The Commons Select Committee System in the 2015–20 Parliament

The House of Commons select committees witnessed some of the most constructive political theatre of the 2010‐2015 Parliament. Recall Rupert Murdoch's public contrition, Margaret Hodge's assault on MNC tax evasion and Keith Vaz's timely interrogations of G4S, etc. The committees also embraced social media and adopted public engagement as a key task. These developments all reflect a newly emboldened system. In recent months, four reports have been published which reflect on these developments. They also look forward to the further substantial development of committee activity. The system thus sets sail with an abundance of specific suggestions, including ideas that could have far wider and more far‐reaching democratic implications.     

How Do Nonprofits Respond to Regulatory Thresholds: Evidence From New York's Audit Requirements

Nonprofits in the United States must comply with various state and federal regulations to maintain their tax‐exempt status. Despite persistent calls to increase accountability in the nonprofit sector, there is little research examining the burden imposed by existing regulatory requirements, especially at the state level. This paper uses a bunching design to estimate the avoidance behavior exhibited by tax‐exempt charities in response to New York State's audit requirements. There is clear evidence of bunching in response to the requirement that nonprofits above certain revenue thresholds file financial statements reviewed by or audited by an independent certified public accountant. Measuring the extent of bunching around the revenue notches yields estimates of the average revenue that nonprofits either forego or fail to report in avoidance of the requirements. Results from dynamic estimation show that charities near the threshold for a review engagement report approximately $1,300 less revenue than otherwise predicted by a counterfactual; charities near the threshold for a full audit report approximately $1,400 less. The results have implications for the optimal design of state‐level financial regulations.     

INTERNAL AUDIT—THE POOR RELATION OF THE PUBLIC SERVICE*

In considering the Public Accounts Committee in relation to internal audit, it should be stated that the duties imposed on the Committee by the Public Accounts Committee Act require it to examine the accounts of the receipts and expenditure of the Commonwealth Government and each statement and report transmitted to the Parliament by the Auditor-General. Inherent in the Committee's functions therefore is a strong association with the audit function.     

THE HOUSE OF COMMONS LOOKS AT THE CIVIL SERVICE*

Abstract: The 1977 report on the Civil Service by the Expenditure Committee of the U.K. House of Commons contains much to interest Australian readers. It recommends abolition of the Administration Trainee Scheme and an extension of the “Open Structure” to Assistant Secretary level; the establishment of a higher management course; the re-activation of the Pay Research Unit; and the appointment of part-time “outsiders” to the Civil Service Commission. Although luke-warm to the Fulton doctrine of “hiving-off”, the Committee favours the creation of more “accountable units” in departments. The centrepiece of the Report is the recommended return of key Civil Service Department functions—manpower control; management services; and internal responsibility for monitoring efficiency—to Treasury. The role of Parliament in improving efficiency is not neglected; it is proposed that the Exchequer and Audit Department conduct audits of management efficiency and effectiveness and that the use of select committees to review Executive activity be extended. The Committee was divided on the issue of whether officials serve ministers as well as they should, but the Report does contain proposals which are seen as “strengthening the minister's arm”. Overall the Report reflects the Committee's limited resources; analysis is often inconclusive, or at best, partial (particularly in areas such as the central organization of government and relations between the centre and departments), and the document seems to lack a clear strategy and sense of direction. However, the Committee's work does compare favourably with that of many other inquiries into the Civil Service.     

The political economics of not paying taxes

This paper considers redistributive as well as political consequences of tax avoidance. When tax avoidance is possible, the official tax rate does not necessarily correspond to what individuals actually pay. This affects both redistributive outcomes as well as political attitudes towards taxation. Depending on the avoidance technology different political equilibria emerge. When the avoidance possibilities are limited, the classical conflict between rich and poor is sustained. If the tax avoidance technology is more effective, however, the equilibrium outcome can change to a situation where a coalition of poor and the very richest favor a higher tax rate. Comparing the model predictions with data on income inequality and evidence of avoidance activity, it comes surprisingly close to actual observations.     

