of the VAT, thereby allowing more time for an information campaign and training measures. The VAT rate was set at the relatively low rate of 10%, and the turnover threshold for the VAT raised considerably. Certain products were exempted from taxation. As a result, the second attempt to introduce VAT was deemed a success.

Source: DFID (2001), Weltbank (2001)

Of all the planning faults, the inadequate coordination between reforms relating to material tax law and the tax administration deserves particular attention. This finding is mainly supported by the experience with stabilization and structural adjustment programmes during the 1980s under the auspices of the IMF and World Bank. In the event, many attempts by the IMF to reform taxation in developing countries failed largely because their administrative capacities were incorrectly assessed.(17)

A central challenge facing current efforts to implement the Paris Agenda is the frequent observation that at all stages of a project or programme, donor coordination is inadequately based on the division of labour. As a result, it frequently happens that different donors provide expert advice not only in relation to the tax administration and design of the tax system but also within the tax administration and even in individual administrative areas, such as external auditing, without maintaining a coordinated division of labour. In the worst cases, this leads to contradictory taxation initiatives, which probably provokes rent-seeking activities. Owing to the large number of technical assistance (TA) initiatives in the field of

7

taxation, the partner organizations often reach the limits of their absorption capacities thereby jeopardizing the attainment of project objectives. (18)

2.2 Culture and Development

Experience with technical assistance shows that even technically and economically well-planned projects and programmes do not always meet development aims. Against this background, culture and development is increasingly regarded as a contributory factor in the success and failure of development efforts. Bliss (2001) und Fukuyama (2001) provide an overview of important factors. In recent years, the BMZ and GTZ have established initial reference points for dealing with this subject in the context of German development cooperation. (19)

In this respect, it is assumed that the stimulant for switching to transferred values, rules, attitudes and practices in development cooperation will not be sacrificed for “cultural relativism” or a misunderstood departure from ‘cultural imperialism’. (20) Although Copland/Criggs are surely right to suggest that there is no “cultural right or wrong, just differences …” and criticism of culture often affronts identity and the sense of self-worth (Landes 1998), project and programme partners must be made aware of any negative consequences that their conduct could have on certain objectives. (21)

Box 2: Non-Monetary Tax Payments in Russia Before 1998, the Russian financial authorities used to enter into so-called “barter transactions” with companies in order to satisfy their tax claims. Therefore, in order to pay the tax debt owed to the tax authorities, taxpayers were able to deliver goods to the state or deliver consignments of goods to state recipients which were then set off against the tax debt retrospectively. Admittedly, these tax payments in non-monetary form did not alter the amount of tax officially owed but, in practice, it was possible to reduce the tax debt considerably by over-valuing the goods. Due to this and other reasons, this form of tax payment was prohibited in 1998 after it had accounted for over 70% of the consolidated state budget in 1997.

The cultural background to this demonetarisation of tax payments was, on the one hand, that both the companies and state institutions from the era of the Soviet planned economy were familiar with the mechanics of non-monetary payment methods. Even during Soviet times, many companies employed workers whose task was to obtain deliveries required for production by skilful bartering. An existing organisation of barter chains meant that they did not have to face any new challenges in post-Soviet Russia. On the other hand, certain aspects of the post Soviet economic system such as “soft budget constraints” or the inconsistent application of bankruptcy law favoured the retention of such payment methods. (Pleines, 2002).

Source: Nerre (2002)

In addition, Lavoie (2000) justifiably points out that there is no such thing as “culture-free” development cooperation.(22) In other words, the conception of the democratic state and good governance by means of transparency, accountability, political participation and freedom from corruption is just as value-based as the demand for gender equality and increased women’s rights. Ultimately, development cooperation comes down to adapting such values on location by means of dialogue with the partner whilst taking into account prevailing cultural characteristics and their possible change.(23)

Critics are increasingly pointing out that tax reforms do not adequately reflect cultural aspects, being all too often planned and implemented according to western ideals. It is argued that the expert advice provided uses concepts which rely too heavily on uniform implementation strategies, reflect the experiences and value systems of donor countries and are far removed from the cultural conditions existing in the countries or target groups.(24) However, if the project or programme does not then meet its aims, partner countries are

8

often quick to allege a lack of ownership without reference to other relevant factors. In Russia, for example, it was the tradition of non-monetary payments dating from the era of the Soviet planned economy which obstructed the successful introduction of modern methods of levying taxes (see Box 2).

According to Fjeldstad (2005), an important reason why many reforms of tax administration in developing countries have failed lies in the excessively technocratic approach of reformers and donor organisations. All too often, reforms are regarded as an ‘engineering problem’ and, accordingly, as a phenomenon which can be tackled using ‘blue print’ or ‘text book’ solutions. It is therefore assumed that problems and their solutions can be worked out in advance and the required measures precisely defined at the outset of reform and implemented within a certain period according to a fixed timetable. In this regard, Klitgaard (1997) refers to a ‘more approach’, i.e. more training, more equipment and more expert advice.

Box 3: The Introduction of VAT in Japan: The Role of Culturally-Aware Reforms The proposal submitted by the leading American commission on tax reform which was set up after the Second World War – the so-called Shoup Commission – to introduce a Value Added Tax (VAT, fuka-katchi-zei) in Japan, which would flow into the local budget, ran into massive opposition from the Japanese business world and society in general.

There were two reasons for the opposition; first, the Japanese business structure and, secondly, the design and nature of this technical variation on sales tax, which was revolutionary at the time. The Shoup Commission had proposed using the difference in value between a company’s gross income and the acquisitions made by other companies (pre-sale deductions procedures). Accordingly, the tax would have included the wages paid and, depending on its design, the interest and dividends paid according to the principle of immediate deduction or the pro rata temporis deduction. It was generally believed that the tax would therefore disadvantage and even punish companies which employed a high number of employees. In addition, introducing VAT in this form would have meant that the smallest companies linked to industrial conglomerates (Keiretsu), would not have been able to pass on the VAT any further. As a result, the smallest companies would have been forced to bear the entire burden of the tax. This would have collided with the duty of the “big players” to safeguard the welfare of “the small players”, which was a feature of Japanese culture, thereby representing not only a problem of acceptance but a serious interference with Japan’s social contract at this time.

The problems which arose in connection with the new form of taxation had a long-lasting effect. Despite its successful introduction in Europe, South-East Asia and Central and South America, it was not until November 1987 that VAT was introduced into Japan following the passage of the relevant legislation and even then it was delayed until April 1989. Moreover, the VAT did not reflect its original design and ended up resembling a consumer tax.

Source: Nerré (2002a)

For some time, it has been observed that countries often attempt to pay sufficient attention to relevant cultural aspects when conceiving the form of cooperation and planning projects and programmes.(25) Once existing cultural conditions accord (at least to some extent) with tax laws and the administrative structure as well as established taxation procedures (i.e. taxation is accommodated by the cultural conditions and, e.g., complies with certain culturally-determined notions of justice), will it be possible to further reduce any known deficits in tax advice. Only then will it be possible to raise taxes at all or raise taxes with far less effort and expense and with far less risk of political rejection. The Japanese example shows how sensitively actors can react to the implementation of a tax which disturbs the traditional social contract (see Box 3).

9

33.. CCuullttuurree aanndd TTaaxxeess:: DDeeffiinniinngg TTeerrmmiinnoollooggyy aanndd PPrroobblleemmss

3.1 Concerning the Term ‘Culture’ There are few terms more ambiguous than “culture”. In its broadest sense, culture embraces everything created by the hand of man. Culture affects and moulds every aspect of human life. Culture is everywhere (26) and makes its presence known through countless behavioural practices. For purposes of this study, culture represents, on the one hand, the sum of all factors influencing the conduct of individuals and people towards each other within groups and conduct between groups, societies or organizations. Cultural factors comprise values, notions of values and value systems (e.g. trust, honesty, and religion), customs and traditions (e.g. food, clothing, forms of politeness) as well as convictions (e.g. regarding the efficiency of public authorities) and attitudes (e.g. work ethic, willingness to cooperate and solidarity) and role models (gender identities, division of labour according to gender as well as generations, ethnic groups and classes).

On the other hand, one corollary of this definition is that culture also reflects the organisation of human co-existence. Rules and institutions, which help define relationships (of power) between genders and social groups, are also cultural or socio-cultural factors. Finally, in this context, the term ‘culture’ also refers to a society’s state of development. (27) For example, a country’s information and communication systems used in the administration are also to be regarded as a cultural factor. The BMZ designates all those medium-term, stable characteristics unique to a certain society (i.e. which are distinct from those in other societies), to be cultural factors. Such factors are to be considered socio-cultural if they perform a role in the functioning of a society (BMZ, 1992).

Culture or cultural factors are constantly changing. Culture cannot therefore be considered a natural phenomenon, something static or intransigent which a society must live with, nor a result of conditioning, in the sense of being received, learnt and transferred from one generation to another. Rather, culture is moulded and changed by human beings. At the same time, it is important to grasp that culture also exerts a formative influence over the values of human-beings, their attitudes, convictions and behavioural practices.(28) Viewed from an institutional perspective, culture therefore represents one of the most important institutional arrangements of a society.

This mutual dependence between culture as a personal orientation and culture as an institutionalized web of rules is overlaid by a strong mutual relationship in which the various cultural facets (e.g. corruption and trust in the government or corruption and solidarity) are intricately interwoven. This integrated, complex whole makes it difficult to quantify the importance of individual factors which influence culture and place them in a fairly definite relationship of cause and effect.(29)

In principle, this problem already arose when formulating the working hypothesis: does culture determine taxation or does taxation determine culture? How is one to quantify the causal relationship between culture and economic development? Jones (1995) advances the theory that culture and economic development give rise to three different relationships: first, the economy’s influence on culture; second, culture’s influence on economic development and, finally, a mutual relationship between the two. (30)

10

A study carried out by Knack/Keffer (1997) provides an example of these interrelationships. The authors concluded that social capital – expressed in trust and civil principles – is important for economic development. They found that social capital is greater, for example, in countries with a high level of income. In addition, the more even the distribution of income the greater the social capital; the better educated and ethnically homogenous the population, the more likely the country was to follow principles of good governance.

Another problem which arises in connection with culture as a subject of study is the fact that a state usually consists of several culturally-diverse population groups. A cultural area cannot be equated with the territorial dimension of one or more states. Rather, it is a more or less defined area where people co-exist who share the same values and attitudes (i.e. who share a certain life-style and maintain a certain form of co-existence).(31) The awareness of culturally specific behaviour plays a more subordinate role in relation to political measures, which cannot or will not reflect such differences (e.g. concerning the right to vote).

3.2 Culture in Terms of Taxation

This section examines culture and taxes using the previous comments on culture and reflections on socio-cultural analyses as a basis. Limiting the investigation to a specific problem area or policy area may assist in the understanding of culture; that said, the following comments and findings presented should be regarded as an initial attempt to tackle this subject area.

History provides convincing evidence of the influence that culture exerts over taxation and vice-versa. (32) Schumpeter’s remarks suggest that it is impossible to overestimate the social, political and cultural effects of taxation:(33) “The intellectual and spiritual origins of a race, its cultural development, social structure, the effects of its policy on companies – this and much more is chronicled quite clearly (in financial history). He who realizes the importance of its message will hear the thunder of world history more acutely than others”.

Since culture is exposed to constant change, the same must also be true of taxation. Schumpeter himself remarked that “every tax ideal is subject to historical, economic and sociological limits”. This implies that it is impossible to create a generally-applicable, universal and “objectively good tax system”. In this context, many authors refer to a ‘historical embeddedness’ of taxation or even to a specific tax culture. (34)

The term ‘tax culture’ coined by tax experts (used here in a more traditional sense as “the art of taxation” á la Bentham), but later adopted by Schumpeter(35) is frequently found in literature whenever the terms culture and taxation coincide. However, this interpretation is only one of many.

Writers usually relate tax culture to voluntary tax compliance, i.e. the citizen’s awareness of the obligation to pay taxes (see box 4). According to this view, the term ‘tax culture’ is synonymous with, or very closely related to, tax mentality, tax morale and tax discipline.(36)

Nerré (2001) provides us with the most comprehensive definition of tax culture. Accordingly, tax culture embraces all interrelated institutions affiliated to the national tax system and its practical implementation and which are embedded in the historical developments of the country in question. The institutions include all relevant habitual ways of thinking, social relationships arising from interaction as well as legal and administrative arrangements.

11

Box 4: Voluntary Tax Compliance It is generally believed that tax compliance refers to the voluntary observance of or adherence to applicable taxation laws. Thereby, tax compliance is closely related to motives for tax evasion in terms of concept and research.

The standard model of tax compliance was provided by Allingham/Sandmo (1972). They chose to base their model of a potential taxpayer on an economic starting point of making a decision in an atmosphere of uncertainty. The authors concluded that a taxpayer will decide to evade tax if the expected benefit of fraud outweighs the expected benefit of honesty. Skinner/Slemrod (1985) criticize the assumptions upon which this model is based. Empirical data demonstrates a notably higher rate of tax morale than this model suggests, thereby implying that the model is based on an unrealistically high degree of risk aversion. Considering that punishments are usually low and that there are few risks of being caught, there would have to be more tax evaders than there actually are.

Since the 1990s, therefore, many economists have attempted to get away from the notion of an ‘economy of crime’ by focussing more attention on investigating those factors which determine the intrinsic motivation of the taxpayers, namely tax morale. Nowadays, socio-cultural factors are important in addition to economic factors such as the rate of tax, income, punishments, probability of being caught (which also depends on the efficiency of tax administration) as well as individual risk preferences.

In order to define these factors, economists refer to ‘cross-cultural studies’ using ‘taxpayers’ attitude surveys’, econometric studies as well as experimental research to avoid the problem of obtaining dishonest answers to illegal conduct.

To date, the relationship between the taxpayer and state institutions (particularly the government, parliament and tax administration) has been considered an important potential influence on tax morale, which was determined by the citizens’ trust in fairness, legality and efficiency of state conduct, their focus of authority as well as the relationship of the taxpaying citizens to each other (e.g. solidarity). Other influential factors which are closely related are fairness and the purpose of taxation as perceived by the individual and society. The studies also feature concepts such as the sense of guilt, civic sense of duty, national pride, religious belief and social capital. Finally, they also examined the influence of individual, socio-economic characteristics such as gender, age, professional and family status and the standard of education.

