Distribution Agreement in Presenting This Thesis Or Dissertation As A
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Distribution Agreement In presenting this thesis or dissertation as a partial fulfillment of the requirements for an advanced degree from Emory University, I hereby grant to Emory University and its agents the non-exclusive license to archive, make accessible, and display my thesis or dissertation in whole or in part in all forms of media, now or hereafter known, including display on the world wide web. I understand that I may select some access restrictions as part of the online submission of this thesis or dissertation. I retain all ownership rights to the copyright of the thesis or dissertation. I also retain the right to use in future works (such as articles or books) all or part of this thesis or dissertation. Signature: _____________________________ ________________ Ryan Tans Date Decentralization and the Politics of Local Taxation in Southeast Asia By Ryan Tans Doctor of Philosophy Political Science _________________________________________ Richard F. Doner Advisor _________________________________________ Jennifer Gandhi Committee Member _________________________________________ Douglas Kammen Committee Member _________________________________________ Eric R. Reinhardt Committee Member Accepted: _________________________________________ Lisa A. Tedesco, Ph.D. Dean of the James T. Laney School of Graduate Studies ___________________ Date Decentralization and the Politics of Local Taxation in Southeast Asia By Ryan Tans M.A., Emory University, 2015 M.A., National University of Singapore, 2011 B.A., Calvin College, 2004 Advisor: Richard F. Doner, PhD An abstract of A dissertation submitted to the Faculty of the James T. Laney School of Graduate Studies of Emory University in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Political Science 2017 Abstract Decentralization and the Politics of Local Taxation By Ryan Tans Why do otherwise similar cities in Southeast Asia vary in their capacity to generate tax revenue? In this dissertation, I argue that local business associations drive increases in property taxation to enable cities to spend on infrastructure, but only if they can resolve two political problems that commonly bedevil taxation. Business associations must build a distributional consensus, and they must forestall local officials from diverting new revenues away from business-friendly projects. It takes strong and influential business associations to resolve these problems. This argument proceeds from an understanding of the political obstacles to taxation as collective action and commitment problems, rather than a mere lack of accountability for public officials. In making this argument, I challenge dominant political economy accounts that view tax policies as outcomes of either class conflict or patronage politics. Instead, I adopt an extended “fiscal contracts” approach which emphasizes the role of private sector associations as an institution that underpins an exchange of taxes for services between taxpayers and governments. My findings show that strong local business associations resolve distributional conflict and monitor public spending to varying degrees in four Indonesian and three Philippine cities, and draw on interviews, administrative documents and press reports as well as national statistical data. This dissertation explains why similar local governments enact different tax policies, and in doing so it poses a partial explanation for geographically uneven development. Furthermore, it delineates the conditions under which self-interested economic elites agree to fund public goods, thereby joining a rich tradition of work that casts public goods as a by-product of rent-seeking politics. Decentralization and the Politics of Local Taxation in Southeast Asia By Ryan Tans M.A., Emory University, 2015 M.A., National University of Singapore, 2011 B.A., Calvin College, 2004 Advisor: Richard F. Doner, PhD A dissertation submitted to the Faculty of the James T. Laney School of Graduate Studies of Emory University in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Political Science 2017 Acknowledgements I acknowledge the generous financial support of Fulbright, American Institute for Indonesian Studies, Council of American Overseas Research Centers, and Emory Professional Development Support. The money would not have been used nearly as productively were it not also for logistical support from Third World Studies Center at University of the Philippines, Diliman and Center for Southeast Asian Studies-Indonesia, in Jakarta. I am very grateful to my committee, Rick Doner, Jennifer Gandhi, Eric Reinhardt, and Douglas Kamman, who guided me all the way to this stage. Professor Doner’s fingerprints are all