Insuring legislative wealth transfers: theory and evidence

Authorities rely on reports from private citizens to detect and enforce more than a trivial portion of effective law-breaking. The present article is the first to study the cultural aspect of peer reporting experimentally. By collecting data in a post-Soviet country (Moldova), we focus in particular on how the Soviet legacy of using citizens as private informants may have a long-lasting effect on their willingness to cooperate with state authorities. We then contrast those effects with peer reporting behavior in France, a Western society. Our results suggest that participants in Moldova view cooperation with authorities as less socially acceptable than their counterparts in France. Our results also suggest that participants in Moldova engage less frequently in peer reporting than individuals in France. However, we also find that less peer reporting does not necessarily imply less tax compliance. Participants in both countries exhibit very similar tax compliance rates. We explain the effect of peer reporting on tax compliance in Moldova using the country's past experience during the Soviet era, when being reported to authorities was common and carried grave consequences.

     

“Editorials at a Glance”: Cultural Policy,Gender, and Modernity in the World War I Bureau of Cartoons

Cultural policy during the Great War, rather than radiating from the central government, evolved from contemporary culture—propaganda, movies, and mass media. The state was a player, but quasi‐public organizations such as propaganda agencies, non‐state actors like the YMCA, and “public opinion” played important roles. The Committee on Public Information (CPI)—the government's propaganda committee—influenced Americans through books, advertisements, posters, and cartoons. This essay examines two of the CPI's efforts: the Bureau of Cartoons and the Division of Pictorial Publicity. In these materials, we can see the intersection of class‐based notions of gendered idealism and a developing media state's use of a sentimental culture of the Victorian middle‐class to represent and motivate the nation. With staff drawn primarily from advertising agencies and newspapers, the Committee's work shows how the formulation of cultural policy is the result of complex negotiated processes involving state interests, cultural liaisons, and ideological assumptions.     

The Church Committee and a new era of intelligence oversight

Thirty years ago, the Church Committee completed what was and still is the most exhaustive look at any government's secret intelligence agencies. The Committee showed that in times of crisis, even constitutional democracies are likely to violate their laws and forget their values. In this reflection, the Committee's Chief Counsel states that by examining the full record over time, the Committee found that it was insufficient to blame abuses solely on intelligence agencies. Ultimate responsibility was properly fixed with the presidents, attorneys general, and other high executive branch officials. Seven general lessons, including the danger of excess secrecy, are drawn from his experience. These lessons are valuable for the present struggle with terrorism.     

How fair? Changes in federal income taxation and the distribution of income, 1978 to 1998

In this paper, we determine how tax law and income distribution changes have separately contributed to the changes in tax progressivity over time, and also how a specific pre‐tax distribution of income affects the equalizing ability of a given tax change. We use information from the Current Population Survey for years that follow immediately after significant tax law changes or after the full enactment of these changes to measure the effect of income taxes on income distribution for selected years over the period 1978 to 1998. We find that, even when account is taken of the induced effect of changes in federal income tax laws on pre‐tax income, the individual income tax structure has been less successful in equalizing after‐tax income since the 1980s and into the early 1990s. We also find that a given tax law's equalizing effect on the distribution of income is significantly affected by the pre‐tax distribution of income. © 2005 by the Association for Public Policy Analysis and Management.     

Tax morale in Latin America

In the tax compliance literature, there is a lack of empirical evidence on the degree of tax morale in developing countries. As a novelty, this paper focuses thus on Latin America, analysing tax morale as a dependent variable and searching for factors that systematically affect tax morale, working with the two data sets Latinobarómetro and World Values Survey. Our findings indicate that there is a significant correlation between tax morale and the size of shadow economy. Furthermore, people who said they knew/have heard about practised tax avoidance have a significantly lower tax morale than others. Looking at individuals’ perception of reasons for tax evasion we found that the tax burden, lacking honesty, and corruption are seen as the main factors. We observed a significantly lower tax morale in South America/ Mexico than in the Central American/Caribbean area. Furthermore, trust in the president and the officials, the belief that other individuals obey the law and a pro democratic attitude have a significant positive effect on tax morale.     

