March 14, 2016Doug Hadden
The financial crisis has created a long-term revenue crisis. Governments struggle with austerity. Yet, without revenue, governments can’t build infrastructure and provide sufficient citizen services. This is a significant challenge to governments worldwide because of the need to create a business environment for growth, thought to require incentives and limited taxation.
— FreeBalance (@freebalance) March 9, 2016
Tax Revenue, the New Hope
The reality: so much tax revenue remains uncollected. Tax evasion and illicit flows statistics are staggering as attendees at the FreeBalance International Steering Committee (FISC) expressed last week in Managua, Nicaragua.
There’s no question full tax compliance can make up for massive revenue shortfalls. There is no easy answer to achieving tax compliance because of differing socio-cultural contexts. Yet, there is one consistent thread – citizen services.
The Citizen Services Calculation
Why do Scandinavians seem happy to pay so much in government taxes? There seems to be a backlash against taxation in other OECD countries. My sense is that many Scandinavians see good value in government services.
Tax evasion can be very high in many countries. The justification for evading taxes is often the government isn’t competent. Yet, the lack of tax compliance results in very low efficacy and engagement in the political system. People who pay taxes are more likely to become engaged – involved in governance. That’s why technology is so important. Case management software, for example, can help create consistent citizen services processes regardless of interaction channel.
The premise of improved government services leveraging technology is:
- Leads to increased tax compliance through facilitated methods like e-filing
- Leads to more revenue for improved services
- Together leads to increased citizen engagement
- Leads to increased trust
- Leads to less perceived risk, so increased business investment
- Leads to increased revenue
There has been difficulty tying Public Financial Management (PFM) reform to improved citizen services. That may be because of the complexities of association and causality. It may also be because many reform efforts lack a holistic approach for citizen services and engagement.