For a long time, learning about Revenue (tax) Collection in the Metro has been a bit of a pet project of mine. I met two guys who had started their own consulting firm, based in the south. The service they offer is to collect data on all revenue sources in the District – market stalls, stores, egg and breads, you name it. Another city, apparently, doubled their Internally Generated Funds (IGF) by doing so!
Knowing these revenue sources is key. If you have the data, you can do a quick check on each source of revenue and see if they’ve paid that year. This lets you target your revenue collection and confirm that your revenue sources are actually being tapped in a given year. Increasing your ‘coverage rate’ (the percentage of ‘revenue sources’ actually paying in a given year) means more money in the Metro’s pocket – obviously a good thing!
Equally important, however, is the consequence of having a low coverage rate. If that’s the case, most people aren’t paying taxes. People therefore operate under the assumption that they won’t have to. Think of it like a game they’re playing with the Revenue Collectors, and when you lose, you have to pay – but the odds are on your side. Therefore, when someone gets ‘caught’ by the tax collector, they have two options: They can pay the tax, and get the receipt proving they did so, or they can pay a bribe (less than the tax, and Revenue Collectors are notorious for accepting them), not get a receipt, and put their number back in the lottery, knowing that odds are they won’t get picked again. Once you have good data on that collection, however, then you can increase your collection rates, and putting your number back in that lottery looks much less attractive. Theoretically, people start demanding receipts, corruption goes down, and IGF goes up, not to mention the social benefits of legitimizing taxation (a whole other topic!).
So these consultants are offering a pretty cool service to the Assembly. They’ve been around a couple times, demonstrated their product based on a District they did in the south, put in a proposal, and talked to all the key folks. But, the project has stalled, and isn’t moving anywhere.
I was chatting with one of the (three) sub-Metro directors about this last week. Sub-Metros are under the Metro Assembly in the hierarchy, and are delegated some of the tasks, one of which is revenue collection. This is immediately a challenge since it means you have to implement THREE databases instead of just one, but isn’t really a game changer. He kept insisting it was a matter of resources, and I kept pushing him on the fact that, to me, it’s an investment. The Metro has money that they could spend on this if they wanted to and prioritized it, but they don’t, even though it would pay off practically overnight (I hypothesize).
Finally, we started to get closer to the root. A big development partner has a project to supply computers, software, and training to all revenue collection branches of the Metros and Municipal Assemblies. They promised the project a while back, and it’s gotten as far as delivering SOME of the computers (they still haven’t actually made it to the Sub-Metro, where they’re eventually going to be needed, however). They haven’t received training, they haven’t received software, there’s no guarantee that either of those will be any GOOD, but the promise is made. And the Assembly will sit and wait until that promise is fulfilled. Why spend money on something you know you’re going to get for free later?
I was still ranting though. The pay-off time would be so short, I was convinced that just going ahead and investing the money would be worthwhile anyways, especially now that those computers have been delivered! The Director shook his head. The nail in the coffin? If they went ahead and did that, then if they ever got audited, it would be counted as a double purchase. So, hands tied, we wait.
To me this was a clear example of the skewed incentives and sometimes downright undermining of government that happens because of the ‘development sector’. Check out my colleague Mina’s post for his reflections on The Industry.