The tax-welfare mix: explaining Japan's weak extractive capacity

Abstract

Despite having the highest level of public debt in the Organisation for Economic Co-operation and Development (OECD), higher than Greece or Italy, Japan has one of the lowest aggregate tax burdens of the advanced industrial democracies. This paper asks why Japan, once described as a strong developmental state, has had such a weak extractive capacity, an inability to raise revenues to confront deficits and public debt? In contrast to the existing explanations that focus on political institutions, partisan preferences, or economic globalization, this article argues that Japan's ‘tax–welfare mix’ – the combination of taxes and redistributive welfare polices – undermined the state's long-term capacity to secure adequate tax revenue. More than just a source of revenue, taxes can be used directly to achieve redistributive goals, such as targeting low taxes and exemptions to specific groups. This study shows how Japan's tax–welfare mix diminished its extractive capacity through three mechanisms: the political lock-in of a redistributive social bargain struck around low taxes, the timing and sequencing of its tax policy and welfare development, and the erosion of public trust, which undermined tax consent. Beyond offering a new theory of extractive capacity, the tax–welfare mix explains aspects of Japan's tax structure that defy existing explanations and contributes to our understanding of the capitalist development state by highlighting the redistributive political function of tax policy and its long-term impact on state capacity.     

Tax Expenditure Reporting: The Utilization of an Innovation

Central to this article is the question, “Are tax expenditure reports used?” State legislators serving on tax committees in ten states were surveyed regarding their use and their perceptions of others' use of tax expenditure report information. Responses indicate (1) strong acceptance and broad use of report information; (2) purposes and policy stages of use characteristic of technical information use; and (3) use focused predominantly on resource acquisition (revenue) policy rather than resource allocation (budget) policy. Thus it appears that tax expenditure reporting does not operate to secure budgetary control over tax expenditures, and consequently tax expenditures continue largely to escape budget scrutiny.     

Raising local authority district revenues through direct taxation in a low-income developing country: evaluating Uganda's GPT

Uganda's graduated personal tax represents a rather unusual attempt at applying a local income tax as a means of financing local authority operations in a predominantly informal, rural economy. Statistical and other analysis and comment reveal it to have serious deficiencies in terms of standard tax criteria and as a result of associated social costs, despite which local authorities have been led to increase rather than to decrease their reliance on it. Some alternative revenue-raising instruments which could serve to reduce this reliance are indicated. Copyright © 1998 John Wiley & Sons, Ltd.     

Mayoral Public Sector Work Experience and Tax Collection Performance in Colombian Local Governments

ABSTRACT

Local governments in Latin America tend to have limited capacity to collect taxes. Existing theory explains tax collection performance as a function of political, socio-economic, and cultural factors. Yet across Latin America, tax collection performance varies greatly between localities that are similar along these dimensions. We suggest that organizational capacity, represented by managers' human capital, explains variation in local tax collection performance. We test this theoretical idea against panel data on most Colombian local governments, where elected mayors are the top managers determining the local tax collection strategy. We examine two indicators of tax collection performance: (1) the per-capita amount of property tax collected and (2) property tax collected as a percentage of total property valuation. Controlling for important confounders, the length of the mayor's prior public sector work experience is positively associated with the per-capita amount of property tax collected but not the percentage of total property valuation collected in property tax. Our results suggest that Colombian mayors gain relevant skills over their career. Our study has implications for other developing countries with a similar property tax collection system.     

Swiss banking secrecy and the problem of international cooperation in tax matters: A nut too hard to crack?

How was Swiss resistance to international cooperation in tax matters overcome? This article argues that while Swiss banks are structurally dependent on access to the United States (US) financial market, Switzerland is structurally dependent on the economic welfare of its largest banks. Taking advantage of a tax evasion scandal in the midst of the global financial crisis, this indirect dependence gave US law enforcement authorities the opportunity to exercise pressure on Switzerland by threatening to criminally indict Switzerland's largest bank. The tax evasion scandal and subsequent Swiss concessions to the US had two important consequences for international tax cooperation. First, the scandal provided a focal point for collective action that allowed other countries to coordinate their strategies and direct them against the country that had been identified as uncooperative. Second, the scandal undermined Switzerland's ability to impede collective action because the bank's public admission of wrongdoing demonstrated the necessity of international tax cooperation.     

