Camille Jackson and Dr. Wade Jacoby, Political Science
The final days of 1991 brought unprecedented changes for Russia. The fall of Soviet rule and struggle toward Western democracy—or at least away from communism—has been a long, hard, and trying process for Russia and her citizens. This struggle stems from the difficult yet necessary restructuring process, a process marked by economic difficulties and, sometimes, failure. One area in which the country has met with extreme difficulty is taxation. Until recently, Russia has been notorious for widespread tax evasion and corruption, problems caused by ill-conceived tax laws and a cultural tendency away from tax compliance. Contrary to popular belief, however, the past few years have seen surprising success in tax reform initiatives. Indeed, amidst all the suffering and calamity, Russia has been making progress in its transition, and the new tax code adopted between 1999 and 2003 is remarkable evidence of this progress.
Such progress poses a perplexing question: what prompted Russian lawmakers to institute the specific, beneficial changes to the tax code that they did? After years of failure in taxation and stubbornness toward reform, how does one explain change and success? To answer this question, I use a theory of international persuasion coupled with rationality. The theory asserts that international organizations used persuasion—and specifically rational persuasion—to exact change from Russian tax officials. This idea not only examines how persuasion and rationality work together, but suggests future tactical methods for international organizations.
To examine the role of international persuasion during the tax reform process, I examined existing literature on international assistance, read reports published by the International Monetary Fund (IMF) and World Bank, read book transcripts by those involved in the reform process, listened to interviews conducted by others, and traveled to Washington DC to interview officials involved in the reform process over the phone and in person. In all, I conducted thirteen interviews with international officials. My questions focused on how receptive Russian officials were during the reform process, whether they made the changes suggested by international officials, and how substantial a role persuasion played in the process. I also used data from the New Russia Barometer to gauge Russian public opinion toward the new tax program and determine whether trust in government and tax programs had increased and whether the new tax program would be able to encourage voluntary compliance.
To test my theory of persuasion I laid out five hypotheses, three of which are: Russian officials made changes as suggested by international assistants, Russian officials made changes in the face of high costs and few benefits, and international assistants used appeals to legitimacy and reputation during the process. Overall, these hypotheses held up fairly well, but the more people I talked to and the more I examined the process, the more difficult it became to convince myself that persuasion was the driving force behind the tax reform process. Instead, many other forces constrained international assistance and the process was more intricate than my persuasion theory would suggest; it consisted of a long-term transfer of understanding as opposed to blatant persuasion. Thus, I ended up rejecting the persuasion theory and instead outlined what the assistance process did and did not consist of, ending with policy proposals for future assistance programs.
The main results of my research found that the assistance process was not: a) uniform; b) direct acceptance of any and all assistance; or c) primarily controlled by Western experts. At the same time, this process was: d) heavily constrained by domestic actors (such as oil companies); e) characterized by adjustment on both sides; and f) dependant on who, where, when, and what (meaning only certain assistants had an influence on certain issues). These findings prompted me to suggest that international assistance come when requested or obviously required, not on every whim of every international organization, and international assistants should be carefully chosen, well-placed, and posted for a lengthy period of time.
In addition to my interviews with international officials, I examined the new tax laws at the domestic level by looking at data from the New Russia Barometer and speaking with some Russian citizens. What I found, however, was that much of this opinion data was contradictory or did not exhibit a statistically significant move in the right direction. At the same time, the new tax program has only been in place for three or four years, and public opinion often changes slowly over time. Thus, I concluded that an analysis of how the new tax laws have encouraged voluntary compliance is too premature.
During the research process, I did encounter a few problems. Of these, the most significant is that I was not able to interview any Russian officials directly involved with the reform process. This disadvantage came primarily because of my limited Russian language skills, the thick bureaucracy of the Russian government, and, possibly, a lack of trust that lies within Russian culture. My efforts on the American side were much more fruitful, so I decided to concentrate my efforts on the IMF, World Bank, and US Agency for Development, although this necessarily gave an American-sided view of the assistance process. If I could do this project again or go further with my research, I would like to interview more Russian officials and learn exactly what their thought processes were and how they changed.
Throughout the project I was fully aware that I am only an undergraduate, have never done research of this magnitude before, and that there are many research skills I have yet to develop. Thus, while this project helped me learn much about Russian politics and tax reform, it also allowed me to learn much about the research process—something that, admittedly, can be learned only by experience. I hope the results of my research will prove useful, but I am confident that the skills I learned during the research process will be invaluable as I pursue a career with the federal government, international organizations, or in law.