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Mobile participatory budgeting helps raise tax revenues in Congo

The World Bank found the ROI in open government through civic participation and mobile phones.

In a world awash in data, connected by social networks and focused on the next big thing, stories about genuine innovation get buried behind the newest shiny app or global development initiative. For billions of people around the world, the reality is that inequality in resources, access to education or clean water, or functional local government remain serious concerns.

South Kivu, located near the border of the Democratic Republic of Congo, has been devastated by the wars that have ravaged the region over the past decade.

Despite that grim context, a pilot program has born unexpected fruit. Mobile technology, civic participation, smarter governance and systems thinking combined to not only give citizens more of a voice in their government but have increased tax revenues as well. Sometimes, positive change happens where one might reasonably least expect it. The video below tells the story. After the jump, World Bank experts talk about story behind the story.

“Beyond creating a more inclusive environment, the beauty of the project in South Kivu is that citizen participation translates into demonstrated and measurable results on mobilizing more public funds for services for the poor,” said Boris Weber, team leader for ICT4Gov at the World Bank Institute for Open Government

, in an interview in Washington. “This makes a strong case when we ask ourselves where the return of investment of open government approaches is.”

Gathering support

The World Bank acted as a convener, in this context, said Tiago Peixoto, an open government specialist at the World Bank, in an interview. The Bank brought together the provincial government and local government to identify the governance issues and propose strategies to address them.

The challenge was straightforward: the South Kivu provincial government needed to relay revenues to the lower level of government to fund services but wasn’t doing so, both because lack of incentives and concerns about how the funds would be spent.

What came out of a four day meeting was a request for a feasibility study on participatory budgeting from the World Bank, said Peixoto.

Initially, the Bank found good conditions with respect to strong civil society, despite years of war. They found a participatory budgeting expert in Cameroon, who came and did workshops with local governments in how the process would work. They chose some cities as control groups, to introduce some scientific rigor.

They shared scholarship on participatory budgeting with all the stakeholders, emphasizing that research shows participation is more effective than penalties in taxation compliance.

“It’s like the process of ownership,” said Peixoto in our interview. “Once you see where money is going, you see how government can work. When you see a wish list, where some things happen and others do not because people aren’t paying, it changes perspectives.”

Hitting the books

When asked to provide more context on the scholarship in this area, Peixoto obliged, via email.

“As shown in a cross-national analysis by Torgler & Schneider (2009), citizens are more willing to pay taxes when they perceive that their preferences are properly taken into account by public institutions,” he wrote.

“Along these lines, the existing evidence suggests the existence of a causal relationship between citizen participation processes and levels of tax compliance. For instance, studies show that Swiss cantons with higher levels of democratic participation present lower tax evasion rates (Pommerehne & Weck-Hannemann 1996, Pommerehne & Frey 1992, Frey 1997). This effect is particularly strong when it comes to direct citizen participation in budgetary decisions, i.e. fiscal referendum (Frey & Feld 2002, Frey et al. 2004, Torgler 2005):

“The fiscal exchange relationship between taxpayers and the state also depends on the politico-economic framework within which the government acts. It has, in particular, been argued that the extent of citizens’ political participation rights systematically affects the kind of tax policy pursued by the government and its tax authority. (…) The more direct democratic the political decision-making procedures of a canton are, the lower is tax evasion according to these studies” (Feld & Frey 2005:29)

“According to his (Torgler) estimates, tax morale is significantly higher in direct democratic cantons. Distinguishing between different instruments of direct democracy, he finds that the fiscal referendum has the highest positive influence on tax morale” (Feld & Frey 2005:19)

Participatory budgeting, which has been gaining more attention in cities in the United States as more governments implement open government initiatives, has had particular success in Brazil, pointed out Peixoto, who is native to that country.

“In the Latin American context, a number of authors have observed a similar relationship with regard to participatory budgeting processes,” wrote Peixoto.

