Taxation, Political Accountability and Foreign Aid: Lessons from Somaliland

Abstract

For years, studies of state formation in early and medieval Europe have argued that the modern, representative state emerged as the result of negotiations between autocratic governments in need of tax revenues and citizens who were only willing to consent to taxation in exchange for greater government accountability. This article presents evidence that similar dynamics shaped the formation of Somaliland's democratic government. In particular, it shows that government dependency on local tax revenues – which resulted from its ineligibility for foreign assistance – provided those outside the government with the leverage needed to force the development of inclusive, representative and accountable political institutions.

Acknowledgements

This research was made possible by the support of the Centre for Global Development's Weak and Fragile State Project. The conclusions of this article are those of the author and are not intended to represent the views of the Centre for Global Development. The author is extremely grateful to Steve Knack, Mick Moore, Maggie Fick, Katie Krackenberger, Meredith Startz, Pierre Englebert, Abe Handler, Roger Low, Rachel Homer, Vijaya Ramachandran, Satish Chand, Todd Moss and other CGD Fragile States Project authors. Any errors are the sole responsibility of the author.

Notes

1. Personal Correspondence, 2010.

2. The limited availability of data on Somaliland comes from two sources – a lack of recent surveys conducted in Somalia, and the treatment of southern Somalia and Somaliland as a single country in what surveys exist.

3. See Online Appendix III for detailed statistics.

4. Estimate derived by simple average of the five regions the make-up Somaliland, as population data by region is not available for calculating weighted averages. Estimates for these regions are relatively tightly clustered between approximately $275 and $350 per capita, however, making an estimate of $300 a reasonable approximation. There is no way to account for the fact that only parts of Sool and Sanaag are a part of Somaliland, however.

5. From a passage describing the Sanaag Grand Peace and Reconciliation Conference in 1993, which Bradbury calls ‘a classic example of a peace process that addressed civil issues’ (Bradbury, 2008: 101).

6. Online Appendix II provides detailed statistics on the degree of fiscal independence that exists between the national government and major municipalities.

7. Moore (2008: 52–57) provides an excellent discussion of these alternative motivators.

Additional information

Notes on contributors

Nicholas Eubank

An Online Appendix is available for this article which can be accessed via the online version of this journal available at http://dx.doi.org/10.1080/00220388.2010.598510