As the book being serialized putting up an interesting question, ‘Why Pay Tax?’ has put up a detailed view of taxation and economic activity in the country, as well as conceptual forms of ascribing functions to various participants in an economy, it is perhaps time to put in a word, while not making a formal review as it isn’t systematic enough. A review has also its drawbacks as one is pained to play the role either of a publisher (if it is a good book) or a reader (whether its contents are right, to an informed reader) and the two aren’t quite compatible. So an informal (illegal?) review skips the role of the publisher as at least one publisher has given a clear answer by publishing it, and another publisher an even clearer answer by serializing it, so no more breath needs to be wasted on that problem per se.
What comes up as interesting is how the discussion in the book takes up and continues matters raised in previous years without conceptual transformation, which is normal, in that we do not usually change to become different people in a debate, but we enable others to take note of our point of view. Whatever change one may undergo through debate is psychic, for instance the reaction to a certain point, though indulgently many of us have tended to think this conforms one’s positions, not by endorsement but by incomprehension, so what matters is a formative stage. After one has passed examinations say for bachelor’s, master’s and then the doctorate, ‘change’ of opinion is only possible in like manner, if the person reads a text that is authoritative to him or her, and then follows up with what the author says.
Thus the review being taken up here is a regurgitation of the sort of debates in seminar rooms at the University of Dar es Salaam that accompanied the start of informal sector economy discussion, one of the key areas of research of Prof. Ted Malyamkono, founder director of ESAURP, a regional research outfit on what universities do. Aside from the technical data and handling of the issues, as to what the non-registered (thus non tax-paying) section of economy had been undergoing, how far it has changed or been changed, there are conceptual elements that remain troublesome. More significantly, they have an impact in the human side of things, as economic study has villains and heroes, either as thumbs up generators of profit or as exploiters of cheap labour, leaving a trail of tragedy, disaster all over the place.
In the first place there is the notion of ‘underground’ economy, and one wonders in how many seminars Prof. Malyamkono has participated where contributors failed to mention the difference between goods smuggled through ‘panya’ routes and thus no tax was paid on them, and when a person sells roasted maize on the roadside and does not pay taxes. The first activity is definitely ‘underground,’ but there is nothing underground about the second type of activity – but it is precisely this sort pavement business, which occupies much of the space where elaborate econometric effort to measure ‘underground’ activity is devoted, if one just picks installment no 7. The notion of underground is morally inseparable from illegality, and if this element were taken into account, the don could have helped us to estimate how far we have come from the days of Ujamaa when underground economy touched most economic life.
This difficulty is not marginal in the study especially when one looks at its impact in how the data is handled, for instance in relation to the growth and decline of the ‘underground’ economy. While shifting the order of reference, one may pick up a later comment and then return to a previous one, the later comment saying that “the decline in tax evasion from 11% in 2000 to about 9% in 2006 (was) a result of (ongoing) tax reforms and improvement (of) tax administration which (has) enabled most informal businesses to be captured by the tax net.” The comment the author made earlier (in installment no. 7) is that the ‘underground economy’ stood at 20 to 22% in the mid 1970s, up to 30% in the 1980s, reaching 39% at the close of the 1990s-and then blossoming to 46% in 2005 and 48% in 2006, which seems to be the final dating of ‘data-stream,’ and that means one takes year 2006 as highest expression of that state.
Strictly speaking, what the author is talking about isn’t underground economy but pavement business, which really was picking up quite fast in the 2005-6 period. So the data stops at the moment that the bulldozing of hundreds of thousands of small businesses along pavements took place, threw millions of people into psychic paralysis, breakdown of countless number of families, and sowed the seeds of distrust of the fourth phase administration (difficulties of life, not the policy measure per se). It is indeed remarkable that the prime minister who supervised nationwide demolitions was himself later removed, without any prior protests, as he was himself involved in informal tendering, just what he had crushed. It is unclear is the research could point a way at humane transition from pavements to other engagement. Nonetheless this load may be too much to place on the shoulders of the researcher or the government, as it was simply consonant with culture as it prevails here, in the sense of the ‘colonial’ notion of trespass where informal traders are just occupying municipal territory meant for other activity.
Hardly any African country is known to have humanely treated informal traders in replacing them, and this culture is being continued at the moment, with roadside bulldozing, beachside erasing etc on the same notion of trespass. The reason it is so appealing is that it is tied up with the non-propertisation of land generally, since it would have been possible for traders to enjoy the protection or influence of those who own houses behind their own activities, or likelihood of paying rents to them, in another setting.
This other setting could have been projected from the way Prof. Hernando de Soto handled the issue, and countless bureaucrats and researchers like Prof. Malyamkono don’t seem to have grasped the point, in which case the bulldozing of pavement businesses in 2006 wasn’t a surprise.
The program that the third phase presidency embarked upon on the basis of the Peruvian economist’s effort was just one of obtaining a title to a residential house and plot, with which one could then borrow money.
Did Prof. de Soto come all the way to teach that if one owns a house he can get a loan so long as he has a title, and in what way would that explain ‘How Capitalism Succeeds in the West and Fails Everywhere Else,’ really?
What the noted Peruvian economist was teaching is that if one is doing business on the roadside, and he is assured of occupying that place for a definite period, say six months, one year or two, he can get a loan on that basis.
If he fails to pay in a given period, the loaner (a microfinance group) can replace him or her with another person by reclaiming that space so long as there is still time for a newcomer to earn what the lender wants.
It was a program of formalisation of roadside business not so that they pay tax but that a key element in the trade, space, becomes a negotiable instrument.
But as he was talking to non-liberals, their whole frame of mind was to squeeze the juice of how to expand the tax net, like Ted…