Overcoming corruption

Broadening the Base: Improving Tax Administration in Indonesia, 2006-2016

Author
Leon Schreiber
Focus Area(s)
Country of Reform
Abstract

In the mid 2000s, Indonesia’s Directorate General of Taxes (DGT) was still struggling to recover from the shock of the Asian financial crisis of the previous decade. Tax revenue had plummeted during the crisis, and the collection rate remained well below accepted standards, as well as below the standards of many peers in the region. In 2006, the directorate’s new leaders launched a nationwide overhaul, drawing lessons from a successful pilot program that had reorganized the DGT’s biggest offices and enabled large taxpayers to settle all of their tax-related affairs with a single visit to one office rather than having to go through multiple steps. Expanding that pilot to more than 300 locations across a 3,000-mile archipelago presented no small challenge. The implementers built a digital database that linked all offices to a central server in the capital of Jakarta, developed competency testing and training that bolstered the quality of staff, and created new positions to improve relationships with taxpayers. Other measures aimed to reduce corruption and tax fraud. When political and practical crosswinds frustrated the DGT’s efforts to build the workforce its leaders thought it needed, the agency turned to big-data analytics to improve compliance and broaden the tax base. By 2018, domestic revenue mobilization had plateaued, but the changes introduced had produced important improvements. The question was then what to do to broaden the base further without decreasing incentives for investment or raising administrative costs to unsustainable levels.

Leon Schreiber drafted this case study based on interviews conducted in Jakarta in January and February 2018. Case published April 2018.

To view a short version of the case, please click here

 

Changing a Civil Service Culture: Reforming Indonesia's Ministry of Finance, 2006-2010

Author
Gordon LaForge
Country of Reform
Abstract

By the mid-2000s, Indonesia had recovered from a devastating economic crisis and made significant progress in transitioning from a dictatorship to a democracy. However, the country's vast state bureaucracy continued to resist pressure to improve operations. In 2006, President Susilo Bambang Yudhoyono tapped economist Sri Mulyani Indrawati to transform Indonesia's massive Ministry of Finance, which was responsible not only for economic policy making but also for taxes and customs. During four years as minister, Mulyani introduced new standard operating procedures, raised civil servant salaries, created a new performance management system, and cracked down on malfeasance. Her reforms turned what had once been a dysfunctional institution into a high performer. But ongoing resistance illustrated the difficulties and perils of ambitious bureaucratic reform in Indonesia.

This case study was drafted by Gordon LaForge based on research by Rachel Jackson, Drew McDonald, Matt Devlin, and Andrew Schalkwyk and on interviews conducted by ISS staff members from 2009 to 2015. Case published May 2016. Other ISS case studies provide additional detail about certain aspects of the reforms discussed in this case or about related initiatives. For example, see Instilling Order and Accountability: Standard Operating Procedures at Indonesia's Ministry of Finance, 2006-2007.

Shaping Values for a New Generation: Anti-Corruption Education in Lithuania, 2002–2006

Author
Maya Gainer
Core Challenge
Country of Reform
Abstract

In 2002, Lithuania was struggling to defeat corruption, which had flourished during the Soviet occupation. Once viewed as the key to survival in an administered economy, offering gifts for services had become an accepted social norm. More than a decade after Lithuania regained independence, polling showed that although 77% of Lithuanians considered this form of corruption a problem, few were willing to change behaviors they saw as practical. The country’s recently created anti-corruption agency, the Special Investigation Service, faced the challenge of changing those social expectations. It decided to focus on a new generation of Lithuanians. The Modern Didactics Center, an educational nongovernmental organization, and a dedicated group of teachers stepped in to help the agency work toward the ambitious goal of changing the attitudes of students across the country. The group experimented with a variety of educational approaches both in and outside the classroom, including a curriculum that integrated anti-corruption elements into standard subjects and projects that encouraged students to become local activists. Despite resistance from educators that limited the program’s scale, the effort developed new approaches that illuminated the ethical and practical downsides of corruption for students across the country.

Maya Gainer drafted this case based on interviews conducted in Vilnius, Mažeikiai, and Anykščiai, Lithuania, during February 2015. Case published June 2015.

Remaking a Neglected Megacity: A Civic Transformation in Lagos State, 1999-2012

Author
Gabriel Kuris
Focus Area(s)
Country of Reform
Abstract

Lagos State began the twenty-first century as a boomtown crippled by crime, traffic, blight, and corruption. A regional economic hub and burgeoning state of 13.4 million people, the megalopolis had a global reputation for government dysfunction. Two successively elected governors, Bola Tinubu and Babatunde Fashola, worked in tandem to set the state on a new course. Beginning in 1999, their administrations overhauled city governance, raised new revenues, improved security and sanitation, reduced traffic, expanded infrastructure and transit, and attracted global investment. By following through on their promises to constituents and forging a new civic contract between Lagos and its taxpayers, Tinubu and Fashola laid the foundations of a functional, livable, and sustainable metropolis.
 
