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Taxed to death (really)

22 November, 2012 : 16:20

"For those living in the villages we visited, it is often impossible to carry out daily activities without being taxed... But can an 'all-pervasive system of taxation' have an upside?"

Katherine Haver, Humanitarian Outcomes. 

In 2009, I carried out some research with Oxfam GB and four local organisations in eastern DRC. Our question was: how do people cope with extreme violence, and is there anything aid agencies can do to support ‘self-protection’ mechanisms? We spoke with over 700 people in 24 communities across North Kivu and South Kivu. Our report concluded, perhaps unsurprisingly, that there was no ‘magic cape’ that could easily be supported or replicated. Rather, the most successful strategies – fleeing, submitting – also entail the worst negative side-effects.

Along the way, however, we learned a lot about the links between protection and livelihoods. An informal, predatory, almost omnipresent state is continually eroding people’s ability to earn a living. It is not so much that the state does not function, but that it functions too much — violently, without rules and without limits. As summarised in a recent SLRC report, much of this was legitimised under the Mobutu regime, which encouraged public servants, including the army and the police, to self-finance salaries and operational costs through informal taxation and extortion of the general public. 

Taxing livelihoods

For those living in the villages we visited, it is often impossible to carry out daily activities without being taxed. Need to travel to the next village to visit a sick relative? Pedestrians pay $0.24, those on a bicycle $0.35. Want to produce some palm oil? For every 20-litre bottle (which can be sold for around $10), the state takes 7 litres as well as $0.12 and the military takes 7 litres as well as $0.25, and there’s another $10 per year to access the trees plus a tax on the machine to extract the oil. Want to buy some food? In one town, the number of tax inspectors (and their agents) had become so high that people were afraid to go to the market. 

It is difficult to distinguish illegal taxes from simple theft. Those who wield more power often justify their theft as an official requirement or payment. Lacking information about what taxes are legal, civilians find it difficult to challenge those making demands, who in any case are often armed. Seemingly everyone collects taxes: agents of the state (including the military (FARDC), the police, the national intelligence agency (ANR) and even ‘anti-fraud’ agents in one place); customary authorities, such as local chiefs; and armed groups such as the Mai Mai and Democratic Forces for the Liberation of Rwanda (FDLR). 

Armed groups will often justify taxes as payment for their ‘protection’ of the population, whereas local chiefs will refer to the need to respect tradition. All of these taxes leave people wondering what the government does with the money. As one participant said, ‘We do everything for the state, but it does nothing for us.’ 

Can an ‘all-pervasive system of taxation’ have an upside?

Given all this, what was surprising was that people did not want the state to disappear. Rather, one of their most frequent (and spontaneous) requests was for information and training – for both themselves and the authorities – about their rights and obligations, and the relevant laws, especially tax laws. When asked how this would help keep them safe, people said they felt that increased clarity would itself prevent abuses by making it more difficult for state agents to justify their actions. People seemed to feel that this knowledge would give them power to stand up for their rights. 

I approached this request with a healthy dose of scepticism. Could it be that people perceived that Oxfam or its partners were providing this type of information, and hence that it was what they thought they should ask for? Had they heard about someone who had received a per diem for attending a training session? In the end, the number of times it was repeated, in different ways by different people, convinced me that there existed a genuine desire for a credible outside actor to help facilitate some kind of dialogue between residents and the relevant duty-bearers. 

I also came away impressed by people’s understanding of the purpose and potential utility of taxes. People want to see something for their money. They want schools with teachers in them, markets with shelters from the rain, drugs in the clinics and roads that are passable. There is a sense that the contract between the people and the leaders who tax them could thrive, even in an informal, local, perhaps even technically illegal way. After all, people are used to paying school and health fees, even if they receive only a rudimentary service in return. Could this ‘all-pervasive system of taxation’, which has become so much a part of the culture, have an upside? I came away thinking that we shouldn't assume that taxes are bad just because they’re informal. 

There are heaps of questions to ask before venturing to say what changes in taxation policy and practice would be of benefit to people’s livelihoods. A good first step would be a better understanding of who is being taxed, how and how much. What kinds of contracts – good or bad, peaceful or violent – exist between the people taxing and the people being taxed? Among the many aid organisations operating in eastern DRC, there is surprisingly little knowledge of how taxation affects people’s livelihoods — and very little understanding of how aid interventions enrich or impoverish the taxers and the taxed. But it is relatively easy to find out this information, if you ask.


This is a guest post by Katherine Haver. Katherine is a partner with Humanitarian Outcomes where she works on operational security management, cash based responses, humanitarian coordination, and disaster preparedness. Before joining Humanitarian Outcomes, she worked as a policy advisor for Oxfam based in DRC, where she authored reports on developing responses to displaced people in host families; improving the targeting of humanitarian assistance; and designing programmes to better support community self-protection mechanisms. 

3 comments

Petros
Dear Katherine, this is a very interesting article and having never been to DRC I must admit that it helps me understanding how local institutions function. You may be interested in having a look at a work of mine with co-authors from IFPRI and U. of York where we show that the presence of valuable minerals in DRC have reduced the intensity of conflict around the mineral extraction sites. The paper is available at: http://ideas.repec.org/p/nam/wpaper/1207.html Our understanding is that the armed factions (whether governement-affiliated or not) that control the mineral-resource region, will better guard the region when the minerals' prices increase. The 'taxation' going on in our story is the taxation of mining companies. But I would be surprised if there was no correlation between this type of taxation and the one you are mentioning. I would expect that this security-provision comes at the cost of higher taxation. Just an idea.
Bishnu Upreti, Nepal
Many of the issues raised in this blog are also reflective and similar in case of Nepal. multiple taxes to products of small and subsistence farmers in their product is a very common phenomenon in Nepal
Katherine Haver
Thanks for the comments and additional examples. Taxes can have a huge impact on both individual household economies and conflict dynamics, especially in areas with important natural resources. I'd love to see more research on this topic, since I think we're just at the tip of the iceberg in our understanding of how taxation works in conflict settings.

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This blog will feature reflections from our team of researchers on the practicalities of actually conducting research in conflict-affected situations. We will also be posting guest blogs written by key researchers and practioners working on livelihoods, basic services and social protection in conflict-affected situations.