Historian Stephen Kotkin observe that autocratic regimes do not need economic growth to maintain power per se, but they do need “cash flows.” Money is essential to bribe the elites; bribing opposition bureaucrats, judges and politicians; lavishing electorates with “gifts”; and maintain the loyalty of the security apparatus. Part is invested in the normal way, through state budgets and welfare payments. Much of it is embezzled or diverted through complex schemes for the benefit of allies and sycophants. A cash-strapped ruling party cannot buy loyalty or acquire talent.
The best type of cash flow is extractive, that is, energy. This fills the ruling party and officials with substantial amounts of money, enough that they don’t need to rely on the economic output of their citizens at all (think of the Gulf states and Russia). In Southeast Asia, Brunei does not charge income tax or VAT because its energy reserves give it a GDP per capita second only to Singapore in the region. There are other forms of cash flow. One can derive it from boss regimes; the decline in donations from the Soviet Union in the 1980s convinced the Vietnamese and Lao communist parties of the need to adopt market practices and access Western aid and loans. Until the 2000s, about a third of the Cambodian government budget was financed by foreign aid. Unrecorded aid and payments from Beijing made up for the Western aid shortfall in the 2010s. In Myanmar, the military juntas have relied on their own military-controlled businesses and on the country’s oil and gas revenues. Wealthy tycoons are also expected to contribute “donations” to the ruling parties in all of these countries, although that is more important when the countries are poorer (and governments need smaller cash flows).
Today, however, those cash flows are drying up. Vietnam and Cambodia lack extractive resources (their oil dreams have died long ago). quick death), while Laos’ natural resources (its mines and hydroelectric dams) are either depleting or saddled with debt. State-owned companies in Vietnam and Laos are no longer a source of funds and are losing money. Myanmar’s military junta has been impoverished by Western sanctions. Foreign aid is drying up as these economies develop. At the same time, the autocratic parties need more and more revenue. Cambodia’s annual state budget was single $1.9 billion in 2010. It will be more than $9.6 billion next year. from vietnam raised by 138 percent between 2010 and 2021.
As such, autocratic regimes in mainland Southeast Asia now rely, to varying degrees, on their own citizens to maintain this cash flow in the form of taxes. In 2005, the Cambodian authorities picked up about 2.03 trillion riel ($484,997) in taxes. This increased 968 percent for 2019. Next year, the General Directorate of Taxes (GDT), in charge only of internal taxes, is duty manager with the collection of $3.5 billion, almost $750 million more than the 2022 target. From 2007 to 2020, the tax/GDP ratio in Vietnam raised by 2.8 percentage points from 19.9 to 22.7 percent, but that was as GDP grew from $77 billion to $361 billion over the same period. laos has duplicate tax collection in the last decade.
Debt, an obligation of future taxpayers, has also increased. At the beginning of the century, it He stood at about $2 billion in Cambodia, and about $11.6 billion and $2.4 billion in Vietnam and Laos, respectively. By 2020, debt had nearly quadrupled in Cambodia and quintupled in Vietnam and Laos. Laos’ total public and publicly guaranteed debt likely exceeded 100 percent of GDP for the first time this year. It could be much higher than that. If one wants to predict the future, there will only be greater burdens for taxpayers and more debt. All regional governments are now accelerating tax reform, mainly to expand the tax base and discourage evasion.
That alters the policy. Because taxes are a new form of cash flow for autocratic parties, that makes economic growth increasingly important to these regimes. After all, ordinary people and small businesses need to get rich to pay the taxes demanded by autocratic parties. And with a slew of new trade deals, it will be harder for authorities to collect tariffs on exports and imports, so income and corporate taxes will become increasingly important. So does a ruling party risk economic sanctions from the West by rigging an election or faltering on reforms? Cambodia cannot afford to risk alienating the US, its biggest export partner, over its close friendship with China, one reason Phnom Penh is now seeking rapprochement with Washington. At the same time, higher taxes and state spending require far more competition in financial affairs, and that means promoting technocrats, not loyalists.
More importantly, higher taxes mean that ordinary people are increasingly being asked to get involved in politics. In this column Last week, I questioned the narrative of social “contracts” or “bargains” in autocratic countries. But the growing demand for taxpayer money adds an additional layer of confusion. The notion of a “social contract” in authoritarian countries is based on the concept that the legitimacy of the autocratic party arises from guaranteeing ordinary people a constantly improving quality of life. In exchange for this, the common people agree not to get involved in politics, leaving autocratic governments to carry on with the administration. Y embezzlement. But due to the increasing reliance on taxpayer income and future taxpayer obligations (debt), ordinary people are expected to get involved in politics (as government financial backers). Because regional governments gave little importance to taxpayers in the past, the oppressors somehow freed themselves from the oppressed. Autocrats did not need to go rummaging through the pockets of their citizens and, in turn, ordinary people. It is easier for the masses to look the other way and make excuses if a corrupt government official is stealing money from foreign donors or private sector magnates.
However, the more these governments depend on their own citizens for revenue, for their cash flow, the more they will have to treat people as real citizens. Speaking to the Phnom Penh Post last month, GDT Director General Kong Vibol (who has been hounded on corruption allegations) made a revealing statement. “We are doing … a modernization to improve voluntary taxpayer compliance, make tax payments more transparent and instill confidence that the money really does reach the state coffers,” he said. fixed. One assumes that his tax department understands that many Cambodians are skeptical about where their hard-earned money really goes.
Taxpayers must respond in kind. There needs to be a new cabal of taxpayer alliances and NGOs looking into how tax money is spent. Cambodian taxpayers, for example, should be able to know how much of their money Prime Minister Hun Sen spent on the limited edition watches he gave visiting dignitaries at the recent ASEAN summit. Vietnamese taxpayers should know how much of their hard-earned money is being spent on intelligence agents kidnapping people in Berlin parks or producing subway line designs. If I were a citizen of Laos, I would be asking how much it cost Thongloun Sisoulith, the president, to make his fawning visit to Beijing this month. Transparency in finance could lead to openness elsewhere; the acceptance that bureaucrats must be held accountable could rub off on autocratic politicians. The cry of “no taxes without representation” is probably reserved for 1776, but Southeast Asians need to know if their public money is serving the public good or serving private vice.