Despite such comprehensive research, many authors regard empirical literature on tax compliance as rudimentary. In fact, the results of studies dealing with the effects of individual factors and the relative importance of respective factors are very ambivalent. This can be explained by the difficulties involved in collecting data. However, it may also reflect the fact that it is simply impossible to regard the influence of any one cultural factor in isolation.

Andreoni et al. (1998) provide an excellent overview of literature on tax compliance.

This study will also examine how cultural characteristics influence taxation using a comprehensive concept as its basis. It will identify cultural factors which have relevant influence on the design or structure of the tax system, the organization and instruments of tax administration, the taxpaying citizens and the way they interrelate.

The following diagram shows the major actors and organizational units of taxation: taxpayers, politicians, tax officials and the financial courts as well as potential intermediaries (tax advisors), experts (tax scientists, tax experts of international donor organizations) and lobbyists (tax advisors and tax specialists from industry), who act as ‘rent seekers’ between these main groups by advising or demanding.

The fundamental decisions relating to taxation are made by politicians (the legislature). Financial officials (fiscal administration) act on their instruction but their involvement is not purely passive in nature. They actively contribute to taxation by means of guidelines, decrees and their general control over procedures. The same applies to the courts, particularly financial courts which scrutinize the administration and apply or develop applicable law. In most states the legislature itself is not autonomous but influenced by interest groups, expert opinions and the attitude of the electorate and limited in its actions by the constitutional court. In turn, taxpayers are often guided by tax accountants when making decisions. Taxes

12

indirectly affect all those economically related to the taxpayer, i.e. his customers, competitors or family members.

Diagram 1: Actors in Taxation

This shows, first of all, that taxation is not limited to the relationship between the taxpayer and tax administration. Rather, one should always take a systemic view of tax reforms. Each actor could act as a ‘veto player’ and block or influence necessary reform measures as his interests dictate. On the other hand, the chart indicates how cultural factors can play an important role since the various actors may have different principles and values. As far as development policy is concerned, the chart helps to identify actors which could be instrumental in instigating the process of reform. For example, if the aim is for tax policy to adequately reflect the needs of women then more women should be employed in the departments of financial ministries dealing with tax policy.

The arrows represent the interaction or spheres of influence between individual actors or organizations as well as between actors within a group. This interaction is a specific manifestation of functional social interaction and, as stated above, is determined by diverse cultural factors which, in turn, are sometimes moulded by the interaction. The arch spanning the actors represents – in accordance with the definition above – culture and more precisely, tax culture in its fullest sense.(37)

What then are these cultural factors? When answering this question most writers attach greatest importance to the relationship between the state, including its administration, and citizens. Whether determining the degree of tax compliance, explaining the tax rate or the organisation of tax administrations and the means by which they attempt to enforce their aims, time and again it is this web of relationships which proves to be the central cultural factor in understanding taxation. (38)

Constitutional Law-Maker/

Legislature

Taxpayers

Financial Administration

Fiscal Courts

People indirectly affected

Experts

Electors Lobbies

13

It is understandable to focus on the relationship between state and citizen because, on the one hand, taxation embodies the entire conflict between the citizen and the state. In essence, taxation amounts to the state confiscating the citizens’ earnings and therefore requires express justification.

On the other hand, it is unclear why citizens should have to forgo the alternative which appears the most favourable to them, even if it does operate to the advantage of all concerned. In literature dealing with tax compliance, writers are therefore right to point out that it is irrational for the individual to pay taxes since it is extremely unlikely that he will be caught evading taxes (see box 4).

In addition, owing to the public availability of certain assets, citizens cannot and should not be prevented from using them if they refuse to contribute to their maintenance. (39) Therefore, it would be rational for taxpaying citizens to adopt a free-rider attitude – unless they suffer from an extreme condition of risk aversion.

The web of relationships between taxpaying citizens and the state (sometimes referred to as the perception of government), holds the key to understanding the phenomenon of taxes and culture (i.e. the interrelationship between the cultural factors influencing the predominant tax system on the one hand and the repercussion of taxation on the state on the other). In this respect, the form of government plays an important role: the influence of taxation on the form of government or the influence that the form of government exerts on the degree and form of taxation is crucially important and also affects the perception of government. (40)

3.3 Taxation and Form of Government

According to Moore (2004), the transformation of the ‘domain state’ into the ‘tax state’ ultimately created the conditions for the emergence of modern European states. Only once states had financed themselves from taxes imposed on the private sector and the domains no longer represented their main source of revenue, could they develop into what they are today. One can take this a step further and argue that only the continuous development of tax culture, in the sense of the art of taxation, led to the emergence of the ‘fiscal state’ (i.e. a state that can also obtain financing by means of debt).

The enormous consequences that taxation had on society – Moore refers here to the re-moulding of values and their moral concepts as well as the convictions and attitudes of citizens and the creation of a powerful public administration as a new social force – also led to taxpaying citizens having greater say in the formulation of government policy. The best-known example of this is the demand of the American pioneers for the representation of American interests in the British parliament (no taxation without representation) after the British homeland had declared its intention to raise taxes in America. (41)

On the other hand, states which are not reliant on taxes to finance their tasks (so-called ‘usurer states’) may display other characteristics. Presumably, these states are characterized by a greater distance between government and citizens. (42) This is unsurprising because citizens are not very involved in politics owing to the lower direct burden of taxation, for example. State practices concerning expenditure might be less transparent and public administrations less efficient because there will be few incentives to supervise them.

Empirical studies show that oil countries are relatively undemocratic, have a weakly developed rule of law and high rates of malnutrition, infant mortality and illiteracy. These are admittedly only partial and indirect indicators as to how the political process of making

14

decisions and developing policy functions but they nevertheless suggest that proceeds from oil transactions generate a political culture in which citizens have little influence and obtain few benefits from state revenues (Moore, 2004).

Taxation in general and, in particular, the method and nature of taxation (e.g. perceptible taxation via direct taxes or imperceptible taxation via indirect taxes) may consequently generate a more responsible and representative government (i.e., good governance).

The most recent studies show – contrary to the comments made above – that tax compliance or tax morale increase as citizens are granted greater rights of participation, e.g. in the form of referenda or petitions for a referendum. Put another way, the more direct the democracy (i.e. citizens have more rights to participate in politics) the less tax evasion there is. (43) Many authors therefore believe that tax evasion not only reflects the free-rider problem but also represents a deliberate, defensive act against the leviathan where the government has too much freedom in determining the state budget.(44) According to this view, therefore, the way in which public finances are determined has an effect on tax compliance.

So far, studies on the relationship between the rate of tax and degree of democratization yield ambivalent results. However, there appears to be agreement that the influence of democratization on the rate of tax depends on the election procedure and the redistribution policy pursued by the government. (45)

The willingness and ability of citizens to participate in the political process are often closely related to the degree of decentralisation. This obviously begs the question whether this also applies to tax compliance. Assuming that the ability and willingness of citizens to participate in the political process increases in line with the degree of decentralization then, on the one hand, the willingness to pay taxes would also increase but, on the other hand, so would the government’s opportunity to increase its revenues through taxes.

According to Bird et al. (2004), there are several possible transmission mechanisms – each producing opposite effects – which explain how fiscal decentralization can influence taxation. Decentralized states tend to concentrate more on the regional needs of citizens and act more responsibly. This suggests, on the one hand, that citizens will be more willing to contribute to financing and demand more public services. On the other hand, in decentralized body politics, competition through migration and protest (‘exit and voice’) between and within the levels of regional bodies effectively restrain the leviathan and tend to suppress both taxation and state expenditure.

Empirical studies appear to support the second theory. Accordingly, more decentralized countries display lower levels of public expenditure. Moreover, governments in decentralized states rely more on fees and contributions than taxes in order to raise finances. This, in turn, allows citizens an improved cost-benefit comparison when demanding public services.

One study commissioned by the Federal Ministry of Finance (BMF), which referred to possible influences on tax morale, concluded that it was better in decentralized states because their institutions were easier to identify with than in centralized states. Therefore, highly centralized states were likely to have low levels of tax morale (BMF, 2005).

The degree of political participation not only has a direct effect on tax morale but also an indirect effect on good governance. Greater participation rights obviously improve taxpaying citizens’ ability to control the government, thereby improving government efficiency and reducing corruption. (46)

15

3.4 Taxation and the Perception of the State

Writers regard the attitude of citizens to the state or their perception of the state as significant cultural factors influencing taxation. For example, it is argued that the willingness to pay taxes increases when the citizens of a state (usually on an equal level with the government and the administration), consider an institution to be trustworthy or the state takes into account certain notions of the citizens in its actions. Vice-versa, it is argued that it will be more difficult for the state to levy taxes, e.g. if it is believed to be corrupt. What exactly are these cultural factors which form the citizens’ perception of the state and which can be important for the mobilization of a state’s resources?

3.4.1 Sense of Justice

When answering this question, justice is the major consideration. If citizens believe state measures to be just, then taxation will obviously improve. This requires a distinction to be made between the various aspects of justice whose importance may depend on the cultural areas in question.

On the one hand, justice can be regarded in the sense of do ut des. Accordingly, taxation is only justified if it does not entail a disadvantage for the citizenry but represents a performance to the state in return for an equivalent counter-performance. Justice in this sense means getting what one pays for. Taxes which contradict this ‘theory of equivalence’ (i.e. which finance the luxury of a ruling class and do not benefit the public), are therefore unjustified.(47) Fees and contributions reflect this aspect of justice more strongly than taxes. The theory of equivalence is relatively strongly pronounced in Islamic countries, for example(see box 5).

On the other hand, justice can mean a fair distribution of burden (e.g. where tax increases are unavoidable). In practice, this is reflected in the application of the so-called ability-to-pay principle’ in taxation. This provides that citizens contribute to the financing of state tasks commensurate with their ability-to-pay. As a rule, ability-to-pay is determined on the basis of income and the burden is represented by the reduction of income owing to taxation. In this case, taxation takes the form of direct taxes.

Finally, taxation can be considered fair if it reflects special values, moral concepts, and value systems of citizens. For this reason, many countries grant special tax benefits to weaker members of society, families with children and old people, for example. In some cases, this also applies to social institutions in general. These include rules and taboos of a religious nature (see section 3.6). The failure to respect religious values (which e.g. forbid the taxation of certain goods and activities) may lead to higher tax revenues but could encourage general rejection of taxation or tax reform measures.

Cortázar Velarde (2000) found, for example, that citizens prefer different forms of financing, depending on the primary objective pursued by the state. Accordingly, where a state pursues a strong social policy (‘estado protector’) the citizens prefer the taxation of rich people and large companies as well as external indebtedness and the exploitation of natural resources to the taxation of everyone using a broad basis of assessment. The situation is different in a state whose policy reflects the market-economy (‘estado regulador y promotor’). Here, the citizens show that they are fully prepared to contribute to state financing.

16

Justice in this sense also includes respect for individual privacy, in other words, the degree to which the state can or should interfere in an individual’s sphere of intimacy. One historical example is the beard tax introduced by Czar Peter the Great and inspired by the western example of men without beards. A more recent example is the controversy concerning data protection, and the confidentiality of bank and tax data. To what extent do countries display cultural differences in their attitude towards data protection? This question also reveals the conflict between the need to sufficiently respect privacy and the need for tax authorities to obtain information which can, in turn, represent a pre-condition of efficient state action.

Box 5: Islam and Taxation The Muslim World is not clearly defined. Depending on context and religious belief, the collection of rules described as Islamic, displays a number of very different features. There is of course a great difference between society’s religiously influenced ideals and the practices of everyday life, just as one finds in Christian countries. There is also no central educational authority capable of laying down a binding uniform doctrine for the definition of rules and legal provisions on the basis of Sharia law.

In states which have a Muslim majority, state and religion are traditionally more closely interwoven than in western democracies and even in states which are relatively secular in character it is increasingly observed that Islamic legal elements are being incorporated into the economic order. Thereby, social justice is accorded a high status. Islam also emphasises individual responsibility although the creation of welfare systems is regarded as one of the most pressing duties of the Islamic state.

Islamic legal experts largely agree that imposing taxes additional to those mentioned in the Koran and related scriptures require clear legal justification. Accordingly, they demand a basic connection between expenditure and income. Although various experts adopt a strict interpretation of this requirement to a greater or lesser extent, evidence suggests a clear recognition of the principle of equivalence and/or a link to the intended use of revenues, in contrast to the prohibition on earmarking funds (non-affectation principle) employed in many western countries.

The Sharia permits a number of taxes – a personal tax on non-Muslims (Djizya), a basic tax on arable land (Kharadj), a 10 percent tax on agricultural produce (Ushr), a twenty-percent duty (Khums), on mining products etc. as well as a property tax for Muslims (Zakat). The Zakat attracts particular attention. Rediscovered by Islamic modernisers during the 1950s for redistribution purposes, this poverty tax was previously only paid on a voluntary basis and earmarked for a specific purpose. It had only been institutionalised in Saudi-Arabia, the Yemen, Libya, the Sudan and in Pakistan. In Kuwait, semi-official organizations had been created to administer the Zakat tax and some countries are considering its institutionalisation. As a matter of fact, the Zakat is based on the religious obligation of all Muslims to share a part of their wealth with the poor and it forms one of the five pillars of Islam.

The actual fiscal importance of the Zakat is somewhat low which suggests that its existence is largely due to cultural beliefs. Although Islamic economists estimate the potential revenues generated by the Zakat at 6 percent of the BIP, it only accounts for 0.3 to 0.5 percent of BIP in various countries. In the Sudan there was an attempt to replace a number of secular taxes with the Zakat during the 1980s, which triggered a financial crisis. The low revenues have been blamed mainly on the methodical problems when setting the tax as well as a lack of willingness amongst taxpayers to participate on a voluntary basis.

Islamic countries obtain most tax revenues by means of secular taxes. When designing the tax systems many countries largely follow western standards. In particular, income and corporation tax are entrenched components of most tax systems. In addition, a number of countries have been introducing a modern form of value added tax since the 1980s. Islamic legal experts regard value added tax in a favourable light since it complements the Zakat by taxing those goods (consumption) which reduce the basis of assessment for the Zakat (property).