Gabriel Kuris drafted this case study based on interviews conducted by Graeme Blair in Lagos, Nigeria, in August 2009 and by Kuris in Lagos, in October 2011 and in Providence, Rhode Island, in November 2012. Case published July 2014.

Associated Interview(s):  Babatunde Fashola, Bola Tinubu

A New Face for a Tired City: Edi Rama and Tirana, Albania, 2000-2010

Author
Tumi Makgetla
Country of Reform
Abstract

When Edi Rama became mayor of Tirana in 2000, he confronted a population that was disillusioned with the way democracy had played out in the capital city.  Albania had sunk into a political morass after a brief period of cheer that followed the eastern European country's emergence in the early 1990s from decades of isolation under a Marxist-Leninist dictatorship.  But change was in the air at the start of the millennium, as national reforms began with the support of a forward-thinking prime minister.  Seizing the moment, Rama aimed to restore public confidence in government by building an administration based on professionalism rather than political connections, sprucing up the drab city, improving services, encouraging citizen complaints and leading open discussions on Tirana's future.  He repaired city hall, cleared out public spaces, painted colorless communist-era apartment buildings in bright hues and planted thousands of trees.  Although his reforms lost momentum after Albania's leadership changed and he became more deeply involved in national affairs, Rama's accomplishments as mayor demonstrated the value of responsive, participatory government in regaining citizen support and attacking entrenched municipal problems.

Tumi Makgetla drafted this case study based on interviews conducted in Tirana, Albania, in June 2010. 

Associated Interviews:  Dritan Agolli​

David Escobar

Ref Batch
J
Ref Batch Number
6
Country of Reform
Interviewers
Matthew Devlin
Name
David Escobar
Interviewee's Position
Campaign Manager, Secretary to Sergio Fajardo, former mayor of Medellín
Interviewee's Organization
Colombia
Language
English
Nationality of Interviewee
Colombian
Town/City
Bogotá
Country
Date of Interview
Reform Profile
No
Abstract

David Escobar describes his role as private secretary to Medellín Mayor Sergio Fajardo and his strategy for reducing violence and bringing about improvements to the city’s complicated problems. He relates how the mayor introduced a package of social interventions such as education, health, public works, and urban transformation. He also describes the process of tackling corruption and getting a development plan approved by the City Council. He specifically highlights the importance of City Hall’s public communication program. He recalls efforts to work with the teachers to implement education reform rather than making demands or ostracizing them. Escobar lists four qualities that he looked for in his staff: knowledge, honesty, social sensitivity, and passion. He describes a process of prioritization, whereby the mayor chose to focus on 13 large projects and develop a simple monitoring system to ensure their completion, instead of pursuing many smaller ones.

Case Study:  From Fear to Hope in Colombia: Sergio Fajardo and Medellín, 2004-2007

Profile

At the time of this interview, David Escobar was manager of Sergio Fajardo’s presidential campaign in Colombia. Previously, he served as private secretary during Fajardo’s mayoral administration in Medellín. During that time, he led the office that controlled and directed strategic projects. He also served as the de facto chief of staff.

Full Audio File Size
33.2MB
Full Audio Title
David Escobar- Full Interview

Building Trust and Promoting Accountability: Jesse Robredo and Naga City, Philippines, 1988-1998

Author
Michael Scharff
Core Challenge
Country of Reform
Abstract
When Jesse Robredo became mayor of Naga City in 1988, he faced a population disenchanted with the corrupt and closeted manner in which previous city administrations functioned. The once-thriving Philippine city was broke. Despite Naga’s landlocked location in one of the most impoverished regions of the country, Robredo had a plan to revitalize the city. He first focused on closing the budget deficit and answered citizens’ demands to crack down on illegal activities that had benefited previous administrations. Next, to promote transparency and accountability in government, he took steps to increase citizen participation in government functions.  By the end of his nine years as mayor—term limits prevented him from running again—Robredo had closed the budget gap, and Naga had gained international recognition as a model of effective and transparent local government.  
 

Michael Scharff drafted this case study on the basis of interviews conducted in Naga City and Manila, Philippines, in March 2011.  Case published July 2011.