The role of tax bases and collections costs in the determination of income tax rates,seigniorage and inflation

A growing theoretical literature on optimal taxation predicts that governments will set the tax rates on money holdings and on more traditional tax bases to minimize the deadweight losses of collecting government revenue. Under the presumption that relative collection costs and tax bases have not changed significantly over time, the empirical time-series seigniorage literature has focused on the theory's tax smoothing implication, finding only weak support. We show that changes in collections costs and tax bases played an important role in the determination of tax composition and find stronger support for tax smoothing when this is taken into account.     

The Committee on Standards in Public Life: Twenty Years of the Nolan Principles 1995–2015

In his recent memoir, William Waldegrave wrote that no country run by John Major and Robin Butler was likely to be in much danger of systemic corruption. The fact remains that a quarter of a century ago, John Major, with the guidance and support of his cabinet secretary, decided to establish the Committee on Standards in Public Life under the chairmanship of Lord Nolan. The apparent prevalence of ‘sleaze’ issues in public life—most notably the ‘cash for questions’ scandals involving Tory MPs—provoked the decision. Lord Nolan's committee immediately enunciated seven principles of public life: honesty, accountability, integrity, selflessness, openness, opportunity and leadership. Over the years, many of the Committee's recommendations have been accepted. There is today vastly greater transparency. The principles have been widely accepted; it is clear the public expects that they should be observed by public servants, including, perhaps especially, MPs. Yet it is equally clear that there is a widespread and still deepening mood of public cynicism on standards matters. The Committee is determined to defend the Nolan principles, but without more help from the political class it will be like Mrs Nupkins in The Pickwick Papers: inculcating moral lessons of great importance and generally ignored.     

Policy attribute framing: A comparison between three policy instruments for personal emissions reduction

A comparative experiment in the UK examined people's willingness to change energy consumption behavior under three different policy framings: energy tax, carbon tax, and personal carbon allowances (PCA). PCA is a downstream cap‐and‐trade policy proposed in the UK, in which emission rights are allocated to individuals. We hypothesized that due to economic, pro‐environmental and mental accounting drivers PCA would have greater potential to deliver emissions reduction than taxation. Participants (n = 1,096) received one version of a survey with the same energy‐behavior–related questions and identical incurred costs under one of the following framings: energy tax (where carbon was not mentioned), carbon tax, and PCA. Results suggest that policies that draw people's attention to carbon (PCA and carbon taxation) could have greater impact on their stated willingness to reduce energy consumption, and on the reduction amounts prompted, than would a non‐overt price signal (energy tax). There is mixed evidence, however, as to whether PCA or carbon taxation would produce the largest energy demand reductions. Some indication was found for a spillover toward wider carbon conservation under the PCA framing. © 2011 by the Association for Public Policy Analysis and Management.     

The Effects of Assessment Quality on Revenue Volatility

This paper examines the relationships between assessment quality, property tax revenue volatility, and other revenue volatility using panel data of all 100 counties in North Carolina between 2003 and 2007. Findings suggest that characteristics of the property tax base are the most important predictors of property tax revenue volatility among counties over time. Specifically, increases in assessed value and years in which a mass revaluation occurs are most influential in determining property tax revenue volatility. The second stage of analysis reveals that population, nontax revenue dependence, property tax dependence, and assessment quality have the greatest influences on volatility of other revenues among counties over time. The effect of assessment quality on nonproperty tax revenue volatility is conditional upon a county's property tax dependence.     

The Tax Revolt and Electoral Competition

This paper explores the effect of electoral competition onstate and local expenditures in the US during the politicalenvironment following the tax revolt of the late 1970s. Itutilizes a theoretical model in which both electoralcompetition and tax and expenditure limits impact spending.Empirical results indicate the tax revolt's primary impact wastransmitted through political candidate competition, notthrough the adoption of tax or expenditure limitations, as iscommonly believed. However, tax and expenditure limits doaffect public education expenditures.