In Islamic states which have large reserves of raw materials and mineral resources the tax ratios are relatively low. Here, governments obviously prefer to finance most of their expenditure from the sale of raw materials rather than by means of taxation. It may be that governments can thereby evade the citizens’ legitimate demand for greater participation rights, according to the motto “no representation without taxation”.

Source: GTZ (2005a), Rosser/Rosser (2004)

17

3.4.2 Efficiency of State Action

In addition to a sense of fairness or justice another influential cultural factor relating to taxation is the efficiency of state action. If citizens perceive the state to be inefficient and wasteful, then tax compliance will probably suffer as a result. Therefore, it is not only important that the state provide a counter-performance but it is seen to do so efficiently.

Using a dynamic model, Pommerehne et al. (1994) investigated the effect that the state’s provision of public services and wastage had on tax compliance. They found that tax compliance decreased when the level of state wastage and the discrepancy between the return-performance expected and that actually received increased. Alm et al. (1992) also conducted an experiment which showed that a decline in the efficiency of state expenditure (i.e. a certain payment of tax results in fewer public services) led to a corresponding decline in the willingness to pay taxes.

The above-mentioned study commissioned by the BMF argued that less efficient state action resulted in lower tax morale because the citizens regarded the conduct of the state to be unjust and, therefore, it could be countered by equally unjust conduct. Tax evasion was viewed in a less negative light with the result that tax morale declined (BMF, 2005).

3.4.3 Legitimation of State Action

The justification of taxation can also be derived from the legitimation of tasks which the state must perform. Presumably, therefore, using taxation to finance tasks which the citizen believes are the responsibility of the state is more likely to be accepted. By contrast, enforcing tax obligations may prove more difficult if the state increasingly finances tasks which tax-paying citizens do not believe it should.

This aspect is particularly important in many Islamic countries where the social, health and educational systems are usually supported by religious and private foundations. If these non-state organizations levy duties similar to taxes (Zakat), it could adversely affect the legitimacy of new, less established state claims. As a result, related tax reform measures could run into considerable opposition (Busse, 2003).

3.4.4 Reliability of State Action

This cultural factor refers to the binding nature of rules, procedural fairness, trust, legality and, above all, corruption.

With regard to the binding nature of rules, Friedman (2003) argues that citizens who are are accustomed to living in a ‘regulated’ world and have internalized a “rule-bound form of behaviour” are also more likely to accept the rules of tax payment. For example, the Russian transformation phase at the beginning of the 1990s showed that unreliable state action adversely affected the citizens’ perception of the state with a corresponding effect on tax morale and state financing (see box 6). Since companies are typically characterized by the existence of an internal body of rules and regulations they assume that they are also more likely to comply with their tax obligations than individual taxpayers. Therefore, tax compliance benefits from a culture which is characterized by administrative routine. As far as the tax administration is concerned, the informal sector deserves particular attention because, in practice, it does not apply rules – at least not in an official sense. (48)

18

Another factor influencing the perception of a state is whether the citizens believe there is procedural fairness(49) in taxation matters, i.e. that legality is guaranteed and not undermined by corrupt practices. As a rule, citizens are more likely to resist taxation if they do not trust the legal actions of tax officials, (i.e. the more they regard themselves as exposed to the arbitrariness of state apparatus). Although there may be exceptions in certain cultural contexts, it can generally be assumed that trust in fair treatment is more likely if state actions are based on written law rather than negotiations and personal relationships or the word of individual officials and informal rules that have little significance. (50)

In particular, Cummings et al. (2004) refer to the importance of trust although they relate this to substantive law (‘trust in the legal system’), the government and administrative officials. They argue that the willingness of citizens to pay taxes will increase according to their confidence in these three aspects (‘intrinsic motivation’).

The authors of the study commissioned by the BMF (mentioned above) deduce that a country’s tax morale depends on its citizens’ trust in the national parliament. The parliament is a state institution which determines many of the taxpayers’ legal obligations and decides how to spend a large amount of the tax revenue. A lack of trust in this institution will probably lead to breaches of tax law being regarded in a less negative light than would otherwise be the case. (51)

Box 6: Russia – the State as Partner in Negotiations Until the end of the 1990s, tax practice in Russia showed that the effectiveness of statutory tax provisions was very limited. As a result, the representatives of the state executive were not remotely able to collect the taxes legally owed. This was partly due to the fact that tax payments were open to negotiation which, in turn, was due to the inadequate authority of the state and public servants. The absence of a separation of powers proved to be a central problem in this regard.

The weaknesses of the state were deeply rooted in the Russian system of institutions which, in contrast to the differentiated and specialized hierarchy found in the West, is marked by a stronger union of business, state and society. On the other hand, in Russian society there is wide-spread trust in the reliability and validity of emotional rules and relationships, i.e. of a family, neighbourly or personal nature and a corresponding distrust in the validity and administration of formal rules.

With the steady weakening of the strict hierarchy in administrative structures which had already started in the Soviet Union under Breznev, personal networks quickly sprung up between bureaucrats and companies with their own dynamic which the central government was no longer able to control. In order to enforce at least part of their claim to tax payments the central government in post-Soviet Russia was forced to hold negotiations. Thereby, it effectively acknowledged the limited validity of tax law. This served to reinforce the companies’ perception of the state as a negotiating partner rather than a superior, neutral guarantor of generally applicable rules.

In practice, this negotiability was reflected in the fact that representatives of the executive made a number of agreements with large companies which, contrary to tax law, laid down the amount of taxation payments in advance and granted other companies tax reductions or a restructuring of their tax debt. On the other hand, companies were, in principle, granted tax reductions by means of tax payments in non-monetary form through the over-valuation of the goods supplied. Finally, the tax authorities permitted a number of companies to accumulate overdue tax debt thereby accepting, in effect, the non-satisfaction of the tax burden legally owed (see Leipold, 2002).

Source: Nerré (2002)

19

3.5 Culture, Corruption, Taxation

Interest in successful anti-corruption measures has also increased since the World Bank started to pay greater attention to the subject of corruption.(52) In a comparative study by the World Bank on the state of corruption in transformation countries, Anderson und Gray (2006) show that corruption is greatest where politics and institutions are weakest. Of particular interest is the fact that the greatest successes in the fight against corruption were achieved via reforms in taxation and customs. Since institutions are to be regarded in a socio-cultural context, there must also be a connection – at least indirectly – between culture, taxes and corruption.

There is widespread agreement in literature concerning the influence of corruption (defined according to the western understanding of culture as the “abuse of public office for private purposes”) on taxation. Corruption compromises a state’s ability to reach a higher degree of self-financing by means of tax revenues. For this reason, Stiglitz (2004) regards the establishment of a ‘corruption resistant tax structure’ as central to fiscal reforms in developing countries. Arguably, less corruption increases the productivity of a state. At any rate, it is widely believed that less corruption increases the productivity of the tax system (McCarten, 2004) and improvements in tax compliance can have positive effects on good governance, since taxpayers will ultimately demand greater participation rights and the trust in the developing state increases. In terms of development policy, it is important to score successes in the fight against corruption because corruption particularly injures poor population groups. Moreover, women represent the majority of poor people and suffer disproportionately from the effects of corruption.

Openings for corruption in taxation are found in the legislative process and tax administration.(53) Lobbyists, in particular, influence the substance of laws pertaining to the definition of taxation elements including exceptions, amount and structure of taxation tariffs as well as the basis of assessment. As far as tax administration is concerned there may be influence on statutory implementation provisions or various procedural steps of taxation. In fact, corruptive practices of varying degrees of intensity are commonly found at all procedural stages: when assessing and registering the obligation to pay duties, establishing and collecting the tax debt, verifying the receipt of payments, setting surcharges and reimbursements as well as carrying out external audits and tax investigations.

Such direct influence over taxation is not the only factor which reduces state taxation. Indeed, it is safe to assume that the awareness or the mere suspicion of such practices could reduce the willingness of citizens to pay taxes voluntarily. Ultimately, tax morale is wholly dependent on trust in state institutions, the state’s counter-performance, the expected conduct of fellow citizens and rate of tax. This last factor would necessarily be higher considering the given expenditure level in a corrupt environment.

As far as the relationship between culture and corruption is concerned, it must first be recognized that corruption is found in all cultures. There is wide agreement that the extent and form of corruption depend on the country in question. At the same time, corruption is also determined by cultural influences, although the degree to which socio-cultural conditions contribute to the emergence of corruption is a source of controversy. The trivialization by a society of corrupt practices also creates a vicious circle which, in turn, contributes to the emergence of new forms of corruption. To a certain extent, this gives rise to a culture of

20

corruptibility. One interesting observation in relation to development policy is that corruption can fall if more women work in the public administration. (54)

De Sardan (1999) cites the following socio-cultural factors in relation to a number of African states, although they may also apply to many South-East Asian and Latin American countries: existence of solidarity networks, tradition of giving gifts and exhibition of wealth. Other potential factors include the existence of patrimonial structures, a weak understanding of law (‘fluid and always negotiable rules of the game’) and high number of personal relationships between citizens and administration (Andvig/Fjeldstad, 2001).

Solidarity networks (‘kinship ties’) are recognizable through reciprocal assistance between network members. Networks include family members, distant relatives and neighbours and are also based on religious and ethnic affiliation as well as regional origin. Therefore, a person forms part of a community in which he (has to) define himself as an individual through his behaviour. This network of relationships (sometimes also characterized as social capital), gives rise to benefits and obligations for the individual. It is mainly the latter which encourages corruption amongst employees in public administrations. Often, demands for financial support or material assistance by the network’s members exceed the economic ability-to-pay of the member they believe to be privileged. Since the failure to satisfy these demands can lead to social disgrace or failure to satisfy a moral duty, the public servant often does not have any other choice but to procure additional income by exploiting his official position or helping another ‘networker’ obtain a position or promotion. The support of network insiders can then be rewarded by means of tax benefits. Tax officials who have undergone training and further training measures in modern administrative philosophy then find themselves “in a schizophrenic situation”, as Fjeldstad (2005) puts it.

In this context, it is unsurprising that – contrary to expectations – higher salaries for public servants do not always succeed in stemming corruption. Higher salaries can awake further desires within the network and tempt financial officers into further corruption in order to satisfy social expectations. Ultimately, “a person that cannot offer needy relatives or friends much assistance due to its incorrupt attitude is not only foolish but also selfish” (Fjeldstad, 2005).

As far as the tradition of giving gifts (‘gift giving’) is concerned, it is difficult to draw a distinction between corruption and custom. However, this tradition is now regarded as being highly relevant to corruption. On the one hand, ’gift giving’ is not only limited to the private sector but is found in everyday human relationships. On the other hand, gifts were originally given to maintain social relationships and not in order to obtain a counter-performance However, giving gifts to tax officers (so-called ‘petty corruption’ or ‘administrative corruption’) would, in itself, hardly satisfy this aim. Moreover, ‘gift giving’ cannot be justified on the basis of an apparent ‘cultural acceptance’ because in traditional societies a practice injurious to the community (e.g. less tax revenue resulting in fewer public services) would hardly be considered socially acceptable.

The cultural tradition of ‘showing off’ is not only reflected in the individual’s outward display of wealth but, once again, is related to the family because ‘greatness’ is also evidenced by distributing goods amongst the family. There is a link to corruption if (as in the use of social networks) expectations exceed the available financial means and the individual concerned seeks additional income through corrupt practices. In this case, the resultant social pressure cannot be underestimated and failure to respond can lead to social ostracism.

21

Patrimonial structures are characterized by the “privatization of public power”. The ‘state’ is used as an instrument for personal gain and a public office is not associated with responsibility for the common weal. The filling of public offices at all levels – from the General Director of Taxation to the External Auditor – is decided on the basis of personal relationships (patronage of public offices) rather than qualifications. Obtaining personal advantage is not regarded as the abuse of public power for private purposes but as a ‘legitimate’ and legal source of income. Decisions (e.g. on exceptions in tax law) are made on the basis of bargaining rather than institutionalized rules and well-founded motives (Andvig/Fjeldstad, 2001). There is great reluctance to implement standardized operational processes in tax administration in order to minimize direct personal contacts.

An interesting aspect of development cooperation in practice concerns the donor. Many authors argue (Moore, 2004) that the financial bearing of donors has created a “begging culture” in many developing countries which has led to corrupt practices becoming even more socially acceptable, entrenched and possibly more widespread in all areas of life.

3.6 Networks, Religion, Solidarity

The previous section illustrated how networks play an important role in explaining the phenomenon of corruption. Networks should be regarded in the context of the predominant cultural and social environment and certainly qualify as a “cultural factor”. They can have substantial influence on the formation of policy, decision-making and also the implementation of tax policies. The relative importance of the actors is not the same in all societies. First of all, this generally applies to the levels of government in a decentralized society. However, it also applies to relationships between state institutions including the ministry of finance, financial administration and financial courts as well as the relationship between these and non-state institutions (e.g. groups of tax advisors).

In particular, if national consciousness is very weak, local and regional structures and authorities have greater authority and legitimation in the population than the central government. Almost always in less developed countries, the quality of tax systems is actually more important for tax policy than substantive tax law. In many cases, it has become almost mandatory to involve quasi-public institutions in order to perform certain functions of the tax administration. For example, Ghana is attempting to integrate the traditional and socially very important “chieftancy-system” into the structure of the modern state and administration (see box 7).

Therefore, in order to avoid difficulties in tax projects, structures, networks and/or individual actors which are recognized owing to cultural, political or even religious reasons, should be used wherever possible. For example, Busse (2003) points out the need to take into account the lower echelons of a region when allocating tax responsibilities, employ well-known people in the tax administration as well as cooperation between institutions such as commercial banks and the financial authorities. However, it must be decided whether this will risk perpetuating and entrenching causal blockades to development.