over this project, in no small part because he has an amazing ability to know when to challenge students and when to encourage them. Douglas Kammen has been my academic guide since 2008, when I applied to study at NUS. The benefactors of this project are far too numerous to mention in the time I have left to write. Many people went out of their way to help me in Indonesia, the Philippines, and here in the United States. To name just a few, Aries Arugay, Paul Hutchcroft, Dockoy Capuno and Niño Alvina were my patrons in the Philippines; Pak Yosef Djakababa, Pak Johan Purnama, and Airlangga Pribadi were my guides in Indonesia; Allen Hicken, Tom Pepinsky, and Matt Winters helped me from the beginning here in the US. I am grateful to the many interview respondents who explained property taxation and other minutia to me at length with great patience, and treasure the friendships that developed over the time I spent in the field. Yet, none of these words would have ever been put to paper without the loving support of my family. The arrival of our first child, David, joyfully upstaged the final stages of this dissertation, and I could never have finished so soon after his birth were it not for the wonderful support of my mother-in-law, Ibu, and my parents. All of them rolled up their sleeves and moved into our tiny apartment (not at the same time) to teach us how to care for a newborn baby. My wife, Ida, endured long absences and hours spent writing without ever losing her infectious optimism. I could never remain discouraged for long because she wouldn’t let me. The ideas here grew during thoughtful conversations with her about the political obstacles to public service provision. Contents List of figures List of tables List of abbreviations and glossary 1 The Institutional Underpinnings of Fiscal Contracts: Theory and Cases 2 2 Beyond Mere Accountability: Political Incentives in the Literature on Decentralization 29 3 Philippine Cases: Iloilo and Batangas 48 4 Indonesian Cases: Surabaya and Banjarmasin 85 5 Lessons, Limitations and Future Directions 128 Appendix of additional tables and figures 152 List of interviews 161 Bibliography 168 List of figures Map of Southeast Asia 1 1.1 Fiscal decentralization in the developing world 6 1.2 Property tax revenue as a percent of GDP, Philippines and Indonesia 7 1.3 Property tax revenue as a percent of GDP, Developing economies 8 1.4 Property tax revenues by value of residential property, MRP method 28 3.1 Local revenues over time 54 3.2 Change in property tax revenue as a percent of GDP, Philippines, 2002-2014 55 3.3 Capital expenses over time, Iloilo City 71 3.4 Evening commuters crossing the Calumpang river 73 4.1 Property tax over- and under-performance, Indonesia 87 4.2 Revenue and capital spending, Surabaya 90 4.3 Land valuation increase & construction spending per capital 95 4.4 Change in land valuations, Surabaya 99 4.5 Land valuations versus market value, Surabaya 99 4.6 Construction spending and property tax assessments by kecamatan, Surabaya 101 4.7 Revenue and capital spending, Banjarmasin 118 4.8 Revenue performance, given central fiscal transfers 121 A.1 Property tax revenue as a percent of GDP, Advanced economies 152 A.2 Property tax revenue as a percent of GDP, Developing economies (Uncorrected IMF figures) 153 A.3 Total revenue per capita, Indonesia 2014 154 A.4 Central fiscal transfers per capita, Indonesia 2014 155 A.5 Total revenue by central fiscal transfers, Indonesia 2014 156 A.6 Revenue and Capital Spending, Makassar & Denpasar 157 List of tables 1.1 Property tax legislation and elections in the Philippines 25 2.1 Comparing types of taxes 32 3.1 Property tax assessments, 2014 (in pesos) 57 3.2 Major Iloilo City tax legislation, 2001 - present 57 3.3 Major Batangas City tax legislation, 2001 - present 58 3.4 A variable comparison 60 4.1 A variable comparison 89 5.1 Evaluating public policies 135 A.1 List of developing countries with decentralized property tax and local elections 158 A.2 List of developing countries with nationally administered property tax 159 A.3 List of developing countries with decentralized property tax but no corresponding elections 159 A.4 Mayoral elections in Surabaya and Banjarmasin 160 List of abbreviations and glossary APBI Asosiasi Pertambangan Batubara Indonesia (Indonesian Coal Mining Association) Apersi Asosiasi Pengembang Perumahan dan Pemukiman Seluruh Indonesia (All-Indonesia Community and Housing Developers Association) Bappeko Badan Perencanaan Pembangunan Kota (City Development Planning Board) BLGF Bureau of Local Government Finance (Philippines) BPS Badan Pusat Statistik (Statistics Indonesia) CBC Cebu Business Club Dispenda Dinas Pendapatan Daerah (Regional Revenue Agency) DJPK Direktorat Jenderal Perimbangan Keuangan (Directorate General for Fiscal