“In the municipality of Porto Alegre (BR) for instance, Schneider and Baquero (2006) show that the adoption of PB led to a substantive increase in tax revenues. In another study Zamboni (2007) compares the performance of similar Brazilian municipalities with and without PB processes: even when controlling for other factors, the study finds a significant relationship between the existence of PB and the increase in tax revenues. Another comparative study of 25 municipalities in Latin America and Europe also finds a significant reduction in levels of tax delinquency after the adoption of PB (Cabannes 2004):

“What is the relationship between the PB process and the municipality’s tax revenues? Most respondent cities indicated that the PB process entailed an increase in tax revenues and a decrease in delinquency. In Campinas, Recife and Cuenca, tax revenues increased significantly in a very few years; in Porto Alegre, property tax delinquency dropped from 20 per cent to 15 per cent and, in less than ten years, property taxes grew from 6 per cent to almost 12 per cent of the municipality’s revenues. Mundo Novo, in Brazil,also emphasized the drop in tax delinquency and relates it to the transparency of public administration entailed by PB. The immediate visibility of the work and services that result from PB also tends to change the citizenry’s taxpaying habits.” (Cabannes 2004:36)

Presenting the mayors with the results of that research provided them a strong incentive to try participatory budgeting, emphasized Peixoto. The results from the pilot, however, provided evidence of the efficacy of the practice:

The World Bank found that tax compliance in Kabare went from 7% to 12% in Kabare. In Ibanda, the impact of the pilot was even greater, with 16-fold increase in tax compliance. After the pilot, the provincial government decided to start transferring money to local areas but only if cities used participatory budgeting in the process.

“This was an eye-opening process,” said Jean Bunani, senior counsel in the Ministry of Budget in South Kivu

, in a prepared statement provided by the World Bank. Bunani was one of the beneficiaries of the project. “As a result, the province started transferring funds to local governments to start providing basic services to citizens,” he said. “This had been mandated by law for years – and for years the law had been ignored.”

Peixoto insisted that the results in South Kivu be interpreted with caution. “It is difficult to confirm a causal relationship participatory budgeting and the increase in tax compliance at scientific levels thus far,” he said, “but the evidence collected thus and testimonials of local officials suggests the existence of this causality.”

Mobile technology helped increase civic participation

“The way the citizens and the provincial Government of South Kivu took ownership of this project shows that technology can help build more inclusive decision making processes even in fragile and low-tech environments,” said Weber.

The vast majority of people in the area don’t have computers. Mobile phones may be one of the most important technologies to enter the region in decades – and people value them, walking long distances to generators to keep them charged.

“This is a place where they don’t have electricity for houses but they charge phones,” said Weber.

The mobile technology initiative was coordinated with the cooperation of the local mobile operators and funded by the World Bank. 1 million text messages cost $10,000, when purchased in bulk. Over 250,000 messages have been sent in support of the project, as of February 2012. Whenever there was a region meeting to deliberate about where to spend budgets funds, every handset under the local cellular towers would get a text message about it. And after the meeting, everyone would get a message with the results.

“The benefits from the participatory budgeting outweigh those costs enormously,” said Peixoto. “For more people to pay taxes, they need to know participatory budgeting exists. That’s the mass mobilization. There was already a substantial increase in the year 2010, when the local government started consulting grassroots organizations on an informal basis. Nevertheless, the process gains steam in 2011, in which the full methodology of participatory budgeting is really in place, with direct participation of the citizens and with the support of mobile telephony. Please note that these results are evaluated with control groups. In other words, in cities without the participatory budgeting process, the same behavior is not identified.”

Peixoto followed up with a review of research on public participation. “Some evidence suggests that participation may be even more effective at curbing tax evasion than traditional deterrence measures, such as fines and controls,” he wrote. “At odds with conventional economic reasoning, the literature in the field of ‘tax morale’ suggests that citizen participation actually comes across as a better remedy for tax evasion than commonly adopted deterrence policies (e.g. Torgler 2005, Feld & Frey 2007, Feld & Torgler 2007).

Weber noted that it’s hard to know exactly what the mobile penetration is in the South Kivu area. Unreliable research estimates put handset ownership at 14%, he said, but people also share devices, which in turn means that it’s not the most accurate estimate for research purposes.

“The new global focus on results-based aid is creating strong demand for better feedback data,” said Weber.