22

Box 7: The Role of the Chief in Ghana In Ghana traditional forms of governance play a crucial role. They survived colonial rule and still play an important role even today as a regulatory agent in the independent national state which limits the power of the central government. Even the constitution recognizes and guarantees the future existence of traditional institutions such as the National House of Chiefs. Particularly in rural areas, the chieftaincy system performs a task which is beyond the short arm of the state, overburdened by its tasks. Therefore, the majority of people believe that the traditional authorities, in a country where scarcely one third of the population enjoys a modern, urban lifestyle, represent far more than a mere guardian of their spiritual heritage or a spiritual support. In everyday life, Chiefs and Queen Mothers act as a mouthpiece communicating regional needs to the central state and vice versa. They also perform tasks in the judiciary and mediation. Since over two thirds of the country is still jointly owned by the respective tribes, each infrastructural measure requires authorization by the chief in question. Nowadays, the traditional chieftaincy system also conflicts with the modern perception of the state. It presents problems such as legal pluralism or dubious control, legitimation and concentration of power at local level. Moreover, instances of corruption have recently damaged the standing of the Nanonom itself (the collective body of princes). Nevertheless, the fact that chiefs have, up to now, performed important functions and constitute a powerful faction supports a cautious integration of the chieftaincy system into the modern structure of the state and administration. Chiefs should be used to provide more effective governance and be involved as partners in the modern development strategy. This is especially true in politically sensitive areas such as taxation. Attempts at reform which conflict with traditional authorities are unlikely be successful. Against this background, the GTZ is currently pursuing a project involving taxes and culture as part of the Revenue Mobilisation Support (RMS) in Ghana and is looking at the possible involvement or roles for chieftaincy institutions in taxation.

Source: GTZ (2006a), Crook (2005)

Religious belief determines the behaviour of people in many ways. Therefore, awareness of the dominant religion in partner countries can help understand people’s behaviour. For example, taxpayers and/or tax officials may consider themselves to be justified in evading taxes or failing in their duty to collect taxes owing to their religious belief in the case where taxation infringes religious principles. The opposition of the Russian Orthodox Church to the issue of a taxpayer identification number (TIN) illustrates the strong influence of religion on taxpayers’ conduct (see box 8). That said, religion can generate a sense of obligation, solidarity or disgrace which could have a positive effect on taxation. According to a study carried out by the BMF, the degree of religious belief influences tax morale. It found that, of the nineteen OECD countries studied, the average level of tax morale was higher in more religious countries (BMF, 2005).

Box 8: The Russian Orthodox Church and Taxation In 1999 the Russian government introduced a compulsory taxpayer identification number (TIN) for natural persons (identifikacionnyi nomer nalogoplatel’ščika, INN), similar to that already applicable to legal persons, in order to improve enforcement. This led to unexpectedly vociferous protests from the conservative faction of the Russian-Orthodox Church. It argued that the issue of a personal TIN represented the first step to bearing the mark of the devil. According to the holy scriptures, in the Apocalypse all people on Earth will be marked with the Devil’s number (i.e. three consecutive sixes). Considering the fact that the influence of the church is now much greater than at the time of the Soviet Union it is unsurprising that many religious taxpayers concerned about the issue of a personal TIN are attempting to avoid it and thereby the payment of tax.

Source: Nerre (2002)

Certainly, individual taxpaying citizens copy the behaviour of their fellow citizens or behave in the way they are expected to. As a result, relationships between citizens (the relationship between taxpayers) are seen as another cultural factor influencing taxation.(55) However, in the mutual application of and compliance with rules (whether formal or informal) expectations are crucially determined by trust. For example, if the citizens of a country believe that other

23

taxpayers evade taxes when the opportunity arises then individual tax morale will also decline.

In relation to tax compliance, literature identifies additional cultural factors such as ‘the sense of community’(56), ‘civic sense of duty’, a sense of guilt, solidarity and cooperation, ‘social customs’ and ‘group conformity’. However, this also includes the importance of punishments and, in particular, a corresponding sense of shame which are characteristics of all societies, to a greater or lesser extent.

24

44.. CCuullttuurree aanndd TTaaxx PPoolliiccyy

Tax policy – a term which refers to the fundamental considerations about the aims of taxation just as much as core political decisions concerning the nature and extent of the taxes to be levied under tax law and their interrelationship (tax design) – is of primary importance for the orientation of tax systems in terms of development policy. Targeted tax policy measures can support primary objectives of development policy (‘pro-poor growth’, RioPlus, gender equality etc.) or even be central instruments for their implementation. The awareness of cultural framework conditions can, on the one hand, assist in the analysis of existing tax policy and, on the other, it can provide expert advisors with information on available courses of action and normative recommendations.

4.1 Cultural Factors Determining Tax Policy

Cultural factors influence taxation policy in various ways. A mere glance at existing tax systems reveals them to be influenced far more by the economic stage of development, techno-bureaucratic possibilities of raising taxes as well as the various notions of social policy than by normative recommendations of public finance as reflected e.g. in the theory of optimal taxation. (57)

Cultural factors influence decisions on taxation policy regarding the conflict between aims of growth and efficiency, re-distribution and other socio-political aims. This is clear from decisions on whether to implement the principles of equivalence or ability-to-pay, which principles of taxation should have priority (e.g. neutrality, equality and fairness, practicability, transparency, environmental acceptability etc.) as well as decisions concerning the choice of taxes, their basis of assessment and applicable rates.

According to the principle of equivalence, the tax collected and the government’s counter-performance correlate and are therefore equivalent. In this case, the tax is imposed in line with the benefit obtained or costs incurred. The clear connection between performance and counter-performance may be important in societies in which trust in the state or public servants is particularly low and rights of participation or other control mechanisms over politicians and bureaucrats are insufficiently established.

Unlike the ability-to-pay principle, which permits a certain degree of discretion in tax policy, neither politicians nor bureaucrats can determine taxes and expenditure independently. Moreover, this principle accords with the perception of fairness insofar as individual citizens should only have to pay tax to the extent that they obtain a return-performance.

According to the ability-to-pay principle, taxes for the individual are levied independently of performances received from the state. Those who can pay taxes should contribute to public financing according to their ability to pay. Generally speaking, this principle leads to increases in taxation being linked to increases in income and – depending on the interpretation – property. Therefore, taxation in this case is largely associated with the policy of redistributing income. This principle is more likely to dominate discussions on tax policy, e.g. in societies whose value system reflects a marked sympathy for solidarity and which believe the state is a suitable organisation for implementing these values.

As far as the different types of taxes are concerned there are, in fact, a number of taxation methods. Even if non-fiscal objectives (such as the prevention of negative external effects)

25

predominate, the main reason for introducing and maintaining most taxes is ultimately to guarantee revenue.

Basically, governments can choose between direct and indirect taxes. Direct taxes are directly connected to indicators of economic ability-to-pay (i.e., mainly income and property). They can take the personal characteristics of those obliged to pay tax into account. Indirect taxes such as value-added tax or retails sale tax, customs duties or specific forms of consumer tax consider economic ability-to-pay indirectly by latching on to a use of income or property transaction.

High tax rates in the case of direct taxes often provoke tax evasion amongst taxpayers and are therefore inefficient in practice. With regard to distributive efficiency and in the interests of growth policy, there are calls to expand indirect taxation in order to compensate for the reduction of direct taxes. Indirect taxes are often believed to be ‘unfair’ owing to their alleged regressive effect (i.e. poor taxpayers could be more seriously affected by such taxes than rich taxpayers).(58) The predominant economic and socio-political culture in a society gives rise to a certain tax structure (i.e. a mix of different types of tax).

Box 9: Burial Tax in Burkina Faso In Burkina Faso a high fiscal charge in the form of a two-pronged burial tax can be imposed on relatives of the deceased. The first component of the ‘taxe funéraire’ applies when the deceased has lain in state for more than forty-eight hours in the open. The second component of the charge is due if the deceased is buried in his own courtyard rather than in an official cemetery. Many ethnic groups in Burkina Faso practice funeral rites which last several days and afterwards bury their relatives in their own courtyard. The historical objective of this tax is to encourage quick burials. In practice, only the second component of the tax is relevant today. The first part has proved successful because, since its introduction, almost all burials take place within the two day period. However, burials still do not take place in official cemeteries. This is because the traditional Lobi (the major ethnic group in the south-western area of Burkina Faso) believe that burials outside the grounds of a courtyard means that the deceased has committed a wrong during his life serious enough to deprive him of the right to be buried in a family grave. As a result the design of the tax, whether intentionally or not, reflects the familiar ‘inverse elasticity rule’ of optimal tax theory which recommends taxing those goods which are unlikely to result in evasive action.

Source: Père (1988); and Chapter 70 of the Municipal Accounting Plan, Burkina Faso, 2006

The widespread recourse to indirect taxes in developing countries can be explained by existing administrative capacities and, sometimes, by the respective administrative culture. In contrast to direct taxation (e.g. income tax), indirect taxes are relatively efficient in terms of administration and thereby easier to collect, as a rule. In politico-economic terms, indirect taxes are also less noticeable for taxpayers and so this form of taxation is unlikely to give rise to protests or demands for greater participation rights.

The basis for assessing individual taxes or exceptions such as tax exemptions and relief reflects the influence of social groups on taxation as well as the consideration of values which are especially important to society (e.g. the exemption of religious and/or military institutions). One example is the degree to which the tax system is influenced by ecological concerns.

In this context, the cross-theme of gender is interesting for development policy. Gender bias, whether explicit or implicit, is not limited to the well-researched area of state expenditure but also appears in relation to state revenue. Tax law suffers from explicit gender bias, e.g. where men and women are subject to different payment and rates of tax benefits and, in exceptional cases, different tax rates. (59) Implicit gender bias is usually more difficult to

26

identify and is found, e.g. in higher effective marginal rates of tax for second income earners (who, in developing countries, are often women) and which can result in the joint investment of budgets, thereby directly influencing the participation of women on the employment market. Barnett / Grown (2004) and Stotsky (2006) provide a good overview of gender bias in tax policy and administration and outline the need to work towards a gender-aware system (see below).

The importance of cultural factors in influencing tax policy is also reflected in the work of Wu/Teng (2005). They stress the cultural relationship between the rates of tax by establishing a connection between culturally influenced tax compliance and the rates of tax. Generally, however, scholars disagree on whether a lower degree of tax compliance will lead to higher or lower tax rates and on how to regard the relationship of causation and effect between tax compliance and the amount of tax rates. (60)

4.2 Culturally-Aware Reform of Tax Policy: Reference Points for Development Policy

Awareness of cultural framework conditions can prove helpful in analyzing tax policy and may be even necessary in the case of normative recommendations. For example, adopting the international textbook recommendation for the ‘rationalization’ of the tax system would require the abolition of many local/national taxes (often they amount to petty taxes) because, viewed superficially they do not satisfy the accepted notion of efficiency and/or are administratively resource intensive. However, the example of burial tax in Burkina Faso shows that sometimes it is even possible to justify culturally-aware taxes which do not correspond to international ‘standard practice’ from the point of view of efficiency . As well as being a source of revenue, the burial tax performs an important persuasive function, i.e. the protection of public health (see box 9). Therefore, an over-hasty abolition would certainly be controversial.

Tax law is a different terrain. Tax law reforms which implement the aims of tax policy play a prominent role in the initiatives of the donor community to support developing countries in their efforts to reform taxation. The national tax law in question always reflects legal traditions and social values. As far as the above-mentioned gender mainstreaming is concerned, there is an opportunity to hold consultations with the partner and discuss any differences in the burden and effects of tax incentives, whether explicit or implicit, and thereby to demonstrate reform options with regard to a gendered tax system which correspond to recognized ideals.

An important example of the application of culturally-aware reforms in tax law is the fiscal code which regulates the rights and duties of taxpayers towards the financial administration. It can have a completely different character in Anglo-Saxon, Continental-European or other legal traditions. Any recommendations for reform which do not take this into account could lead to lacunae, rejection and problems of acceptance. Legal advice in connection with taxation policy should adopt a culturally-aware approach to specialized terminology. Experience shows that the meaning of legal terms vary according to their cultural contexts. A ‘blueprint’ approach can even jeopardize the success of reform.

27

55.. CCuullttuurree aanndd TTaaxx AAddmmiinniissttrraattiioonn

“Tax policy is tax administration” – this assertion by de Jantscher (1986) is nowadays widely shared by development practitioners. It underscores the important role that administrative processes and functional procedures play in the implementation of political targets. Two mutually influential aspects are important in relation to culture and tax administration. On the one hand, the external relationship between the tax administration and the citizens which is moulded by special cultural aspects, and, on the other, the internal administrative structures and organisational patterns as well as the resultant administrative actions.

5.1 Cultural Factors Determining Tax Administration

The relationship between the citizen and administration in general is particularly sensitive because citizens often equate the state with the administration. Even more than tax policy, their encounters with the tax administration determine their perception of and attitude to the state and thereby taxation . Tax administrations are public authorities through which the citizen comes into contact with the state in the most direct and often most unpleasant way. They work very interactively and in an atmosphere of conflict. If the state has its legitimacy questioned, loses the trust of the taxpayer or has its legality challenged then the efficiency of the tax administration is the first to suffer (Busse, 2003).

The aspects discussed in previous sections dealing with the form and perception of government are also relevant with regard to the culturally determined relationship or culturally relevant factors which determine the relationship between citizen and tax administration.

Feld/Frey (2000) expressly refer to the importance that the scope and nature of political participation has for the relationship between taxpaying citizens and the tax administration. In their study, they not only conclude that this relationship becomes more important when citizens have comprehensive rights of political participation but also that the different treatment of taxpayers by tax authorities can be explained by differences in the rights of political participation (i.e. the existing political culture). According to their argument, the stronger a society’s elements of direct-democracy , the more important it becomes for tax authorities to treat taxpaying citizens with respect if negative effects on tax compliance are to be kept at a low level.(61) In contrast to less democratic societies, coercive measures are less productive than building up trust by means of respectful treatment.

Riggs (1964), in particular, refers to the cultural dependence of administrations both in terms of administrative organisation as well as the result of administrative action in the same or similar administrative structures. Andvig et al. (2001) point out that merely transferring the administrative structures of industrialized countries to developing and transformation countries does not lead to the same administrative action. Therefore, it is to be expected that in a different cultural context other internal organizational structures will be more beneficial in increasing tax compliance.

