As a state moves from collecting a low level of public revenue of around 10% of national income toward collecting around 40%, tax bases typically shift from trade taxes and excises toward labor income and other broad bases such as value added. To study this process is a challenge of appreciating incentives and constraints. Incentives are shaped by political institutions, existing power structures, and societal demands that the state perform certain functions. Constraints are imposed by a society’s economic environment, social cleavages, and political interests. Over time, these constraints can be shifted and governments play a key role for such shifts. They may invest to improve the working of the economy and the efficiency of public-goods provision. They may also try to create a sense of national identity and propose reforms to political institutions. Analyzing such issues requires a dynamic framework and this chapter has sketched an approach.
Throughout the course, we have taken political institutions as given. But it is questionable whether the forces that shape the development of the tax system can be separated from those that lead to institutional change. States that raise significant revenues will find themselves facing strong demands for accountability and representation, creating a two-way relationship between political development and the growth of the tax system. Little is yet known about this relationship. But it seems far from coincidental that states that are able to appropriate nearly half of national income in the form of taxation have also evolved strong political institutions, particularly those that constrain the use of such resources. This further underlines the close links between taxation and state development suggested long ago by Schumpeter, namely:
“The fiscal history of a people is above all an essential part of its general history. An enormous influence on the fate of nations emanates from the economic bleeding which the needs of the state necessitates, and from the use to which the results are put.”
This quote underlines the importance of combining economic, political, and social factors when studying the development of tax systems at the macro level. The tools of modern political economics can augment traditional explanations, based on economic factors alone. This course is now widely accepted in development economics and has a wider resonance for public finance.
We have also stressed the gains that can be made by innovative micro-level studies of tax compliance in developing countries.
For developing countries to support their citizens at a level now taken for granted by citizens in developed countries, they have to undertake a series of investments, making the state more effective and responsive. Discovering the preconditions for such investments and what works on the ground are central tasks for future research on taxation and development.
This course is designed to introduce students to the basic aspects of public revenue in public sector accounting including its meaning, scope, objectives, basis, units, processes and structure, the regulatory and professional framework of government accounting, sources of government revenue, pensions and pension fund accounting, treasury and expenditure control system, financial reporting, cash flow statement, value added statement, interpretation of government financial statement, International Public Sector Accounting Standards and standardization of Government accounts in Nigeria.
Upon completion of this course, it is expected that the students will be able to understand:
- The basic aspects of public revenue
- The basis, units, processes and structure of public revenue
- The regulatory and professional framework of government accounting;
- Sources of government revenue and treasury control accounting system;
- Treasury and expenditure control system;
- Pensions and pension fund accounting;
- Preparation of government statutory financial statements in the treasury;
- Interpretation of government financial statements; and
- IPSASs and standardization of Government Accounts in Nigeria