Paper short abstract:

This paper analyses the institutional reforms adopted in post-conflict Angola and Mozambique aimed at strengthening the tax system. It argues that these measures have not had their intended effects on state capacity due to the imperatives provided by integration into the international market economy.

Paper long abstract:

A fair and well-functioning tax system is a fundamental element in building state capacity, power, and legitimacy. Given that effective taxation plays a redistributive role in society, the reform of fiscal institutions provides a critical means for fast-growing yet persistently underdeveloped countries such as Angola and Mozambique to address the disconnection between macroeconomic achievements and equitable growth.

This paper analyses institutional reforms adopted in Angola and Mozambique aimed at strengthening the tax system in the context of post-conflict statebuilding. In comparative perspective, it assesses the impacts of these reforms on state extractive capacity, as well as the extent to which they have promoted government accountability and wider institutional development. Despite demonstrable political will, both governments have struggled establish broad-based taxation, and the institutional reforms that have been adopted have not achieved their intended state-strengthening results.

In assessing the main challenges to fiscal reform, the paper challenges the dominant narrative - pervasive in both development policy and academic discourses - that the obstacles to institution-building lie in the nature of domestic politics. Rather, the paper argues that the main impediments to establishing effective taxation in Angola and Mozambique are rooted in their integration into the international market economy. This integration has engendered dependence on, respectively, foreign investment and development finance, which has provided the governments with autonomous revenue streams that disincentivise institutional reform. The paper argues that this has also disconnected state finances from society, with the effect of disrupting the link between the imperatives of revenue generation and redistribution.