28

5.2 Culturally-Aware Reform of Tax Administration: Reference Points for Development Policy

Against this background, the question arises as to whether it would be possible to reform the tax administration in a way which is culturally aware. Accordingly, it must be investigated, under cultural aspects, whether it would be possible to organize the tax administration according to types of taxes (e.g. consumer taxes, income taxes), functions (setting the rate of taxes, collecting taxes etc.) or groups of taxpayers (e.g. small and large taxpayers). Internationally, the function-based administration appears to provide a successful model.(62)

At least as far as large taxpayers are concerned, this type of organisation is preferable because tax culture, in the sense of the willingness to pay taxes voluntarily, differs according to the various groups within a country (e.g. companies and individuals) and thereby the administrative costs of collecting taxes differ. For years, the IMF has been demanding the establishment of separate organisational units for large taxpayers in developing countries (‘large taxpayer units’) and, in certain cases, has partly made this the subject of conditions. (63)

Nevertheless, there is a risk that the regular tax administration will become uncoupled from the reform process. In the long-term it is essential to include larger sections of the population in the assessment of tax. Only then will it be in the taxpaying public’s interest to demand the accountability of government and administration concerning their use of tax revenues. When reforming the tax administration it is therefore important to develop a strategy as early as possible as to how the positive effects of a reformed ‘Department for Large Taxpayers’ could be extended to the whole revenue administration. (64)

A culturally-aware approach is also conceivable in all other areas which regularly form the subject of discussions in connection with tax reforms. Accordingly, the system of deduction at source, which aims to simplify tax collection and for years has been recommended and adopted throughout the world, appears particularly recommendable where corruption is wide-spread and tax compliance is low. The actual conceptual and instrumental manifestation in the areas of external audit and tax investigations might be strongly influenced by the ‘cultural environment’. Accordingly, it is only possible to discuss arguments for and against the confidentiality of bank information or the creation of a financial police by considering cultural peculiarities. Many countries have recently implemented a risk management system, supplemented by service management, in order to increase tax compliance. Whether this approach is suitable for a country or cultural area and, if so in what form, depends on culturally-specific characteristics.

The previous section has already referred to the possible or necessary involvement of private or quasi-public institutions in registering taxpayers, setting the level of tax or collecting taxes. In countries where there is a tradition of informal agreements and less rule-bound administrative action, attempts to automate procedural operations which fail to consider these cultural peculiarities will encounter resistance and/or at best lead to the creation of parallel structures.

Besides organisational structure, the efficiency of tax administration depends to a large extent on the rules and values which determine the attitude of the tax official and his actions. For example, it is important how the tax officer understands his job, accepts his obligations and defines his relationship with taxpaying citizens. Accordingly, the result of administrative

29

action largely depends on whether the tax official regards himself as the supreme authority and power or adheres to the statutory requirements when making his decisions.

Furthermore, the willingness to pay taxes also depends on whether it is possible for the tax officer to deal with the taxpayer as an equal partner or whether he will only regard him as a subordinate in a hierarchical relationship. The influence which solidarity networks and patrimonial social structures exert over the actions of individual tax officers has also been dealt with above.

30

66.. CCoonncclluussiioonnss aanndd RReeccoommmmeennddaattiioonnss ffoorr DDeevveellooppmmeenntt CCooooppeerraattiioonn

6.1 Conclusions

In dealing with taxes and culture, in the sense of the mutual influence of cultural factors on a country’s existing tax system and, vice-versa, the effect of taxation on the perception of government and culture, this study has, to a certain extent, broken new ground. As far as development cooperation is concerned, this has been long overdue. On the one hand, the discussion in recent years concerning the cultural relevance of development cooperation suggested considering specialized themes in a more culturally specific light. On the other hand, following the Paris Declaration, there has been growing interest in the question as to how public finances are to be reformed as a condition for programme-based approaches as well as the role that tax reforms are to play in a sustainable public financing.(65) More specifically, partner countries are keen to develop reform initiatives which aim to boost self-financing as part of public finances and thereby learn from their earlier mistakes; for their part, the donors are keen to improve their initiatives to support these processes and improve their effectiveness through greater harmonization.

To this extent, the question concerning culturally-aware tax reforms is extremely topical. The aim of this study was to identify relevant cultural factors and identify starting points for development cooperation. The core results may be summarized as follows:

There is a complex, reciprocal connection between culture and taxation. The predominant political culture of a country – i.e. the form and perception of government – plays a central role in this respect.

The form of government and taxation influence each other. As a rule, the willingness to pay taxes voluntarily increases according to the degree of democratization and good governance. That said, the level as well as the method and nature of taxation influence the demands of taxpayers to have the right to participate in the decision-making process (domestic accountability).

The perception of government (i.e. the attitude of the citizens towards the state and their perception of the state as the central cultural factor having an influence on taxation and, in this context, above all tax compliance) is determined by a number of mutually influential factors: a sense of justice, as well as the efficiency, legitimacy and reliability of state actions are particularly important.

Cultural factors such as the existence of networks and importance of religion and solidarity mould the relationship between citizens and are therefore significant for taxation.

With regard to tax policy and administration, both of which are key areas for reforming taxation, it can be seen that cultural determinants influence taxation policy and mould the external relationship between the tax administration and citizens as well as internal administrative structures.

31

6.2 General Recommendations for Development Cooperation

Development initiatives should be integrated more thoroughly into the donor-donee dialogue in relation to taxation matters as part of good financial governance.

(1) The field of taxation should be introduced with more emphasis in discussions at international level, particularly where themes such as ‘strengthening domestic accountability’, cooperation, tax and accountability’ or sustainable development are concerned.

(2) Donors should draw the attention of their partners in developing countries to the fundamental importance of cultural factors in the effectiveness of measures of development policy and initiate other processes to obtain knowledge in this area.

(3) A gendered tax system should become an attribute of development cooperation. (4) In the dialogue between the donor and partner countries, it should be made clear that

expected improvements in the effectiveness of development initiatives relating to taxation matters by considering culturally relevant factors for taxation can only be achieved if these initiatives are integrated into more comprehensive programmes which comprise the whole area of public finances (good financial governance).

(5) It should be more strongly argued externally that consultative monitoring or even the deliberate initiation of change processes in the tax culture of partner countries as part of an intercultural dialogue can form a component of tax reform projects (intercultural dialogue on the introduction and promotion of values).(66)

(6) In the case of actual projects relating to taxation, an intercultural dialogue(67) limited to the substance of the project should be established (intercultural dialogue as an instrument in order to achieve aims of development cooperation).

6.3 Recommendations for Technical Cooperation

6.3.1 General Recommendations for Technical Cooperation (1) In tax reform projects and programmes relating to tax matters there should be greater

attention paid to cultural and gender aspects at both the planning and implementation stage.

(2) Influential cultural factors must be studied in order to ascertain their relevance to the objective of tax reforms in question.(68)

(3) All relevant actors should, regardless of their formal status, be involved in the intercultural dialogue within the framework of tax reform projects because sometimes it is only through their involvement that it is possible to understand why actors act the way they do. It should also be ensured that women participate in this dialogue as equals.(69)

(4) Above all, reform measures should pay greater attention to the taxpayers’ point of view than has hitherto been the case. The dissatisfaction and legal uncertainty of taxpayers can be more usefully exploited as a driver for reform than the somewhat conservative attitude within the administration. In corrupt systems of taxation the administration often disapproves of reforms which restrict discretion in decision-making and strengthen the intermediary-level between administration and citizen.

(5) Since the transformation of established values and attitudes obviously requires a lot of time, it is advisable, when evaluating projects or programmes, not to apply traditional time limits to project measures which serve this secondary aim.(70)

(6) Continuity and long-term availability of expertise should be guaranteed in order to effectively transpose the intercultural dialogue onto projects to reform taxation. Generally, it is to be expected that culturally-aware development cooperation, which postulates a change in consciousness, demands long-term commitment.(71)

32

6.3.2 Further Questions

In future, in order to systematically identify cultural characteristics in tax reform, it is advisable, as a further step, to develop an investigative concept which will permit research teams / fact finding missions working on national studies on tax reforms as well as project staff involved in the implementation of the project to incorporate the cultural context, in which the reform measures are to be carried out, into the concept of the project to an increasingly practical extent. This concept should also contain a gender analysis which could thereby improve the effectiveness and sustainability of cooperation measures. The investigative concept could deal with two categories of questions:

(1) Fundamental cultural framework conditions: Which religious belief conditions human behaviour?

What does a society understand by the word ‘justice’?

How do the citizens perceive and act towards the state (including the administration) and vice versa, as a result of: the role that the state plays in society generally and, more specifically, in business? the allocation of responsibility in tax legislation, jurisdiction and administration? taxation principles?

(2) Specific Cultural Factors: Which socially relevant actors are affected by reform measures? How are these actors

interrelated? What is the basis for the web of relationships and what is the position of the potential organisation responsible for implementing the project within it? (72)

How culturally heterogeneous is the partner country and, e.g. with reference to regions (including urban and rural regions), religion and, above all, to the target group of taxpayers (persons and companies)? Can tax reform measures reflect such cultural heterogeneity and, if so, how?

Which socially recognized organisations or groups, whether non-state or semi-state, can be incorporated into the taxation process (e.g. as suppliers of information or payment offices etc.)?

Are the citizens and tax officers receptive to the idea of automating standardised administration procedures or is there a risk that such a move would only lead to the creation of parallel structures?

How can taxpayers be given greater legal certainty in order to reduce their dependency on the individual tax officers? What role does the jurisdiction of fiscal courts play in this respect?

How is the relationship between tax officers and taxpayers perceived in the partner country or how will it be perceived: as a hierarchical/bureaucratic relationship or in the sense of a partnership?

How can the tax reform measures be supported by means of information campaigns including professed taxpayers, public relations work as well as training courses in order e.g. to make the citizens understand the aims of tax policy and the choice of instruments?

Is the tax system tailored to the official tasks of the state?

33

6.4 Outlook

This investigation has attempted to introduce culture into the discussion concerning tax reforms as a new methodology for action-based development cooperation. This study is to be viewed within a broader context. Some time ago, the DFID attempted to improve the understanding of the political economy of reform initiatives by means of its Drivers of Change Methodology and thereby derive recommendations concerning action for development cooperation.(73) The paradigm culture could now be used to supplement this and other attempts of the international donor community to arrive at a better understanding of reforms in developing countries. In this respect, German development cooperation can look back on many years of experience in dealing with cultural factors.

At the same time it must be noted at this point that a culturally aware approach per se cannot be sufficient. Technical cooperation projects are not necessarily successful because they are conceived and implemented in a culturally sensitive way. Knowledge of the cultural context – and this is an important aspect of this study – is necessary but not sufficient for successful tax reforms in developing countries.

With regard to definite and country-specific investigations on culturally-aware development cooperation, the following questions will arise in the future:

What is the cultural environment for development cooperation?

Who controls the meaning of culture?

What are the given cultural conditions and thereby possible challenges confronting culturally-aware development cooperation? Which variable cultural factors can a value-based development cooperation use proactively to instigate transformation processes?

This study is intended as a contribution to the discussion about the way in which culture, in this sense, can be utilized to amplify reform processes. Therefore, the cultural perspectives put forward by this study should first be expanded to other themes and connected with other studies such as e.g. the analysis of actors(74) and, second, concerning the continuation of the approach, to use the ideas outlined in this study as a basis for more detailed considerations as to how to improve development cooperation in tax matters.

I

NNootteess

(1) Successful reform processes in the field of taxation also involve related themes of development policy. Accordingly, it should be noted that the design of taxation can affect the gender relationship (different types of tax impose different burdens on men and women; the effect of incentives on the distribution of paid and unpaid work between the sexes). To a large extent, the relationship between the genders is moulded by cultural norms and values.

(2) See Lahl/Nguyen-Thanh (2006). (3) That portion of state revenues resulting from sovereign duties (taxes, charges and contributions),

revenues from state production and commercial monopolies as well as domestic loans, is self-financed (i.e. ‘self-finance’ in the wider sense). Self-finance in the narrow sense only includes original revenues (taxes, charges and contributions). A country’s self-finance does not include foreign borrowing, foreign transfers and gifts.

In the middle ages and early modern period, taxes were not regarded as the main source of state revenue. In this period state revenue mainly flowed from the domains (crown estates). It was widely accepted that taxes were only to be levied in exceptional circumstances; in striking contrast to modern times they were regarded as extraordinary public revenues (“The King should live on his own”). See Homburg (2005).

(4) Historical examples, which clearly show the importance of taxes for economic and political development, are easy to find. Accordingly, it is pointed out that the instrument of levying taxes, namely the ‘tax lease’ (which until the 18th century was not objected to being a variant of the public procurement of revenues), restricted economic development. ‘Tax lease’ in this context meant that a semi-public company was granted the right to raise taxes and usually in return for the pre-payment of a fixed sum of money to the ruler. Privatizing the tax authorities in this way obviously had the advantage of efficiency but may have been outweighed by disadvantages relating to the rule of law. British tax policy had unintended and far-reaching effects in what is today the USA where imposition by the tax authorities of a tea tax triggered off tax revolts. Although the American pioneers initially demanded only representation of American interests in the British parliament (no taxation without representation), this culminated in the War of Independence and the Declaration of Independence of 1776.

(5) The GTZ has made sustainable development the focal point of its work. See GTZ (2005). It has been noted that it is not only possible to achieve accountability by means of taxes in the narrow sense of the word but also by means of charges because payment by the citizen is related to the state’s obligation to perform.

(6) The chain of effects concerning the alleviation of poverty primarily leads to the interaction between good governance and the degree of self-financing. Improving good governance by reducing corruption can increase ‘quasi voluntary compliance’. On the other hand, a higher degree of self-financing can increase the willingness of citizens to participate. Experience in different countries shows that states which do not depend on taxes for revenue tend towards bad governance. Alternative sources of revenue such as oil revenues or foreign financial assistance relieve the government of the need to develop a functioning tax system and to offer the taxpaying population public services or to be accountable for its dealings. In effect, foreign financial assistance thwarts the development of a so-called ‘tax-accountability relationship’, whereas increasing the degree of self-financing can lead to good governance.

II

(7) The Federal Government lists the improved use of the state’s own resources as a basis of development policy in the “The Basis for the Development Policy of the Federal Government”, particularly in fig. 30 (support in building up an efficient economy), fig. 32 (efficient infrastructure) and fig. 76 (training and further training of expert and managerial staff from developing countries). The Action Programme 2015 represents the overarching framework of German Development cooperation. It is based on the aim agreed by the international community after the Millennium Summit, i.e. to halve the numbers of those living in extreme poverty by 2015. Poverty is to be reduced inter alia by increasing a state’s degree of self-financing.

