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Tax Earmarking and Political Participation: Theory and Evidence from Ghana

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  • Ahrenshop, Mats

Abstract

Earmarking taxes for specific expenditure categories is thought to be a crucial factor in the development of the early modern European fiscal states and remains a widespread yet fiscally rigid and often inefficient policy tool. I explore a decidedly political logic to the puzzling prevalence of tax earmarking. In this paper, I test an initial micro-behavioural condition for this political logic of earmarking: that general fund taxation may produce more political mobilisation than earmarking would, threatening the political survival of governments in lowcapacity states. I outline two interrelated mechanisms for this expectation: citizens’ discontent with the absence of government-provided information aboutthe revenue uses of taxpayers’ money and the anticipation of increased government discretion over spending policy. I design an online survey experiment with 874 citizens in Ghana to test these implications. The experiment randomly varies different proposals of how to use increased tax revenue from a recent government fiscal capacity programme and measures citizens’ intentions to engage politically. The results indicate that earmarking does not produce greater bottom-up accountability pressures than general fund taxation.

Suggested Citation

  • Ahrenshop, Mats, 2024. "Tax Earmarking and Political Participation: Theory and Evidence from Ghana," Working Papers 18406, Institute of Development Studies, International Centre for Tax and Development.
  • Handle: RePEc:idq:ictduk:18406
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    File URL: https://opendocs.ids.ac.uk/opendocs/handle/20.500.12413/18406
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    Keywords

    Finance; Politics and Power;

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