Informal Revenue Generation and the State: Evidence from Sierra Leone

How states raise revenue is critical to understanding how they govern. Orthodox analyses of the state, however, have tended to focus only on formal taxation, formal budgets, and formal revenues. I correct his bias by extending the analysis of taxation and the state beyond formal tax systems, capturing the informal dynamics of public finance that affect the majority of citizens in low-income countries. By examining informal revenue generation in the context of formal taxation, I shed light on the how and why of the state and institutional development. This study presents a new approach to understanding formal–informal institutional interactions and offers insight into a set of tangible issues of critical importance to the citizens of modern states. Classic theories of statehood anticipate that the state should always seek to control informal revenue generation. In practice, states often coexist with this informality. Informal taxing actors can reinforce state authority in unexpected ways and the relationship between the state and informal taxing actors is not necessarily zero-sum. State engagement with informal revenue generation is not always driven by a desire to gain a monopoly on taxation and authority. Instead, informal revenue generation may align with or even underpin the state’s governing strategy. Informal revenue generation can also have counterintuitive effects on statebuilding. Though informality is usually seen as detrimental to statebuilding, I show that informal revenue generation can strengthen state institutional capacity. The politics of statebuilding are, at least in part, played out at the local level in conjunction with informal institutions. It is in these local processes where informal revenue generation and informal taxing actors can reinforce modern statehood and statebuilding processes. The state that emerges may not look like a rational, Weberian institutional model. Nevertheless, it may prove more resilient and dynamic than expected.Ph.D