62 Social Contracts for Development
programs are most often targeted through a variety of mechanisms (for example, community based, geographical targeting, categorical targeting, proxymeans testing). Yet, the decision to target, and how to do it, can have significant implications beyond the program itself: Is it considered fair? When are errors of inclusion acceptable to avoid exclusion? Is there a legitimate actor, even if not the state, that can justify the targeting and the mechanism chosen? How do considerations about the social contract enter when making these decisions? Program conditionality can consolidate state authority, cement the rule of law, and contribute to the building of human capital through investments in health and education, for example. In doing this, conditionalities reflect, but can also impose, a social contract arrangement between citizens and the state. Thus, which conditionalities can strengthen the overall social contract at the local and national level? Which behaviors can generate a virtuous cycle to help communities and countries move to a better equilibrium in their social contract? Are there cases in which conditions can have negative effects on social contract dynamics? Background work commissioned for this report (Dreier, Alik-Lagrange, and Lake 2020) illustrates these patterns with specific programmatic examples, highlighting promising avenues for advancing democratic accountability and citizen participation while guarding against strengthened authoritarian control.
The Taxation Challenge in Africa: Cause and Effect of Prevailing Social Contracts Many countries in Africa struggle to collect taxes, partly both a cause and a consequence of prevailing social contracts. The collected tax1 to gross domestic product (GDP) ratio in the region is, on average, 19 percent, but there is wide variation across countries, with taxes equating to less than 1 percent of GDP in Somalia and between 7 and 10 percent in countries such as Angola, Ethiopia, and Madagascar. In contrast, in Namibia and South Africa, taxes equate to about 27–28 percent of GDP.2 In countries where tax collection is low, the capacity of the state to provide services is undermined, thus possibly undermining the stability of the social contract. Hence, a key challenge for many countries in Africa is to be able to increase taxation and to improve the accompanying use of resources. The World Bank, through its Innovations in Tax Compliance project, which accounts for social contract dynamics, has developed a conceptual framework for developing more effective approaches to tax reform and compliance in developing countries (Prichard et al. 2019). The project places fiscal contracts squarely at the center of its approach to tax reform. It goes beyond traditional approaches that rely solely on enforcement and facilitation and brings in trust. By combining
