Migrants’ Remittances, the Fiscal Contract and Tax Attitudes in Africa and Latin America

Abstract

How does the receipt of remittances shape recipients’ attitudes towards taxation? We argue that remittances are likely to reduce support for the fiscal contract of taxes in exchange for public services because recipients rely less on the national economy and the state for their well-being. Remittance recipients can use the money sent by friends or family overseas to obtain public services in the private market instead of, or in addition to, tax-funded welfare services. In doing so, remittance recipients become detached from the national political community and develop a transactional relationship with the state whereby they pay licence fees, taxes and bribes to protect investment goods procured with remittances, making them less willing to support general taxation and more likely to approve of tax evasion and avoidance. We find strong support for our theory in analysis of survey data from Africa and Latin America. Our article contributes to knowledge of the micro-foundations of the fiscal contract and the political-economic effects of emigration and remittances on migrants’ homelands.