Bargaining for exemptions: bargaining power and producer groups in Africa
Theories of the fiscal contract in political science assume a quid-pro-quo that often is not immediately identifiable in the developing world. Revenue bargaining may be about NOT paying, and the returns for the non-payment may be favorable policy-support. In other words, in real life bargains in low-income countries, the fiscal contract theory may be turned on its head. In spite of an overall liberalization of Agriculture in Africa and a general perception that most producers of most crops are tax exempt, in reality, taxation of crops vary. This is the case in Uganda, where some sectors have more favorable in terms of both tax incentives and policy support than other sectors. The purpose of this paper is to explain these differences in terms of the bargaining power of the producer groups in two selected sectors: dairy and coffee. Whereas coffee throughout Uganda’s postindependence period has been the main foreign exchange earner, it has in many ways been neglected by government. Even if taxes on coffee after liberalization were reduced, it is uncertain whether the taxes on the sectors that are in effect have actually been turned into policy sypport for the sector. Dairy on the other hand seems to have been largely exempted, but at the same time favored by the government. The paper uses a mix of interviews with sector actors and a survey among producers and traders to focus in on possible explanations.