The Federal Government has defined ten priority initiatives of the action programme to combat poverty. The point “Reduce debt – finance development” requires greater mobilization of capital in order to halve poverty and, to this end, that developing countries must utilize more of their resources e.g. by means of improved tax systems and tax assessment.

In accordance with the financial chapter of Agenda 21, developing countries are largely responsible for producing the necessary investment themselves. The project expressly aims to boost self-financing.

(8) With increasing globalization, taxes are becoming more important as a factor in choosing the location for goods and capital transactions. As a result, tax policy is becoming an important instrument of international locational competition. Even small differences in tax rates could prove important in the future because new technologies are reducing transaction costs in cross-border activities. Furthermore, considering the abolition of internal customs duties, member states of regional economic communities are only left with tax policy measures in order to attract foreign capital or bind domestic investors to their native country.

(9) Here it should be noted that it is hardly possible to design systems of taxation to reduce poverty directly. Nevertheless, their indirect contribution to the reduction of poverty is controversial. The reduction of poverty can be expected if additional funds, which may be obtained by the project, are used to combat poverty and the majority of taxpayers/citizens also support the fight against poverty or thereby poor citizens achieve a greater say in the formulation of policy and decision-making. Therefore, it is very important to integrate tax reforms into the whole area of public finances – i.e. in expenditure management, budget matters, invoice controls and fiscal decentralization (see BMZ 2003).

(10) This also includes the distribution of gainful employment and reproductive work between the sexes. Many regard this as an example of external effects because a planned economy cannot be sustained without looking after the following generation and social reproduction work (care economy).

(11) The importance of tax administration is clearly expressed by the oft-quoted assertion by de Jantscher (1986) i.e. “tax administration is tax policy”. Concerning the importance of tax administration for development see Edling/Fischer (1991).

(12) Good financial governance represents the principles of good governance applied to the system of public finances. The GTZ, acting on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) has defined this concept and developed a systemic approach to good financial governance. See GTZ (2006).

(13) Two of the ten subject areas are relevant for classifying the taxation project within the BMZ’s area of activity: “Democracy, civic society and public administration” (human rights including their special manifestations in women’s and children’s’ rights, judicial reform, decentralization and development

III

of local authorities) as well as “economic reform and development of the market economy” (including finances, commercial policy and promotion of private economy, employment, professional training, informal sector, small and medium-sized companies, industrial environmental protection) (WIRAM, German abbreviation).

Taxation forms part of the framework of a market economy. Accordingly, expert advice in relation to taxation represents a useful component of the subject “Economic Reform and Strengthening of the Market Economy” (human rights, decentralization, development of local authorities, judicial reform) expert advice relating to the tax system in connection with (fiscal) decentralization and expert advice in relation to tax administration forms part of public administration (BMZ 2002).

(14) In recent years, donor and implementation organisations such as the British Department for International Development (DFID) and the German Federal Ministry for Economic Cooperation and Development (BMZ) have carried out comprehensive evaluations of their bilateral support of tax reforms in partner countries. See DFID (2001), BMZ (2003).

(15) However, this tendency is understandable, especially when referring to counter-poverty strategies in connection with the inadequate consideration of taxation projects. Although in national PRSP calls have been made for tax reforms, ultimately they can only have an indirect effect on poverty. Therefore, it is also unsurprising that in Ghana, despite the re-orientation of the national development strategy in 2001 (accession to the HIPC Initiative and drawing up of a PRSP) no financial donors were active in relation to revenue administration in subsequent years and that the GTZ has only supported the Ghanaian tax administration since April 2004 within the framework of the project “Revenue Mobilisation Support”.

(16) Following a study by the International Monetary Fund, countries which receive budget support on the basis of grants display a relatively low tax ratio. See Clements et al. (2004) and Gupta et al. (2003).

(17) See Wallace (1990) and Gray (1989), who deal with this aspect in detail. (18) In the case of donor coordination, this will of course take very different forms. The type of

cooperation ranges from fixed, institutionalized coordination boards to informal meetings with or without the participation of institutions from partner countries. In the GTZ the type of cooperation ranges from joint audit commissions (e.g. public finances in Afghanistan as a joint audit with the IMF and DFID), joint project planning (e.g. introduction of value-added-tax in Iran in coordination with the World Bank and IMF), joint project implementation (e.g. cooperation with the Ministry of Finance in Ghana in close coordination with DFID), simultaneous or successive financing of measures to a ‘joint venture’ (e.g. in the project “Tax Administration Support” in Nepal). In general, however, the mere formal and/or informal, selective exchange of information predominates.

In this way, the real aim of donor coordination (i.e. jointly coordinated influence over taxation and/or other areas of policy in order to improve the framework conditions) is usually not met. In some cases, the lack of donor cooperation even leads to significant problems in project implementation.

(19) See BMZ (1992, 1995, 2002). In particular, Fuhrke (2001), Dümcke (2003) und Gómez (2005) are representative of the work carried out by GTZ. The protagonist analysis initiated and developed by the GTZ (2006b) represents an important reference point for the subject of culture in relation to development cooperation.

IV

(20) Lavoie (2000) traces the failure to consider cultural factors in the conception of development measures precisely to this aspect, when he states: “Policy analysts and policy makers usually take only institutional factors, not cultural factors into consideration when developing economic policy. The reason for this most likely lies in one of two perspectives: they either think that culture is of little or no consequence, or that while it is possible to dictate institutional policy measures, it is impossible to dictate culture. Indeed cultural processes play a crucial role in defining the economic course a society will take. To the second point, we recognize the questionableness of asking government to dictate cultural values. Most economic analysts do not see it as their role to “preach” a certain set of moral or ethical values, even if by following the prescribed values society would have a better change of enriching itself.”

Furthermore, he argues: “The hesitation to advocate cultural values as a deliberate political policy is understandable. Such preaching conjures up images of social engineering, or ethnocentric chauvinism. If a kind of policy activism in regard to culture is possible, it needs to be tempered with a profound sense of respect for existing cultural beliefs.”

(21) German development cooperation organisations believe that intercultural dialogue refers to the intention to actively introduce and promote their values in other societies (BMZ, 2002).

(22) “But we must recognize that in endorsing institutional policies, by necessity, we endorse cultural values as well. Thus, in advocating one or another institutional policy, we are also advocating a specific set of cultural values which go along with that policy. To suggest that policy makers ought to stay out of the business of cultivating values is to misunderstand the nature of values. Public policy can not help but be value laden.” (Lavoie, 2000)

(23) In German development cooperation, the following themes aim to influence the ‘political culture’ of the partner countries: respect of human rights, participation of the population in political decisions, the rule of law and guarantee of legal certainty, a social economic system orientated towards the market economy and state actions orientated towards development (BMZ, 1995a). Owing to the complexity of the reform processes, the provision of expert advice, in practice, does not aim to achieve actual change but rather the possibility of change, i.e. placing the local partner in the position to control the desired reform processes.

(24) See, for example, Busse (2003). Owing to the fact that reforms in the tax administration contain many important technical aspects, it was obviously overlooked to the greatest possible extent that those reforms are also determined by socio-cultural factors. Or cultural factors were simply erased in recognition of the fact that cultural change was dependent on reforms – e.g. in awareness of the long and difficult process within which the employees in the tax administration differently define and understand their work, obligations and relations to taxpayers.

(25) See BMZ (1992). Socio-cultural factors at this level already assume direct operative significance by means of “brief socio-cultural analyses” commissioned by the GTZ and their integration into country plans.

Since 1999, the consideration of cultural questions in development cooperation has been promoted by the “participation concept of the BMZ” (BMZ, 1999), which provides a standard for bilateral public cooperation and guidance for NGOs of development cooperation. It goes beyond the “socio-cultural criteria for development cooperation projects” and “target group concept”. The participation concept emphasizes respect towards other cultures, equality, the character of exchange and mutual influence through participative development cooperation.

V

(26) According to Lavoie (2000, p. 23) culture is “an aspect of political, economic, psychological, and sociological causal factors, rather than another distinct cause alongside these factors. It is the level of meaning underneath social action, so that to compare it with an particular causal factor, such as political conditions, is to fail to comprehend its larger significance. Low marginal tax rates are themselves shaped by cultural meanings, and the way they affect action depends on cultural interpretations. Indeed it is difficult to identify specific factors which are distinguishable from others by being ‘cultural’.” “Culture lies at the foundation both of markets and political processes. Social institutions work to protect and improve our democratic political values, and work to improve our standards of living, to the extent they ever do work, only because there is a set of loosely shared values, which provides for the acceptance of the norms that sustain those institutions. A legal system cannot provide the rule of law if there is no generally accepted attitude about justice. A property rights system will not allow for the expansion of trade if there is no commonly accepted notion of ownership. The pre-sence of a written Constitution will be of little help if the underlying cultural norms which maintain its legitimacy are eroded away, we may no longer be able to rely upon the benefits which they have traditionally conveyed, to varying degrees, upon societies” (Lavoie, 2000, p. 20).

(27) See Jones (1995). The BMZ points out that, despite differences, many of the definitions of this term contain elements which can be divided into two classes: (1) elements which express different social orientations such as values, standards, behavioural practices; (2) those which describe the stage of development, such as the degree of social complexity attained regarding the formation of institutions and development of production resources.

The cultural factor ‘organizational structure’ is also reflected in the definition of Heinrich et al.. According to this definition, culture is “information stored in people’s heads, which can be transmitted among individuals. This information can be thought of as the ideas, values, beliefs, behavioural strategies, perceptual models and organizational structures that reside in individual brains, and can be learned by other individuals through imitation, observation (plus inference), interaction, discussion and/or teaching.” See Heinrich et al. (1999).

According to the prevailing opinion in institutional economy, ‘institution’ is taken to mean a collection of rules (e.g. human rights, the right to vote, private property) which encounter human interrelationships in a certain sphere of activity (e.g. society, democracy, market). Such rules, which may be intended to influence conduct, can first of all order or prohibit certain behavioural practices, in other words, limit the scope of permissible behaviour and thereby arrange relationships. They can, secondly, arise unintentionally or be made or agreed deliberately. They can be formal or informal in nature. And finally they can be followed predictably owing to custom or conviction or be enforced by special authorities, if necessary by coercion. Institutions lend social relationships a regularity owing to which more or less reliable expectations concerning the behavioural practices of fellow citizens can be formed and relationships of trust become possible. Depending on the extent to which applicable rules are followed and on the resultant incentives, the course and results of social relationships including the economic relationships of exchange based on the division of labour are systematically influenced. People become attached to institutions owing to emotional (moral), religious or ideological grounds or coercion and reason.

According to Pleines (2002) economic cultural factors include those which create incentives as an institutional framework, e.g. the organization or payment flows between federal, regional and local budgets, the division of responsibilities for the settlement of debts and high levels of taxation in combination with complex tax law.

VI

(28) A comparison between East and West Germany shows e.g. that cooperation and solidarity are supported by varying degrees of willingness. This result can certainly be explained by the different social systems (here: culture understood as the way in which co-existence is organised in a society) in the second half of the twentieth century. At the same time, the investigation also shows that historic roots do not have to be all that deep in order to generate changes in behaviour. See Ockenfels/Weimann (1999).

Torgler also justifies a difference in tax morale he discovered between East and West Germans at the beginning of the re-unification by the influence of different cultural factors resulting from different social systems and their unique characteristics. Accordingly, he explains the higher rate of tax morale in East Germany by arguing that the citizens of the former DDR were highly conditioned to regulated behaviour and that, initially, they retained this behaviour towards the authorities as well, whose approach now reflected West German standards. See Torgler (2003).

(29) The possibility to analyse culture as an independent explanatory factor is doubted by some including Lavoie (2000), as the quote in fn. 26 illustrates.

(30) Unlike the relationship between culture and taxes, that between culture and economic development is very broad and has been analyzed and discussed in specialist literature in detail. In particular, reference should be made to the work of Max Weber (1956). It is more obvious to investigate this relationship than the influence which culture has on a country’s tax system. In this respect, reference should be made to the OECD publications by Christian Morrisson and Johannes Jütting, who investigate the influence of social institutions on the economic role of women (2004/05).

(31) For many authors, the term ‘culture’ directly refers to the different lifestyles or ways of life of a certain group. Accordingly, Lavoie (2000) interprets “in the general sense of a set of widely shared values and beliefs […] a shared set of attitudes and values which constitutes what people find meaningful and significant in life”. Empirical cultural science (ethnology and anthropology) also regards the word ‘culture’ as the sum of the ways of life of a population which are identified as typical.

(32) For example, in the heyday of the Greek Polis (500 – 400 B.C.) the citizens remained tax free, as an expression of their personal freedom. Rich Greek citizens did not pay any direct tax but performed services for the benefit of the community voluntarily (the liturgies). They financed warships, theatre performances or processions. A proud Greek could not accept compulsory taxes which he regarded to be symbolic of servitude. Nevertheless, the liturgies represented a social standard from which one could not easily extricate oneself. By contrast, the obligation to pay personal tax characterized semi-free and enslaved people. The old principle applied: the nobleman pays with blood, the cleric with prayers and the proletariat with taxes.

Although cause and effect are difficult to separate, the gradual decline of the Roman Empire was accompanied by a similar gradual rise in excessive taxation (Homburg, 2005). Like American independence, the French Revolution also had its origins in tax revolts.

(33) Quoted according to Homburg (2005), p. 25. (34) See the assessment of Nerré (2001). See also GTZ (2006a, p.23): “a country-specific tax culture is

the entirety of all relevant formal and informal institutions connected with the national tax system and its practical execution, which are historically embedded within the country’s culture, including the dependencies and ties caused by their ongoing interaction.”; cf. also GTZ (2006a).

VII

(35) The distinction between ‘economics as an art’ versus ‘economics as a science’ was made by Jeremy Bentham (1804[1954]) and also John Stuart Mill (1848); cf. also Scheer (2002) concerning Mill’s statements as a ‘tax philosopher’. In this sense, Homburg also uses the term ‘tax culture’ in his comments on the development of individual types of taxation within a tax system. Accordingly, traffic taxes in the Middle Ages were preferred to consumption tax supposedly owing to the technicalities of collection but only because the ‘Roman tax culture’ could not be maintained during this period. In accordance with the cultural state of Roman civilization, the legalization of tax matters had also been continuously advanced. (Homburg, 2005).