“This type of initiative can provide it and help crowdsource the monitoring of development impact. As more governments start to make commitments as part of the Open Government Partnership, they now need to stand up to the challenge on how to do engage citizens in a meaningful manner,” said Weber. “This type of project provides us with valuable lessons how donors can support governments in this effort.”

Finding the ROI for open government

This project clearly shows some of benefits associated with open government, said Peixoto, but only when citizens are involved in the process. Technology, in that context, is an enabler but is not sufficient by itself.

“These benefits are only generated when there is real engagement of the citizens,” said Peixoto. “Both the politicians and those working on the ground very convinced that the transparency of the budget in itself would not suffice to generate the results that we now observe. Nevertheless, to ensure that real engagement happens is an extremely long process, which cannot take place without having all the stakeholders involved.”

In that context, making participatory budgeting work using mobile devices isn’t just about working with the mayors, regional government, development officials, citizens or telecommunications companies: it’s about systems thinking and collaboration between all of the stakeholders.

“While we spend 10% of our time to convince governments to make their budgets transparent, the other 90% is convincing them to let citizens having a real say on where the money is going,” said Peixoto. “The road from transparency to accountability is neither obvious, nor an easy one.”

He also noted that technology complements what he describes a core components of citizen engagement, participatory design and institutional reform. Which is to say, rethinking processes and institutions come first, followed by figuring out how to architect technology to support them. In the Congo, mobile phones supported participatory budgeting by reducing associated costs, avoiding elite capture, maintaining public engagement and raising awareness of the process, which helped gather popular support.

Exploring mobile government

South Kivu is also experimenting with mobile phone voting, including some beta tests during the budget meetings.

“Mobile voting is expected to be implemented in full-scale, enabling a large number of inhabitants to remotely participate in the process of budget allocation,” said Peixoto. “The program is now going beyond the pilots, aiming to institutionalize ICT facilitated participatory budgeting in other provinces in the DR Congo and beyond.”

Weber said that after the pilots, 100% of citizens asked preferred to vote by mobile. “With ballots, there were huge lines,” he said. “It’s really about the costs of participation. This spoke to them.”

An important next step will be finding more ways to bridge the digital divide to engage the community in an ongoing dialogue about governance, including more analog methods like “data murals.”

“We are interested in inverting the logics of innovation,” wrote Peixoto. “The replication of contents and processes from the offline world into the online world has been the focus of people working in this field for a long time. Now we are looking how we can bring elements of the online world to the offline reality of South-Kivu, where access to the Internet is extremely scarce. Hence, one of our priorities for the beginning of next year is the creation of ‘data murals’ in which budget visualizations often available in online environments will be painted on the walls of the cities. If the logic is that of ‘going where citizens already are,’ in South-Kivu we will bring data and data visualization to the streets: budget data in citizen readable format.”

For instance, in Brazil, they’re painting the numbers for the budget on the wall, said Peixoto. “So, you could paint data visualizations on street walls. Fancy online data visualizations are very nice – but what if there’s no Internet? You need to get creative. We want to bring data vizualization to the streets, with a physical version of a dashboard where you go back and do updates as steps happen.”

Peixoto expects that the experience in South Kivu will also help inform how upcoming participatory budgeting initiatives mediated with mobile technology will be implemented elsewhere in the world, from Brazil to Cameroon to the Dominican Republic.

“Organizations working with participatory budgeting in the United States and Europe have already demonstrated interest in learning from the experience of South-Kivu and the use of mobile phones,” observed Peixoto, who said that the approach is already being replicated in Cameroon, the Dominican Republic and (back) in Brazil.

“In Cameroon, we are making a randomized experiment to assess the impact of SMS as a means to mobilize citizens and avoid elite capture,” he said.

The World Bank as set up a beta website for the Cameroon project and is working on another one with the Open Knowledge Foundation, similar to “Where does my money go?” The visualizations will be used to inform the participatory budgeting process, providing citizens with the means to use those visualizations to indicate where they’d like money to be allocated.

“This all goes to show that innovations in open government go both ways, from developing to developed countries,” said Peixoto. “The fact that people are not blogging about it in English does not mean that it does not exist. Sometimes people are just too busy making it happen. “

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