Building a social contract for transformation through direct taxation:from consumer to citizen

Abstract

Externally driven financing of national development strategies has resulted in a serious challenge faced by African States to develop an effective exit strategy from resource rents and aid. This paper seeks to demonstrate that direct taxation, while raising revenues for development, has the added advantage in the makings of a social contract which enables economic transformation. It contributes to the growing debate on governance necessary for development using secondary data on governance and taxation to further investigate this relationship. Initial findings show that over the period 2006-14 a one per cent increase in direct taxation is correlated with a 0.13 per cent increase in accountability, whilst trade taxes are less significantly correlated and indirect taxes and ODA are in fact negatively correlated with accountability. This takes on increased urgency as the Agenda 2030 Sustainable Development Goals – based largely on domestic resources and with a focus on transformation – take center stage as the new development agenda.