Strategic Taxation - Fiscal Capacity and Accountability in African States

Across the developing world, governments still lack the fiscal capacity to fund critical public goods, alleviate poverty, and invest in economic development. Yet, we know little about how to effectively build strong states in these settings. This book develops and tests a new theory to explain why fiscal capacity in African states is low. Drawing on work in psychology and behavioral economics, this book argues that taxation leads citizens to demand more from leadersas they seek to recover lost income from taxation. It then argues that governments'' willingness to tax will depend on the extent to which they can satisfy citizens'' demands while maintaining rent extraction. Rent-seeking leaders of low-capacity states will strategically underinvest in fiscal capacityin order to avoid the higher demands they face under taxation. Contrary to many existing theories, Martin shows that this can actually lead to lower taxation in democracies compared to autocracies, as citizen accountability dem