strategies for designing locally-appropriate reform strategies that combine investments in enforcement, facilitation, and trust to construct stronger fiscal contracts.

# **CONCEPTUAL FRAMEWORK**

Traditional approaches to tax reform have generally aimed to strengthen compliance through investments in enforcement and facilitation of tax payment. These approaches reflect standard models of tax compliance, which treat taxpayers as rational economic actors responding to the likelihood of audit, the strength of penalties, and the ease and cost of compliance. The logic has been relatively straightforward: identify contexts in which there appears to be political support for reform, implement relatively standard investments in strengthening enforcement and facilitation based heavily on international experience,<sup>36</sup> and trust that expanded revenue collection will, ultimately, be translated into broader public benefits. This stylized, and admittedly highly simplified, model of reform is illustrated in Figure 6.

**Figure 6: Traditional Theory of Change for Reform**

<!-- Start of picture text --> Political<br>Support for<br>Reform<br><!-- End of picture text --> <!-- Start of picture text --> Enforcement<br>and<br>Facilitation<br><!-- End of picture text --> <!-- Start of picture text --> Expanded<br>Tax<br>Compliance<br><!-- End of picture text --> <!-- Start of picture text --> Fiscal Contract<br>(Services and<br>Accountability)<br><!-- End of picture text --> <!-- Start of picture text --> Political Enforcement Expanded Fiscal Contract<br>Support for and Tax (Services and<br>Reform Facilitation Compliance Accountability)<br><!-- End of picture text --> This approach has significant merit, and has achieved meaningful gains, but it neglects three key factors. It pays limited attention to political realities, the need to foster quasi-voluntary compliance, and the importance of strengthening fiscal contracts. Research suggests that each of these elements can and should play a critical role in tax reform programs. The conceptual framework developed here is thus centered on addressing these three broad challenges.

First, ample evidence now suggests that political support is critical to reform,<sup>37</sup> yet traditional models largely consider it exogenous. Recent developments in public administration research stress the need to think and work politically when pursuing reform and emphasize the role of trust in generating political support.<sup>38</sup> However, it is not always clear whether these findings are being translated into changes in development programming. While some reform programs have internalized this insight,<sup>39</sup> many have not, or they focus on identifying environments in which sufficient political support appears to exist but there is a lack of clear metrics and strategies to

> 36 Fjeldstad, O-H., & Moore, M. (2008). Tax reform and state-building in a globalized world. In Brautigam, D., Fjeldstad, O-H., & Moore, M. (Eds.) _Taxation and State-Building in Developing Countries: Capacity and Consent_ . Cambridge: Cambridge University Press; Sanchez, O. (2006). Tax systems reform in Latin America: Domestic and international causes. _Review of International Political Economy_ , 13 (5):772-801.

> 37 World Bank Group. (2017). _World development report 2017: Governance and the Law_ . Washington: World Bank.

> 38 Andrews, M. (2013). _The limits of institutional reform in development: Changing rules for realistic solutions_ . Cambridge: Cambridge University Press; McCulloch, N., & Piron, L-H. (2019). Thinking and working politically: Learning from practice. Overview to Special Issue. _Development Policy Review_ , 37(S1):1-15.

> 39 Booth, D. (2014). Aiding institutional reform in developing countries: Lessons from the Philippines on what works and what doesn’t and why. _Working Politically in Practice Series Case Study 1_ . The Asia Foundation and the Overseas Development Institute.

11