Associated Interview(s):  Jesse Robredo

Babatunde Fashola

Ref Batch
D
Ref Batch Number
12
Country of Reform
Interviewers
Graeme Blair
Name
Babatunde Fashola
Interviewee's Position
Governor
Interviewee's Organization
State of Lagos, Nigeria
Language
English
Nationality of Interviewee
Nigerian
Town/City
Lagos
Country
Date of Interview
Reform Profile
Yes
Abstract

Babatunde Fashola describes an overhaul of the tax collection system in Lagos that successfully increased revenue for the state and indirectly financed various other reforms.  He secured public support for the overhaul after revealing the corruption in the previous tax agency through an orchestrated, public sting operation, which revealed that corrupt officials sold fraudulent tax documents on the street. He replaced the old tax agency with a smaller internal revenue service staffed by no-contract employees governed by performance incentives rather than state civil-service workers. The new service better enforced existing tax requirements and expanded the taxpayer base by introducing a simplified, single-page tax form for informal businesses.  

Case Study:  Remaking a Neglected Megacity: A Civic Transformation in Lagos State, 1999-2012

Profile

At the time of this interview, Babatunde Fashola was the governor of the Nigerian state of Lagos.  He previously served on the Lagos State Executive Council, State Security Council, Treasury Board, and as chief of staff for the former governor of Lagos.  He received a law degree from the University of Benin, after which he worked at a private Nigerian law firm for more than decade, dealing with mergers and acquisitions, intellectual property and commercial law.

Full Audio File Size
72 MB
Full Audio Title
Babatunde Fashola - Full Interview

Municipal Turnaround in Cape Town, South Africa, 2006-2009

Author
Michael Woldemariam
Country of Reform
Abstract
In March 2006, the Democratic Alliance won elections in the city of Cape Town, taking over administrative and political control of the municipality following four years of rule by the African National Congress, South Africa’s dominant party. Helen Zille, Cape Town’s new mayor, stepped into a difficult situation. Crumbling infrastructure had eroded service delivery for years, undermining public confidence in the city government and jeopardizing the long-term economic prospects of the Cape Town metropolitan area.   Lacking the revenue and administrative capacity to address Cape Town’s infrastructure crisis, and facing a politically charged racial climate, Zille and her Democratic Alliance government initiated a package of innovative and far-reaching reforms. This case study recounts these efforts from 2006 to 2009, and describes how tough decisions to raise local revenue interacted with a program to stabilize an underskilled and demoralized city bureaucracy, reversing Cape Town’s precipitous decline.
 

Michael Woldemariam compiled this policy note on the basis of interviews conducted in Cape Town, South Africa, in March 2011. Ayenat Mersie, Sam Scott and Jennifer Widner provided assistance.  Case published July 2011.

Associated Interviews:  David Beretti

Bola Tinubu

Ref Batch
D
Focus Area(s)
Ref Batch Number
13
Country of Reform
Interviewers
Graeme Blair
Name
Bola Tinubu
Interviewee's Position
Former Governor
Interviewee's Organization
State of Lagos, Nigeria
Language
English
Nationality of Interviewee
Nigerian
Town/City
Lagos
Country
Date of Interview
Reform Profile
Yes
Abstract
Bola Tinubu, former governor of the state of Lagos in Nigeria, reflects on his administration’s successes in reforming the civil service, reducing corruption, and improving state infrastructure.  He details the process he went through to reform the state government, from the waste management system to financial mismanagement within the public sector.  Tinubu lays out the steps he took to improve incentives for civil servants, including salary increases, improving quality and hygiene of working environments, and teaching investment principles and how to work toward home ownership.  His payroll-system reforms removed thousands of ghost workers from the system.  Tinubu explains how he applied principles he learned in the corporate world to the public sector reform effort.  Tinubu also details the steps he took in removing endemic corruption in the public sector, which included eliminating cash payments to the government.  He discusses how he brought back expatriates to improve the hospitals and transportation system.  He also touches on the difficulties in working with a federal government that sometimes undermined reform efforts.
 
Profile
Bola Tinubu served as governor of the state of Lagos from 1999 to 2007, during which he initiated reforms that improved the efficiency of the civil service and improved infrastructure.  He served from 1992 to 1993 as a senator until the end of the Nigerian Third Republic.  Prior to entering politics he worked in the private sector for companies including Arthur Andersen and Deloitte, Haskins, & Sells.  He was also an executive of Mobil Oil Nigeria.  After Tinubu left politics, he became active in negotiations to unite Nigeria’s opposition parties and in pushing for electoral reforms.   He earned a bachelor’s degree from Chicago State University in business administration in 1979.  He holds the tribal aristocratic title of asiwaju, given to him by the Oba of Lagos, who holds a ceremonial position as traditional leader of the state of Lagos.
Full Audio File Size
71 MB
Full Audio Title
Bola Tinubu - Full Interview