Raising Revenue Right : A Roadmap for Domestic Resource Mobilization - Chapter 5 : Trust and the Political Economy of Taxation

Overview & Synopsis

This chapter explores the critical role of trust in shaping tax policy, administration, and compliance. It argues that effective taxation depends on the cooperation of three key actors: politicians, bureaucrats, and citizens, whose interactions influence the design, implementation, and acceptance of tax systems. Trust in government institutions encourages voluntary tax compliance, strengthens the fiscal contract between citizens and the state, and enables more ambitious and sustainable tax reforms. Conversely, low levels of trust can undermine revenue collection, weaken policy implementation, and limit governments’ ability to move closer to the fiscal frontier. The chapter examines how trust affects tax outcomes, reform feasibility, and state capacity, highlighting its importance alongside technology and transparency in building efficient, equitable, and sustainable tax systems.