What is Fiscal Justice? A rationale and some great examples

January 10, 2017

     By Duncan Green     

What is ‘Fiscal Justice’? It’s one of those campaign buzzwords that appears every so often, and fiscal-justice-coverOxfam is going big on it (you’ll hear plenty about it at the impending Davos meeting, provided the media cover anything other than Donald Trump’s inauguration that week). If you want to get a sense of what it means on the ground, check out Oxfam’s ‘Fiscal Justice Global Track Record’ paper, which is stuffed with case studies from 21 countries, plus the global campaign on things like tax havens that will be beating the drum in Davos.

First the rationale:

‘Fiscal justice is about people having the space, voice and agency to exercise their rights, and to use this to influence and monitor fiscal systems to mobilize greater revenue and increase spending for quality public services.

Fiscal Justice is about more than technical tax or budget systems; it is about power, politics and supporting people to fight inequality. Fiscal Justice is about levelling the playing field, giving citizens a say in decision making, it is about changing power relations and tackling extreme inequality in a proactive and practical way.

Tax systems, the budget cycle and public spending are the most visible and tangible expression of the social contract between citizens and state. Increasing tax revenue allows developing countries to use and control their own resources to support their national development plans. Greater domestic resource mobilisation can improve governance and accountability, leading to fairer and more equal opportunities to access services. Fiscal justice includes revenue raising through taxation, allocation and spending on public services. It is about how tax administrations are built, how taxes are collected, how public money is spent and who benefits from that.

The budget of a country and its tax systems are not neutral – they are deeply political. The national budget is a statement of political priorities. In some countries, tax systems are biased towards consumption and wage taxes, which impact on formal sector and poorer households presenting a higher tax burden. To make tax systems fairer, tax reform is needed to shift the burden to wealthier households.

Action Aid tax campaign, Uganda

Action Aid tax campaign, Uganda

Quality Public services, like healthcare and education, can also be great equalizers, and can mitigate the worst impacts of today’s skewed wealth and income distribution by putting “virtual income” into people’s pockets. For the poorest, those on meagre salaries, this can be as much – or even more than – their actual income. Public services have the power to transform societies by enabling people to claim their rights and to hold their governments to account and to improve their life chances.’

The lessons drawn from the cross country analysis are good, but pretty generic (good FJ work needs to be context specific and engage citizens; use power analysis and multi-stakeholder approaches; timing is all). The meat is in the case studies – here’s a flavour from the Dominican Republic:

‘The Yellow Umbrella Campaign in the Dominican Republic Despite impressive economic growth, the Dominican Republic is the second most unequal country in Latin America. With a social investment level of 7.1 percent of GDP, the country lags behind the regional average of 16.2 percent. School (pre-university) education is particularly affected by investment levels which have never exceeded 2 percent of GDP despite legislation setting the minimum level of 4 percent of GDP for the education sector.

In 2012, an electoral year in Dominican Republic, an groundswell of people and civil society dom-rep-yellow-umbrellaorganisations formed a civic movement that began to demand and mobilise around a very specific target. The target was the implementation of the General Education Law 66- 97 on budgetary matters which establishes 4 percent GDP investment in school education, which successive governments had never put into practice. Protesters, armed with yellow umbrellas – to protect themselves from the sun and the rain and with ‘4%’ printed on them in black – became the symbol of this movement.

Their collective action was marked by three moments: 1) aggression against a group of protesters in front of the National Palace; 2) a legal appeal presented to the Constitutional Court; and 3) a nationwide protest nicknamed “Yellow Monday”. The backlash that the protestors received far from deterring them, triggered a massive outpouring of support and social commitment via social networks, media and with public support of Dominican academics and opinion leaders. This pushed all political parties to sign the “Political and Social Commitment for Education” pledge. As a result, since 2013, the Dominican Republic government has met its legislative duty and allocated 4 percent of GDP for education.’

Smart stuff.