Post-conflict states can raise significantly more money in taxes than they receive in international aid. As such, domestic revenue mobilization is a critical and long-overlooked peacebuilding tool, according to Kieran Holmes, the Commissioner General of the Burundi Revenue Authority and a leading expert on tax collection in post-conflict states. Increased tax revenues allow governments to deliver fundamental services to citizens while simultaneously reducing their dependence on foreign aid, as Mr. Holmes has witnessed firsthand in Rwanda, Yemen, Lesotho, and elsewhere.
“The volume and the value of revenues collected by the state itself is often far, far greater than international development assistance flows or indeed any other flow,” he said.
However, “post-conflict states do bring different challenges,” Mr. Holmes said, highlighting the big issue of corruption. “Fighting corruption is central to everything we do in tax administration. We have a zero tolerance corruption policy within the revenue authority.”
Mr. Holmes, a former Irish tax collector who has been working in post-conflict and developing countries since 1984, discussed how he gains trust when arriving in a country—particularly in an era when development and peacebuilding projects are increasingly locally driven. “I think trust is something that you earn; you can never expect it as an entitlement,” Mr. Holmes contended. “In the tax administration, when the population and the business community perceive you doing your job, and they perceive you doing it openly and transparently and fairly, then that creates trust.”
“In my work over 29 years, to me, revenue generation has been a no-brainer. But I think it’s taken the international community a while to catch on to the idea that revenue generation is actually a very powerful tool for influencing change in states, not just in conflict states but in all states,” he said.
Last year, Burundi built its first domestically funded hospital using its higher tax revenue, and other tax-funded projects are underway. Mr. Holmes agreed that improved deliveries of government services are central to the role of domestic revenue generation in peacebuilding.
When countries bring in their own revenues and use them without any strings attached, “it’s a hugely powerful way of empowering states,” he said, “and it’s a hugely powerful way of building the social contract between the population who pay the taxes and the government that spends the taxes.”
The interview was conducted by Andrea Ó Súilleabháin, Visiting Fellow at the International Peace Institute.
Listen to interview (or download mp3):
Andrea Ó Súilleabháin (AOS): Our guest today in the Global Observatory is Kieran Holmes, the Commissioner General of the Burundi Revenue Authority, a post he assumed in June 2010. He has been building and reforming tax policy and collection in countries around the world since 1984, including Lesotho, Swaziland, Yemen, Rwanda, and elsewhere. Kieran, thank you for speaking with us today.
Following your work in countries recently emerged from civil war, including your current post in Burundi where a 15-year civil war came to an end in 2008, you’ve argued that domestic revenue mobilization should be a core component of peacebuilding. Why is it so important for post-conflict states?
Kieran Holmes (KH): Well actually, it’s extremely important for post-conflict states, but I would say it’s equally important for all states. It’s important for post-conflict states because by building the revenue administration—by empowering the state—you facilitate the state to provide basic services to the taxpayers, you strengthen the state, and its dependency on international aid is reduced because it has its own funds. The volume and the value of revenues collected by the state itself is often far, far greater than international development assistance flows or indeed any other flow.
AOS: How does operating in a fragile state, versus states with no recent history of violent conflict, change your work in establishing revenue authorities? Do post-conflict states bring different challenges, in addition to obvious heightened security concerns?
KH: Yes, post-conflict states do bring different challenges. In many of the post-conflict states, corruption is a big issue. To do revenue collection properly, you need a corruption free environment. In Burundi, we were fortunate that after his last election President Pierre Nkurunziza announced a zero-tolerance-on-corruption policy—which of course was music to my ears, because I had only just arrived in Burundi one month before his confirmation speech. Fighting corruption is central to everything we do in tax administration. We have a zero-tolerance corruption policy within the revenue authority. We have a code of conduct. We have disciplinary committees. We have means of dealing with corrupt staff, and we utilize those means whenever we find corruption in the revenue authority.
AOS: You talk about corruption quite a bit, for good reason, not just among revenue authority employees but also among taxpayers, potential tax evaders, and business owners. So across post-conflict countries, as you institute policies aimed at changing these ingrained practices around bribes and corruption, are steps also taken to prevent backlash or incidents of violence that possibly could destabilize your efforts?
KH: Yes, security is a huge issue, and I’ve had situations where my staff have had guns pointed at them. I also have a close protection unit where I work. We employ a police unit within the revenue authority; we have 80 police officers who are there to assist us with, shall I say, the sharp end of activities—night patrols and protection of people, protection of buildings, protection of revenues. It’s all germane to the cause.
AOS: Across the fields of foreign aid, development, and peacebuilding today, there’s an increasing shift from externally imposed initiatives to country- and citizen-driven projects. When you arrive in countries like Rwanda or Burundi, you’re an outsider; how do you gain trust and legitimacy? And how do you build acceptance and ownership of the new tax process? In Burundi, you’ve said that you’ve enjoyed the support of the country’s highest elected leaders, the head of state, but what about the wider population?
KH: I think trust is something that you earn; you can never expect it as an entitlement. For me, when I arrive in a country, I know I have to work hard to earn the trust. I have to demonstrate my technical ability to my staff. They have to know that I am somebody who understands all aspects of a problem and I can provide the leadership that’s necessary. And the population has to know they’ve got someone with a good technical competence in charge. But also, they judge you not by what you say, but by what you do. First of all, I try to do what I say. So if I say I am going to do something, then I follow through and I do it.
Of course, we don’t make policy within the tax administration. We only carry out policy. Policy is made by politicians and by ministers. But in the tax administration, when the population and the business community perceive you doing your job, and they perceive you doing it openly and transparently and fairly, then that creates trust.
AOS: Your research has shown that even minor improvements in tax collection in countries can bring in funds equal to or more than the sum of foreign aid and diaspora remittances. If this is the case, is domestic revenue generation now a priority for national governments in Africa and elsewhere, as well as the international aid community? And if not, why isn’t its potential fully embraced?
KH: I’ve been doing this work for 29 years, and suddenly I find I’m an overnight success. When I went to Kiribati, people laughed—because I went to join, shall we say, older and more cynical aid workers who laughed at the idea of someone coming out to collect taxes on a group of coral atolls. But, at the end of the day, after a few years, we had quadrupled revenue collection. So if it can be done there, it can be done anywhere. To me, it was a no-brainer, after I’d seen how my initial experience worked out.
The next country I went to was Lesotho, and we grew revenue there by 2,000% over a six year period. Again, it was a small economy, a heavily dependent country on South Africa—which surrounds it. In my work over 29 years, to me, revenue generation has been a no-brainer. But I think it’s taken the international community a while to catch on to the idea that revenue generation is actually a very powerful tool for influencing change in states, not just in conflict states but in all states.
AOS: I just read about one specific example of that change in Burundi, where you work now. Using its higher tax revenue, Burundi built its first domestically funded hospital just last year, in 2012. And now, other tax-funded projects in the fields of energy, education, farming, and food security are planned and underway. Is this improved delivery of government services central to the role of domestic revenue generation in peacebuilding?
KH: Yes, it is. It goes to what I was saying about empowering countries to bring in their own revenues and to use their revenues without any strings attached. It’s a hugely powerful way of empowering states, and it’s a hugely powerful way of building the social contract between the population who pay the taxes and the government that spends the taxes.
AOS: Kieran Holmes, thanks so much for being with us today.