Economic Advisor to a in Africa
Economic Advisor to a Less-Developed Nation in Africa
For many years, experts in fiscal decentralization and local public finances have held the firm opinion that tax is close to an ideal tax for local government finance. The experts have presented compelling reasons why they hold this conviction. This study provides some recommendations to property taxes in Least Developing Country (LDC) on how they can achieve their objectives.
Property Tax
Role that I would assign to property taxes in this nation to achieve its objectives
LDC’s should assign revenue sources, particularly taxes to each level of government. This will enable the country to align expenditure assignments with sufficient revenue thus raising capacity at every level of the government to finance the assigned responsibilities. LDC can raise adequate revenues through a wide range of revenue assignments even without any tax autonomy. This can be achieved through intergovernmental transfers. However, this approach raises concerns because if governments are allowed to carry out the transfers, the country will end up overspending on local services because they will fail to internalize the full cost of providing the benefits (Bahl, 2008).
Political accountability can be enhanced through the provision of sub-national governments with revenue autonomy. In this context, sub-national governments in LDC will be able to raise their own funds and face hard budget problems on their operating budgets.
In the perspective of LDCs, I would recommend that these governments raise their own revenue to finance expenditures at different margins. This will create a nexus link between the cost of providing the services and the benefits of locally provided services. This will encourage the nation to internalize the marginal costs of providing services thus avoiding overspending on them. Alternatively, once LDC accepts that the at least some form of limited tax autonomy, they will be able to limit some ways of levying certain taxes such as introducing taxes on (Bahl, 2008).
With the above general restrictions in place, any LDC in Africa can choose between a closed list of allowable taxes and an open list of taxes. Whichever approach the country adopts, they will enjoy significant benefits. In overall terms, if the country embraces a closed list of sub-national taxes, it may be able to avoid the introduction of highly distortionary taxes and nuisance taxes, which can easily impede on their economic development and growth. Alternatively adopting a closed lit of taxes may encourage for the cohabitation of tax bases by intergovernmental transfers and different levels of government designed to correct for vertical externalities (Bahl, 2008).
Property Tax 3
Two features of an economic system that I would recommend this country implement.
Unlimited Government Intervention: under such an economy, the government intervenes more in the country’s businesses. This feature suggest that the nation will not that the government will provide maximum support in economic matters of the country. The main function of the government is to develop, sustain and promote marketing institutions. The nation will enforce law and order to protect its public property, regulate monetary frameworks and correct market failures. The government will be responsible for protecting private life of its citizens and property (Grant & Vidler, 2000).
Market and Competition Forces: the country’s economy should be designed in such a way that it will promote competition. This is because competition means a fair deal in obtaining results. The government should increase sellers and buyers in the market because this would promote competition thus increasing the quality and efficiency. With competition, the country will be able to control and manage different functions of its economy (Grant & Vidler, 2000). Demand and supply are the prime market forces determining the production of a country produces and the suitable ways to do so.
Market equilibrium, price and output, are determined by market forces. Therefore, I would recommend that any least developed nation to emphasize on freedom of markets and individuals. Such an economy will give priority to freedom of individuals over the society thus promoting self-interest, which may provide and of the nation. In this context, individuals and businesses have the freedom to make a choice thus freely leaving and entering the market. Such an economy, labor will have the freedom to choose its service while maximizing its output (Hyman, 2011).
I would recommend any LDC in Africa to take a gradual approach in mailing reforms, in its policymaking. First, the country must avoid any serious disruptions to the economy. If the adjustments turn out to be deficient, the country can modify them to suit national and local conditions. Through implementation of those policies that had the potential of being successful, political support for further reforms will be built in the country. This will be particularly necessary for social unrest and political conflicts that could hinder the whole process of reforms. For these reforms to be effective, it would be necessary for the country to set up new legal and regulatory frameworks, build new institutions and offer training to personnel so that they can become familiar the new practices (Grant & Vidler, 2000).
Conclusion
An economic system comprises of industries, means of production, individuals and a medium of exchange. The medium of exchange is necessary in selling and buying of services and goods. Different forms of government have different ways of controlling these factors. Assigning of property tax in an intergovernmental system of finance is the most critical issue for a least developed country. This concludes that the most vital function is for the government to have the autonomy to make other tax policy decisions on the structure of the property tax.
References
Bahl, Roy, W. (2008). Land taxes vs. property taxes in developing countries. Cambridge,
MA: Lincoln Institute of Land Policy.
Grant, S. & Vidler, C. (2000). Economics in Context. New York: Heinemann.
Hyman, D.N. (2011). Public finance: A contemporary application of theory to policy (10th ed.).
Mason, OH: South-Western.
