Strong checks and balances on government policies and on tax and expenditure help ensure that taxation policies and the provision of public goods are appropriate and of good quality (te Velde 2013). Strong checks on tax and expenditure policies do not imply the absence of corruption. Rent-extraction and rent-sharing are often a feature of effective state-business relations (Khan 2006).
The design of effective government policies and regulations depends, among other things, on input from, and consultation with, the private sector. More efficient institutions and rules and regulations might be achieved through policy advocacy, which could reduce the costs and risks faced by the private sector and enhance productivity (te Velde 2009). However, formal checks and balances can be of value only when state actors are incentivised to follow formal rules.
Checks and balances on fiscal policy in Zambia
The engagement of interest groups in the budget-making process can generate relevant information that enables policy makers to make better choices on tax and expenditure. In Zambia, the government has put in place a mechanism through which individuals and interest groups can submit tax and expenditure proposals for inclusion in the national budget. This has become an important feature of the national budget-making process (Bwalya et al. 2011).
This mechanism has enabled different interest groups (including the private sector) to seek dialogue with the government on budget decisions by formally submitting and presenting their preferred fiscal policy positions to government at various stages of the budget process. The lobbying by interest groups can be formal, through budget submissions, or informal through avenues such as articles in the media.
By entering into a dialogue with the government on fiscal policy, the private sector has strengthened fiscal transparency and accountability in the government’s taxation and expenditure policies (Bwalya et al. 2011). For its part, the government was responsive to formal consultations on the budget through the emergence of a stable “reform coalition” with the Zambia Business Forum as the key non-state actor in the coalition since the 1990s (Bwalya et al. 2011).
- Bwalya, S., Phiri, E., & Mpembamoto, K. (2011). How interest groups lobby to influence budget outcomes in Zambia. Journal of International Development, 23, 420-442. See document online
- Khan, M. (2006). Corruption and governance. In K. S. Jomo & B. Fine (Eds.), The new development economics: After the Washington consensus (pp. 200-221). London and New Delhi: Zed Press and Tulika.
- Te Velde, D. W. (2009). Analysing the economics of state-business relations: A summary guide (IPPG Discussion Paper No. 23B). Manchester: IPPG. See document online
- Te Velde, D. W. (2013). Introduction and overview. In D. W. te Velde (Ed.), State-business relations and industrial policy: current policy and research debates. London: ESRC DFID Growth Research Programme. See document online