Taxation and government accountability and responsiveness in Rwanda

Morton, Sion Lloyd (2025). Taxation and government accountability and responsiveness in Rwanda. University of Birmingham. Ph.D.

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Abstract

This thesis examines the extent to which a hybrid regime, specifically a dominant authoritarian state, in a low-income country in sub-Saharan Africa –when faced with acute revenue pressure- is willing to cede power, accept increased political accountability, and become more responsive to the needs of its citizens through explicit or implicit tax bargaining. To investigate this issue, the research focuses on Rwanda in the period 2012 to 2020, and specifically on the interaction between government and citizens in relation to two reforms undertaken in the wake of the 2012 fiscal crisis, namely a revision of income tax law, and the rollout of VAT electronic billing machines.

Although Rwanda can be characterised as a typical low-income country in sub-Saharan Africa in terms of the challenges it faces to raise sufficient domestic revenue, it is nonetheless relatively distinct because of its governance arrangements and development model, and therefore deviates from generalized theory. Rwanda’s recent history and broader political economy factors have helped shape a state where the government’s authoritarian traits sit alongside the leadership’s stated commitment to drive forward broad-based and inclusive socio-economic development. Parallels can therefore be drawn between Rwanda and other dominant authoritarian developmental states in East Asia as well as in Africa, in countries such as Ethiopia and Botswana.

To examine the central question, this thesis adopts a theoretical model developed by Pritchard (2015) in his book “Taxation, Responsiveness and Accountability in Sub-Saharan Africa”, which outlines broad mechanisms linking taxation to improved responsiveness and accountability, and which identifies causal processes through which contestation between taxpayers and tax-reliant governments results in expanded responsiveness and accountability. This thesis draws on in-depth qualitative research, using a single-case study with embedded units (in-case studies), to examine, at country level, Rwandan government strategies in relation to particular taxes, the relative bargaining power of specific taxpayer groups, and how different groups of taxpayers respond to the imposition of a given tax. This approach enables three secondary questions to be posed. First, what are the contextual factors that determine the likelihood of tax bargaining in dominant authoritarian contexts such as Rwanda? Second, how do local actors cooperate, coordinate and conflict with regards to the formulation of tax policy in contexts such as Rwanda? Third, what does the Rwandan experience tell us about development partners’ role in fostering governance dividends in low-income dominant authoritarian countries? The research therefore contributes to several strands of the academic literature, complementing the existing body of work on development economics, and shedding new light on the political economy, organizational theory, political sociology, governance, public administration, and formulation of public policy in contemporary dominant authoritarian states.

In Rwanda, little evidence was found of direct tax bargaining, or of positive outcomes from the causal processes envisaged in the theoretic model during the period under observation. This is primarily because of the extent of state authoritarianism in Rwanda, which became increasingly evident as the research progressed. Government was predisposed to coercive expansion of taxation to finance its legitimization strategy. On the demand side, state repression eliminated any prospect of tax resistance envisaged in the model, while those that may have sought to challenge government’s tax plans faced insurmountable collective action challenges. On the supply side, the research provides further evidence how normative institutions and de jure institutional checks and balances established in hybrid authoritarian regimes –in this case the semi-autonomous revenue agency model strongly promoted by donors in SSA- are overridden by de facto systems and practices arising from relationships, interests and incentives of policymakers and bureaucrats within the system. Rwanda’s governance arrangements -with accountability invariably inward and upwards to the President- generated strong perverse incentives that negatively affected the behaviour of decision makers on tax policy. This was compounded by the de facto practice of delegating tax policy formulation to the revenue authority -an entity with a vested interest in coercive expansion of taxes- and a lack of oversight and scrutiny by the Ministry of Finance.

Despite these factors, the research finds evidence of mutual behaviour adjustment. This raises the prospect of governance dividends emerging more incrementally through tax bargaining in Rwanda over a longer timeframe. Two promising developments identified in the thesis point to more positive outcomes in future, and these developments call for further research. The first development is the creation of new institutions for tax policy formulation and dialogue. These reforms appear driven by the realisation by policymakers that flawed processes combined with insufficient consultation and scrutiny during formulation of tax laws made for bad policy. The second development arises from a controversial policy choice in the revised income tax law to tax surplus incomes of non-governmental organizations, which may have inadvertently made taxation a more politically salient issue for civil society, spurring them to engage in tax advocacy and bargaining in future.

Type of Work:

Thesis (Doctorates > Ph.D.)

Award Type:

Doctorates > Ph.D.

Supervisor(s):