(36) Cummings et al. (2004, p. 4) define tax morale “as the intrinsic motivation to pay taxes. It is the individuals’ willingness to pay taxes or, in other words, the moral obligation to pay taxes or the belief in contributing to the society by paying taxes.”

(37) See also Nerré (2002), who in this context is justified in pointing out that other relevant actors could appear in individual cases. In Russia, for example, this would include the tax police, Russian Orthodox Church or the mafia. In addition, attention must also be paid to the relative importance of individual actors as ‘drivers of change’ in individual cases.

(38) Referring to the acceptance of tax evasion e.g. Cortazar Velarde (2000) links the cultural context of taxation to the attitude of citizens towards the tax administration, tax system as well as the role of the state and its relationship to the citizens. Pommerehne/Weck-Hannemann (1996) also believe that tax morale depends on the perception of government or on the citizens’ attitude towards the state. If the individual has the impression of being handed over to the implacable machinery of the state, whose fiscal policy he does not support either in terms of fairness or efficiency, then his motivation to evade taxation is greater than if he can identify with the state in one form or another. Resentment against the taxation authorities can arise e.g. if the individual is forced to look on helplessly, as the state causes inflation to rise whilst he himself, owing to fixed progressive income tax rates, must give up an ever greater proportion of his income in taxes (see also Torgler/Schneider, 2004). Friedman takes an opposite view. He argues that it is simply not reasonable to make tax compliance dependent on the perception of government: “Rather than seeking tax payers who share a sense of political community with the state, we look for those who are sufficiently immersed in the state’s rule-bound institutions in ways prompt them to assume that the rules are indeed implemented in the manner intended.” (Friedman, 2003).

(39) One example of this is national defence. Particular individuals or groups cannot be excluded from the use of the asset ‘security’. Moreover, it does not make any economic sense to do so since its use by additional inhabitants is non-competitive. This means that other users do not incur any additional costs and the existing users do not suffer any loss of use should the number of users increase.

(40) The answer to the question posed by Friedman (2003) as to whether the relationship of taxpayers to the state (the tax relationship) determines the nature of the state or vice-versa is, ultimately, that this relationship can only be mutual.

(41) A modern version of this aspect arises in connection with the discussion concerning the introduction of an independent, ‘EU tax’. Critics of the creation of an EU body responsible for tax legislation and tax point out that the powers of the European Parliament are still inadequate.

VIII

(42) Moore (2004) and others refer to the “autonomy from citizens” and the “absence of incentives for civic politics”. He argues inter alia that “the absence of direct taxes reduces the likelihood that citizens will be motivated to engage in politics through a sense of a right to influence the use of ’their’ own money; non-transparency in public expenditure; ineffective public bureaucracy.”

(43) See Feld/Frey (2002). A study commissioned by the BMF refers to the fact that tax morale improves as elements of direct democracy become more important. This is because comprehensive possibilities to exert direct influence over legislation increase the probability that citizens will ‘internalize’ the legal standards decided upon. In this case, the citizens themselves will negatively view infringements against such standards (BMF, 2005).

(44) Pommerehne/Weck-Hannemann (1996). See also Cullis/Jones (1998), who, following the public choice approach, regard tax evasion as the sole opportunity for taxpayers to oppose state monopoly power even if it entails a disadvantage for them in the form of fewer public services. Sometimes, tax evasion is regarded as acceptable even in the case of considerable legal uncertainty, for example, owing to high corruption.

(45) See Wu/Teng (2005) who point out that “Democratization thus affects tax rates through its effects on the extent of franchise and the extent that the redistribution of tax revenue is biased toward the rich”. Lee (2003) confirms in an empirical investigation that the tax rates in democratic countries are higher than in dictatorships. Clotfelter (1983) established in the USA that tax compliance declines when marginal tax rates increase.

(46) Prud’homme (1995) and others refer to the possibility that fiscal decentralization can also lead to more corruption and mismanagement.

(47) Homburg (2005) regards this theory of equivalence plausible in relation to the legitimation of state actions.

(48) Wu/Teng (2005) also believe regulatory density to be a relevant cultural factor in taxation. (49) This term is also used by Smith (1992) and others. (50) For many authors the traditional personalization of relationships between state actors and

companies has not only led to the negotiability of individual tax debt but also encouraged taxpayers to evade taxes either by means of corruption or in the apparent anticipation of the results of negotiations (Pleines, 2002).

(51) See BMF (2005). The reliance on law particularly corresponds to the European way of thinking based on the fundamental notions of the Roman Empire according to which the state is a legal community. Busse (2003) points out the importance of differences in the understanding of law. She explains the dominance of informal rules in many partner states as particularly due to the profound, historically entrenched reluctance to deal with the state as equals. Taxpayers therefore prefer informal agreements to insisting on their legal rights.

(52) See Mallaby (2006). (53) See, in detail GTZ (2004). (54) Swamy et al. (2000) and Dollar et al. (1999) find a negative relationship between corruption and

greater proportion of women in public administration. Goetz (2003) and Alatasa et al. (2006) take a rather critical view of this connection.

(55) The empirical assessment of the date of the World Value Survey shows that the estimation of the conduct of other taxpayers has a significantly high influence on tax morale. This result is also

IX

supported by economic theories of cooperative behaviour. Therefore, cooperative behaviour is more likely, the fairer the behaviour of others is believed to be (BMF, 2005).

(56) Cortázar Velarde (2000, p. 4), defines the sense of community as follows: „Este es la forma de conocimiento práctico que utilizamos cotidianamente, mediante el cual expresamos las realidades de todos los días con la ontundencia de algo objetivo e incuestionable.“

(57) According to Bird et al. (2004): “The dominant policy ideas in different countries – about equity and fairness, efficiency, and growth – like the dominant economic and social interests – capital, labor, regional, ethnic, rich, poor – and the key institutions – political (democracy, decentralization, budgetary) and economic (free trade, protectionism, macroeconomic policy, market structure) – all interact in the formulation and implementation of tax policy. This changing interplay of ideas, interests, and institutions over time affects the level of taxation, the structure of taxation, and many of its critical details such as the progressivity of rates.”

(58) With regard to the concern in development policy to boost the role of women, it could be that the increase of indirect taxes has a disproportionately negative effect on (poor) women, if one assumes that women are primarily responsible for managing the private budget and that an increase e.g. of value added tax is not compensated by increased intrafamily transfer payments.

(59) Before reform in 1995, married women in South Africe with an income were subject to a higher tax rate than married men; see Stotsky (2006).

(60) See also Hettich/Winer (1997) as well as Friedman (2000) and Fuvelle-Aymar (1999). (61) Friedman (2003) also refers to the general importance for tax compliance of tax officials dealing

with citizens respectfully, when he notes that tax lawyers and administrative officials have to negotiate at the same level (“the culture must fit between them”), if better results are to be achieved in tax compliance.

(62) Concerning the respective advantages and disadvantages see McCarten (2004). (63) Baer et al. (2002) provide an overview of experiences with regard to tax compliance of Large

Taxpayer Units and discuss their advantages and disadvantages from the IMF’s point of view. (64) See GTZ (2006). (65) See Lahl/Nguyen-Thanh (2006). (66) Obviously, political culture is crucial for tax culture in the broadest sense as reflected inter alia in

the extent and nature of the participation rights of taxpaying citizens, in the budget process (e.g. through dealings with secondary budgets or the approach in the awarding of public contracts), in the state structure and legal certainty.

(67) The function of this dialogue should be to understand the relevant socio-cultural factors which are relevant to the success of the project, to get to know the ideas and interests of the respective partners and develop a joint project conception. Concerning the intercultural dialogue in German development cooperation in general, see BMZ (2002).

In this regard, it is important that countries reflect and critically analyze their own cultural values. Only through reflection can one understand other cultural situations or culturally-sensitive solutions such as the existence of a financial police or the absence of confidentiality for tax information and can ultimately lead to a project conception which is carefully attuned rather than clumsily superimposed. An intercultural dialogue will ideally contain a self-reflection of the project partner on its own cultural background, its awareness of cultural limits and questioning of its own values.

X

(68) Whether tax reform projects ultimately serve primarily fiscal or non-fiscal aims (e.g. a stronger poverty or environmental orientation of the tax system), the recommendation to pay more attention to cultural factors in the project still applies. However, different objectives require a special in-depth analysis of influential cultural factors. For example, a successful introduction of an eco-tax in relation to production requires detailed knowledge of traditional production procedures.

(69) In order to use cultural characteristics for successful project implementation, knowledge e.g. about the relationship between the taxpaying citizens and tax administration is not sufficient. Additional knowledge is also required, e.g. why this relationship is the way it is or why the actors in the process of taxation behave the way they do. Sometimes, this is connected with informally established power structures which can only be tapped into if many areas of society are participate in the intercultural dialogue.

(70) Pleines (2002, p. 119) points out that it is not a question of “whether the behavioural practices handed down can be changed or not but rather to what extent and at which speed the process of change takes place”. Fjeldstad (2005, p. 21) also remarks: “Observations suggest that the impact of traditional values and social obligations on the behaviour of public officials have fluctuated and can be changed. There are revenue administrations in Africa that perform relatively well despite dauntingly unfavourable contexts such as patronage and extensive corruption.” According to Cortázar Velarde (2000), experiences in Peru show that it is possible to change the collective perception of the tax administration provided that fundamental organizational reforms are undertaken.

(71) Regardless of the choice made, dialogue instruments must be embedded in a process or continuous project cooperation. This usually means the development and maintenance of long-term personal and institutional relationships among partners and the development of credibility, continuity, trust and reliability.

(72) As far as the last aspect is concerned, the BMZ (1992) is referring to the key factor of legitimacy which should be dealt with in advance in the individual project phases. Further factors which are required by the BMZ and which are to be settled in advance are the stage of development and social heterogeneity. The factor relating to the stage of development affects the absorption capacity or the problem-solving capacity of the society concerned. The socio-cultural heterogeneity relates to the existing inequalities between population groups on the basis of language and religion and consideration of the thereby possibly different project effects.

(73) See e.g. Warrener (2004). (74) See the analysis of actors developed on behalf of the GTZ in GTZ (2006b).

XI

BBiibblliiooggrraapphhyy

Alatasa, V., Cameron, L., Chaudhuric, A., Erkalb, N. und Gangadharanb, L. (2006), Gender and Corruption: Insights from an Experimental Analysis, Internet: http://www.economics.unimelb.edu.au/lcameron/papers/gender1.pdf

Allingham, M.G., Sandmo, A. (1972), Income Tax Evasion: A Theoretical Analysis, in: Journal of Public Economics 1, pp. 323-338

Alm, J., Sanchez, I. DeJuan, A. (1995), Economic and Noneconomic Factors in Tax Compliance, Kyklos 48, pp. 3-18

Alm, J., Torgler B. (2004), Culture Differences and Tax Morale in the United States and in Europa, CREMA Working Paper 2004-14, Basel, Center for Research in Economics, Management and the Arts

Anderson, J. und Gray, C. (2006), Anti-Corruption in Transition 3: Who is Succeeding…and Why?, Juli 2006, Worldbank: Washington, D.C.

Andreoni, J., Erard, B., Feinstein, J. (1998), Tax compliance, Journal of Economic Literature 36, pp. 818-860

Andvig, J. and Fjeldstad O.-H., with Amundsen I., Sissener T. and Søreide T. (2001), Corruption: A Review of Contemporary Research, CMI Report R 2001:7, Bergen, Chr. Michelsen Institute

Baer, K., Benon, O., Toro R., J. (2002), Improving Large Taxpayers’ Compliance: A Review of Country Experience, IMF, Occasional Paper No. 215

Bentham, J. (1804 [1954]), Method and Leading Features of an Institute of Political Economy (including Finance) Considered not only as a Science but as an Art. In: Werner Stark (Hrsg.): Jeremy Bentham's Economic Writings. London, GB, 1954

Bird, R., Martinez-Vazquez, J., Torgler, B. (2004), Societal Institutions and Tax Effort in Developing Countries, CREMA Working Paper 2004-21, Basel, Center for Research in Economics, Management and the Arts

Bliss, F. (2001), Kultur und Entwicklung. Ein zu wenig beachteter Aspekt in Entwicklungstheorie und -praxis, in: Thiel, R.E. (Hrsg.), Neue Ansätze zur Entwicklungstheorie, DSE, Bonn

BMF (2005), Steuermoral – Das Spannungsfeld von Freiwilligkeit der Steuerzahlung und Steuer-hinterziehung, in: Monatsbericht des BMF 3/2005, pp. 49-57, Zusammenfassung einer Studie des Instituts für Angewandte Wirtschaftsforschung (IAW) Tübingen, durchgeführt im Auftrag des Bundesministeriums der Finanzen

BMZ (2003), Synthesebericht zur Serienevaluierung Steuersysteme und Einnahmenentwicklung in Entwicklungs- und Transformationsländern als Instrument der Armutsbekämpfung, Bonn

BMZ (2002a), Schwerpunktsetzung in der Entwicklungszusammenarbeit, Bonn

BMZ (2002), Interkultureller Dialog in der deutschen EZ, Evaluierungsbericht

BMZ (1995a), Zehnter Bericht zur Entwicklungspolitik der Bundesregierung, in: Deutscher Bundestag, Drucksache 13/3342

BMZ (1995), Sozio-kulturelle Fragen in der Entwicklungspolitik II, Materialien No. 93, Bonn

BMZ (1992), Sozio-kulturelle Kriterien für Vorhaben der Entwicklungszusammenarbeit –Rahmen-konzept, Bonn

Busse, E. (2003), Interdependenz von Steuersystemen und Kultur – eine Gedankenskizze, Memo, SV Öffentliche Finanzen und Verwaltungsreform, Eschborn

Clements, B., Gupta, S., Pivovarsky, A., Tiongson, E. (2004), Foreign Aid: Grants vs. Loans, in: Finance & Development, 4/2004

Clotfelter, C.T. (1983), Tax Evasion and Tax Rate: An Analysis of Individual Returns, in: Review of Economies and Statistics 65, pp. 363-373

