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ABSTRACTMultinational corporations can play off host governments to minimise their tax payments in the absence of internationally coordinated fiscal policies. Without a supranational enforcement agency, most tax harmonization policies are unstable because one or another signatory always has an incentive to break ranks. This produces a sub‐optimal tax harvest for a group of host governments taken as a whole. This is a collective action problem for host governments which can be stated in the form of a Prisoner's Dilemma supergame. Equilibrium cooperative solutions have been suggested for this game which do not need higher authorities to enforce them. The application of these solutions to the host governments' tax problem is discussed, with the conclusion that under certain conditions self‐policing tax harmonization agreements are possible.

MULTINATIONAL COMPANIES CAN PLAY OFF MOST GOVERNMENTS TO MINIMISE THEIR TAX PAYMENTS IN THE ABSENCE OF INTERNATIONALLY COORDINATED FISCAL POLICIES. WITHOUT A SUPRANATIONAL ENFORCEMENT AGENCY, MOST TAX HARMONIZATION POLICIES ARE UNSTABLE BECAUSE ONE OR ANOTHER SIGNATORY ALWAYS HAS AN INCENTIVE TO BREAK RANKS.

It is increasingly argued that bargaining between citizens and governments over tax collection can provide a foundation for the development of responsive and accountable governance in developing countries. However, while intuitively attractive, surprisingly little research has captured the reality and complexity of this relationship in practice. This book provides the most complete treatment of the connections between taxation and accountability in developing countries, providing both new evidence and an invaluable starting point for future research. Drawing on cross-country econometric evidence and detailed case studies from Ghana, Kenya and Ethiopia, Wilson Prichard shows that reliance on taxation has, in fact, increased responsiveness and accountability by expanding the political power wielded by taxpayers. Critically, however, processes of tax bargaining have been highly varied, frequently long term and contextually contingent. Capturing this diversity provides novel insight into politics in developing countries and how tax reform can be designed to encourage broader governance gains

Many Sub-Saharan African countries are unable to generate sufficient tax revenues for public purposes. While it is widely accepted that governments' ability to tax is shaped by politics, the precise mechanisms through which this relationship takes place in practice remain elusive. Based on a historical analysis of four major tax reforms in Ghana from the 1850s to the late 1990s, this article captures the various ways in which taxpayers negotiate with the state in an attempt to limit the extent of taxation, especially in cases where state reciprocity falls short of what people expect. Our evidence suggests that, far from being a recent development, effective taxation in Ghana has long depended on the ability of the state to convince taxpayers that tax revenues will be used for the public benefit. A history of misappropriation of tax revenues, overt corruption, and profligacy diminished taxpayers' support for governments' tax efforts. More generally, the article points to the importance of understanding how tax bargaining works in practice and people's perceptions of their governments over the long term to overcome resistance to tax reforms.

Studies of political budget cycles in developing countries have generally sought to inform understanding of short-term fiscal dynamics, but can also offer unique insight into broader political dynamics in developing countries. This article correspondingly employs markedly improved data in order to study the impact of elections on tax collection, and draw broader lessons. It shows that while electionsas a grouphave had no significant effect on tax collection, the subset ofcompetitive electionshas had a significant negative impact on pre-election tax collection; while this effect appears to be largest where incumbents are particularly unpopular. This provides powerful evidence that the impact of elections on political incentives in developing countries is conditioned by the existence of an electorally competitive opposition, while offering preliminary evidence that popular resistance to taxation by unpopular governments may be an important means by which taxpayers may generate pressure for improved governance.

"Tax, Politics, and the Social Contract in Africa" published on by Oxford University Press.

AbstractThis paper deals with the neutrality of profit taxes levied on firms as well as the implications of tax evasion in economies with right-to-manage wage formation and efficient bargaining, respectively. Contrary to the outcome under competitive labor markets, we show that profit taxes are not neutral and the firm's tax evasion decision is not separable from its production decision under right-to-manage wage formation, where a trade union and firm bargain over the wage rate (except in the special case of a monopoly union). A similar conclusion follows from an efficient bargaining model, where a trade union and firm bargain over both the wage rate and employment. In addition, wage bargaining plays an important role in determining the optimal profit tax and the enforcement policy.