Reforming the Developing World

AFRICA good afternoon, attachment. Reference material attached. Africa: Public finance and legislative procedures Financially-strapped African nations must make difficult choices when calculating the opportunity costs of different decisions they must make regarding financing. The goals of this hypothetical African nation are to encourage personal savings on the part of citizens but also to encourage foreign investment. One of the suggested reforms has been to institute a property tax.

While property taxes have been frequently used in the United States to fund education, this paper will suggest alternative prioritization to accomplish national goals. Property taxes Property taxes are often controversial as a source of soliciting economic revenue. On one hand, they have the advantage of not taxing the income or the consumption of the poorest members of society. There is the presumption that those who are able to own property have at least some subsistence income.

However, merely because someone has a modest amount of property does not necessarily mean he or she is wealthy and such a proposal could result in undue taxation upon poorer, small, subsistence farmers. Those with property (usually residents in agrarian locations) might begin to resent those living in urban areas, creating class conflict as well. Using property taxes to fund local initiatives such as education is particularly problematic, given that this inevitably means more funds will be allocated to wealthier districts which need it the least.

In China (another developing world nation which has seen a stratospheric increase in its prosperity), there has been considerable criticism of the government for being overly reliant upon selling land as a source of revenue and it has been suggested that property taxes should be used as an alternative source of financing investment in the infrastructure. "There is no doubt that revenue from land sales has been the backbone of local government coffers… The problems with this are obvious.

There is a limit to the quantity of sellable land…local governments' fiscal decisions are often made on the assumption that land prices will continue to appreciate. When property prices do not go up anymore, the trading volume of land will drop and severely affect the spending ability of local governments" (Young & Xia 2013). However, the fact that the value of land determines revenue is a problem with property taxes as well given if land values go down so will revenue.

Fighting corruption Corruption exercises a considerable drain upon most African economies. One reason there is a strong reluctance to invest amongst Westerners today is because of the tremendous costs in dealing with corruption in the region. "Corruption tends to produce a variety of negative socio-economic and political outcomes, such as socio-economic underdevelopment (e.g., an increase in income inequality and a reduction in productivity, GDP per capita, economic growth), political instability and poor public sector infrastructure"( Dimant, Krieger, & Meierrieks 2013).

Corruption (such as needing to bribe officials to start local businesses, 'skimming off' various taxes and regulatory fees, and nepotism in determining civil service positions) creates cynicism amongst the local population about the political process and the potential for reform through participation. People are also less likely to save money if they feel that the economy is unstable and unlikely to honor their commitment. Foreign businesses are reluctant to invest in very corrupt nations because of the costs of doing business there.

Talented citizens are also less likely to remain in corrupt countries because they believe that their innate abilities are less likely to be rewarded. "Corruption negatively impacts the quality of and the return to education. For instance, by impairing economic growth and increasing the probability of becoming unemployed corruption reduces the workers' expected return to human capital" (Dimant, Krieger, & Meierrieks 2013). Fighting against corruption means strict enforcement of existing laws against such activities.

People will continue to engage in corrupt activities if they know they will not be prosecuted for doing so. The government should also appoint an anti-corruption taskforce to highlight the worst potential abuses. This can also facilitate collection of existing taxes by reducing corrupt officials' skimming of revenues. Investing in education A serious problem for developing African nation is that taxing wealthier outside businesses can curtail growth but shifting the economic burden to impoverished residents is likewise financially unsustainable as well as ethically questionable.

All state dollars must be carefully spent and designed to yield dividends on the investment. One investment, however, that does 'keep on giving' is that of education: education is less costly than infrastructure investment and pays greater dividends in the long-term. Education has yielded impressive dividends for both China and India, as a highly-educated high-tech sector in both nations has meant a spike in foreign investment, due to.