Cortázar Velarde, J.C. (2000), Estrategias educativas para el desarrollo de una “cultura tributaria” en América Latina. Experiencias y líneas de acción, in: Reforma y Democracia No. 17

XII

Crook, R. (2005), The role of traditional institutions in political change and development, CDD/ODI Policy Brief No. 4, Legon-Accra, Ghana

Cullis, J., Jones, P. (1998), Public Finance and Public Choice, 2nd Ed., Oxford

Cullis, J.G., Lewis, A. (1997), Why people pay taxes: From a conventional economic model to a model of social convention, Journal of Economic Psychology 18, pp. 305-321

Cummings, R., Martinez-Vazquez, J., McKee, M., Torgler, B. (2004), Effects of Culture on Tax Compliance: A Cross Check of Experimental and Survey Evidence, CREMA Working Paper 2004-13, Basel, Center for Research in Economics, Management and the Arts

Das-Gupta, A., Engelschalk, M. and Mayville, W. (1999), An Anti-Corruption Strategy for Revenue Administration, PREM Notes No. 33 (October), Washington D.C.: The World Bank

DFID (2001), Evaluation of Revenue Projects – Synthesis Report Volume I&II, by Gray, J. and Chapman E., EV636

Dollar, D., Fisman, R., und Gatti, R. (1999), Are Women Really the "Fairer" Sex? Corruption and Women in Government, World Bank Development Research Group, Washington

Dümcke, C. (2003), Zur kulturellen Dimension der Entwicklungszusammenarbeit der GTZ, Bericht zur Orientierungsphase der GTZ-Maßnahme „Kultur und Entwicklung“, Im Auftrag der GTZ, Eschborn

Edling, H., Fischer, E. (1991), Steuerverwaltung und Entwicklung, Baden-Baden

Fauvelle-Aymar, C. (1999), The Political and Tax Capacity of Government in Developing Countries, in: Kyklos 52, pp. 391-413

Feld, L., Frey, B. (2002), Trust Breeds Trust: How Taxpayers are Treated, Institute for Empirical Re-search in Economics, Working Paper No. 98

Fjeldstad, O.-H. (2005), Revenue administration and corruption, U4 Issue Paper 2:2005, Bergen, Chr. Michelsen Institute

Fjeldstad O.-H., and Tungodden B., (2003), Fiscal Corruption: A Vice or a Virtue? World Development Vol. 31, No. 8, pp. No. 8, pp. 1459-1467. An earlier version can be downloaded as CMI WP 2001:13

Friedman, S. (2003), Sending them a message. Culture, Tax collection and governance in South Africa, in: Policy: Issues and Actors, Vol. 16, No. 3, June 2003

Fuhrke, U. (2001), Kultur und Entwicklung. Abschlussbericht der Orientierungsphase für ein Projekt zum Thema „Kultur und Entwicklung“, Im Auftrag der GTZ, Berlin

Fukuyama, F. (2001), Culture and Economic Development: Cultural Concerns, in: Smelser, N.J., Baltes, P. (Ed.), International Encyclopedia of the Social and Behavioral Sciences, Oxford, pp. 3130-3134

Gómez, R. (2005), Kulturbezogener Vergleich von Wirtschaftssystemen, GTZ mimeo

Goetz. A. (2003), Political Cleaners: How Women are the New Anti-Corruption Force. Does the Evidence Wash? Institute of Development Studies, University of Sussex, Brighton

Gray, Ch. (1989), Issues in Income Tax Reform in Developing Countries, Weltbank, Working Papers, Washington D.C.

GTZ (2006b), Mainstreaming Participation – Instrumente zur Akteursanalyse: 10 Bausteine für die partizipative Gestaltung von Kooperationssystemen, Sektorvorhaben Mainstreaming Participation, Eschborn

GTZ (2006a), The Tax Culture Of Ghana, Draft Final Report, prepared by R. Ataguba on behalf of GTZ Revenue Administration Support Project, Accra

GTZ (2006), Good Financial Governance – Good Governance in den öffentlichen Finanzen, Eschborn http://www.gtz.de/de/themen/politische-reformen/oeffentliche-finanzen/7658.htm

GTZ (2005a), Entwicklungszusammenarbeit in islamisch geprägten Ländern: Erfahrungen und Per-spektiven, Memo, Eschborn

GTZ (2005), GTZ-Orientierung ‚Nachhaltige Entwicklung’, Eschborn http://www2.gtz.de/dokumente/bib/05-0672.pdf

XIII

GTZ (2004), Korruptionsprävention im Bereich Öffentliche Finanzen, GTZ-Praxisleitfaden, Eschborn http://www.gtz.de/de/dokumente/de-korruptionspraevention-und-oeffentliche-finanzen.pdf

GTZ (2003), Capacity Development für nachhaltige Entwicklung, GTZ Policy Paper No. 1, Eschborn

Gupta, S., Powell R., Yang, Y. (2006), Macroeconomic Challenges of Scaling Up Aid to Africa – A Checklist for Practitioners, Washington D.C.: IMF

Gupta, S., Clements, B., Pivovarsky, A., Tiongson, E. (2003), Foreign Aid and Revenue Response: Does the Composition of Aid Matter?, IMF Working Paper 03/176

Hechler, H. (2003), Die Ursachen der Korruption in Afrika. Eine Frage der Kultur? Memo

Heinrich, J. et al. (1999), What Is the Role of Culture in Bounded Rationality? Unpublished manuscript

Hettich, W., Winer, S.L. (1997), The Politicial Economy of Taxation, in: Mueller, D.C. (Ed.), Perspectives of Public Choice, Cambridge University Press

Holtz, U. (2003), Der Beitrag der Entwicklungspolitik zum interkulturellen Dialog, Informationsvermerk für die Sitzung des Bundestagsausschusses für wirtschaftliche Zusammenarbeit und Entwicklung

Homburg, S. (2005), Allgemeine Steuerlehre, 4. Aufl., München

Jantscher de, C. (1986), Problems of Administering a Value-Added Tax in Developing Countries: An Overview. Paper prepared for the Conference on Value-Added Taxation in Developing Countries, Washington D.C.

Jones, E. (1995), Culture and its Relationship to Economic Change, in: Journal of Institutional and Theortical Economics 151/2, pp. 269-285

Jütting, J.; Morrisson, C. (2005), Changing Social Institutions to improve the status of woman in developing countries, OECD Policy Brief No.27, OECD Development Centre, Paris

Kaufmann, D. (2006), Myths and Realities of Governance and Corruption, Chapter 2.1, The World Economic Forum, Global Competitiveness Report 2005-2006, Washington DC: World Bank, Development Research Group, Public Services

Klitgaard, R. (1997), Cleaning up and Invigrating the Civil Service. Public Administration and Development, Vol. 17, pp. 487-509

Knack, S., Keefer, P. (1997), Does social capital have an economic payoff? A cross-country investigation, in: Quaterly Journal of Economics No. 112, pp. 1251-1288

Lahl, D., Nguyen-Thanh, D. (2006), Eigene staatliche Einnahmen und Programmorientierte Gemein-schaftsfinanzierung, GTZ Policy Brief 4/2006, Eschborn

Landes, D. (1998), Wohlstand und Armut der Nationen

Lavoie, D., Chamlee-Wright, E. (2000), Culture and Enterprise. The development, representation and morality of business, London

Lee, W. (2003), Is Democracy More Expropriative than Dictatorship? – Tocquevillian Wisdom Revisited, in: Journal of Development Economics 71, pp. 155-198

Leipold, H. (2002), Kulturelle Determinanten der wirtschaftlichen Entwicklung, in: Höhman, H. (Hrsg.), Wirtschaft und Kultur im Transformationsprozess. Wirkungen, Interdependenzen, Konflikte, Bremen, pp. 14-41

Mallaby, S. (2006), Wolfowitz's Corruption Agenda, in: Washington Post, Monday, February 20, 2006

McCarten, W. (2004), The role of organizational design in the revenue strategies of developing countries: Benchmarking with VAT performance, World Bank, Washington D.C

Mill, J. (1848 [1987]), Principles of Political Economy with Some of Their Applications to Social Philosophy, herausgegeben von Sir William Ashley (1909) [Nachdruck Fairfield, NJ, 1987]

Moore, M.(2004a), Revenues, State Formation, and the Quality of Governance in Developing Countries, in: International Political Sciences Review Volume 25 No.3, pp. 297-319

Moore, M.(2004), Taxation and the Political Agenda, North and South, Forum for Development Studies, No.1-2004

XIV

Morrisson, C.; Jütting, J. (2004), The Impact of Social Institutions on the Economic Role of Woman in Developing Countries, OECD Working Paper No.234, OECD Development Centre, Paris

Nerré, B. (2004), Steuerkultur – Ein vernachlässigter Faktor der Steuerreformpolitik, in: Blümle, G. et al. (Hrsg), Perspektiven einer kulturellen Ökonomik, pp. 271-286

Nerré, B. (2002a), Tax Culture Shock in Japan, Diskussionsschriften des Instituts für Finanzwissen-schaft No. 65/2002, Hamburg

Nerré, B. (2002), Steuerreformen und Steuerkultur in Russland, in: Höhmann, H. (Hrsg.), Wirtschaft und Kultur im Transformationsprozess. Wirkungen, Interdependenzen, Konflikte, Bremen, pp. 288-295

Nerré, B. (2001), Do social and cultural norms matter? – The Concept of Tax Culture. Extended version, November 2001

http://www1.worldbank.org/publicsector/pe/Tax/norms.pdf

Ockenfels, A., Weimann, J. (1999), Types and patterns: an experimental East-West-German comaprison of cooperation and solidarity, in: Journal of Public Economics, pp. 275-287

Panther, S. (1999), Kulturelle Faktoren in der Ökonomik und die Webersche Protestantismusthese, in: Priddat, B. (Hrsg.), Kapitalismus, Krise, Kultur, Marburg pp. 165-188

Père, M. (1988), Les Lobi. Tradition et changement, Burkina Faso

Pleines, H., (2002), Wirtschaftskultur als Hemmnis für die Umsetzung von Reformen. Eine Fallstudie zur russischen Unternehmensbesteuerung, in: Höhman, H. (Hrsg.), Wirtschaft und Kultur im Transformationsprozess. Wirkungen, Interdependenzen, Konflikte, Bremen .pp. 105-119

Pommerehne, W.W., Weck-Hannemann, H. (1996), Tax Rates, Tax Administration and Income Tax Evasion in Switzerland, in: Public Choice, 88, pp. 161-170

Pommerehne, W.W., Hart, A. Frey, B. (1994), Tax Morale, Tax Evasion and the Choice of Policy In-struments in Different Political Systems, in: Public Finance 49, pp. 52-69

Prud’homme, R. (1995), The Danger of Decentralization, in: The World Bank Research Observer, Vol. 10, pp. 201-220

Riggs, F. W. (1964), Administration in Developing Countries: The Theory of Prismatic Society, Boston

Rivera A., Roy/ Sojo Obando, C. (2002), Cultura tributaria, in: Herrero Acosta, F. (Hrsg.), El sistema tributario costarricense: contributiones al debate nacional, San José, Costa Rica, pp. 457-516

Robles Robles, J.A. (2002), Cultura tributaria. Algunas pautas a seguir en su creación, in: Democracia Digital, San José

Rosser, J.B., Rosser, M. (2004), Iran: The Struggle for a New Traditional Islamic Economy, in: Comparative Economics in a Transforming World Economy, MIT Press, pp. 486-513

Sardan, O. de (1999): A moral economy of corruption in Africa?, The Journal of Modern African Studies, Cambridge: University Press

Scheer, Ch. (2002), John Stuart Mill als Steuerphilosoph, in: Erich W. Streissler (Hrsg.), John Stuart Mill. Studien zu Entwicklung der ökonomischen Theorie XIX. Schriften des Vereins für Socialpolitik, N.F. Bd. 115/XIX. Berlin, pp. 111 - 187

Schmidt, A. (2002), Schmückt Kultur die Entwicklungszusammenarbeit oder hat sie mehr zu bieten?. Auswertung eines Fragebogens zum Thema Kultur und Entwicklung; im Auftrag der GTZ Eschborn

Schönhuth, M. (2004), Beratungsvorhaben “Kulturelle Faktoren in Konzeption und Instrumentarium der deutschen EZ im Kontext der aktuellen Diskussion und “best practices” ausgewählter bilateraler Geber”, BMZ-Abschlussbericht, Bonn

Skinner, J., Slemrod, J. (1985), An Economic Perspective on Tax Evasion, in: National Tax Journal 38, pp. 345-353

Stiglitz, J.E. (2004), Development Oriented Tax Policy, Memo

Swamy, A.; Knack, S.; Lee, Y. und Azfar, O (2000), Gender and Corruption, World Bank, Washington, Internet: http://www.anticorruption-online.org/Swamy_gender.pdf

XV

Tangri, R. (1999), The Politics of Patronage in Africa: Parastatals, Privatization and Private Enterprise, Oxford: Currey

Torgler, B. (2003), Does Culture Matter? Tax Morale in an East-West-German Comparison, in: Fi-nanzArchiv Vol. 59 No. 4, pp. 504-528

Torgler, B., Schneider, F. (2004), Does culture influence tax morale? Evidence from different European countries, memo

Wallace, L. (1990), Neugestaltung der Technischen Hilfe, In: Finanzierung und Entwicklung 12, pp. 26-30.

Warrener, D. (2004), The Drivers of Change Approach, ODI Synthesis Paper, No.3.

Weber, M. (1956), Wirtschaft und Gesellschaft. Grundriss der verstehenden Soziologie, 4. Aufl., Tübingen

Weltbank (2001), Introducing a Value Added Tax: Lessons from Ghana, in: Prem Notes, No. 61, December 2001, Worldbank: Washington, D.C.

Wilson, J., Sheffrin, S. (2005), Understanding Surveys of Taxpayer Honesty, in: FinanzArchiv Vol. 61 No. 2, pp. 256-274

Wu Sh., Teng, M. (2005), Determinants of Tax Compliance – A Cross-Country Analysis, in: Finanz-Archiv Vol. 61 No. 3, pp. 393-417

Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH Dag-Hammarskjöld-Weg 1-5 65760 Eschborn/Deutschland T +49 61 96 79-0 F +49 61 96 79-11 15 Tx 40 75 01-0 gtz d E info@gtz.de I www.gtz.de