Participatory Budgeting with direct citizen participation

I do not claim to be an expert in the field of taxation. I am only expressing my civil point of view on how I would like the budget to be managed, especially in terms of the taxes I have paid.

The following discussion, with the exception of the last point, will take into account the statement accepted as TRUE: “the taxpayer and the government are decent and honest.” The risks associated with violating this statement are given in the last point.

Concept

Figure 1. A layman’s view of the state budget: NP — Natural Person, JP — Juridical Person

In my layman’s mind, the scheme of budget funds movement looks like in Figure 1. Taxpayers represented by Natural Persons (NP) and companies as Juridical Persons (JP) transfer funds to the budget, from which they go to budget organizations and then to individuals for work performed (salaries, government orders, government purchases, etc.).

This scheme has one key feature — that it introduces, at best, an intermediary, and at worst, a whole chain of intermediaries between the taxpayer (the customer of the work) and the performer of the work.

This feature has its advantages, since it relieves the taxpayer of the obligation to control the quality and performance of the work, attracting qualified specialists for this.

On the other hand, the removal of this obligation leads to the fact that the taxpayer loses any opportunity to control, influence and evaluate this work, even if it is not performed in the best way or is not in his interests.

This rigid separation of the taxpayer from the budget is the root cause of many problems of representative public administration. They are based on the taxpayer’s lack of tools and ability to influence the process of performing work, and, as a result, lack of competence, experience and skills in this area.

The lack of competence, in turn, is seen by the government as confirmation that the taxpayer cannot be trusted to control and, even more so, pay for this work — a vicious circle, a chicken-and-egg, a dead end, whatever you call it.

A way out of this vicious circle may be to break this rigid boundary of responsibility and transfer part of the budget under the direct control of taxpayers (Figure 2).

At the beginning, the part may be small (1–3% of taxes paid) and then increase as the taxpayer acquires competence and, accordingly, the associated risks decrease.

Figure 2. A layman’s view of the state budget with direct civil participation: NP — Natural Person, JP — Juridical Person

The taxpayer distributes the civil part himself monthly/quarterly (“distribution”), by budget levels (local, regional, federal) and by areas (healthcare, social sphere, etc.) — this part is sent directly to the employee in this area, bypassing the budget organization that ordered the work.

You can also leave part of the funds (“for tips”) to the budget employee, for example, when receiving government services.

Thus, the taxpayer partially creates demand for certain works through “distribution”, and also partially pays for the work in accordance with their quality through “tips”.

Many taxpayers now have the skills for such activities, since they are essentially equivalent to setting “cashback” categories and paying tips via QR code through bank applications. That is, you will no longer have to start from scratch.

It is important that there is no intermediary of any kind between the taxpayer and the contractor. Otherwise, this will be just one of the options for the classic budget management device.

Examples

At the first stage, it is possible to limit the direction of funds only for individuals who are performers of work of state institutions. This, as indicated above, will create demand from citizens in the area that they think is necessary through “distribution”, and will also “spur” the development of internal competition through “tips”.

Figure 3. An example of receiving funds by a budget natural person directly from a taxpayers

At the next stage, it is possible to provide the opportunity to transfer funds to non-budgetary organizations engaged in socially significant activities, for example, in the field of health care, culture, ecology, etc. (Figure 4). This will create additional competition between budgetary and non-budgetary institutions.

As an example, we can consider many non-profit foundations that will have more funding opportunities.

Figure 4. Example of transferring funds to a non-budget organization

Next, it is possible to provide the opportunity to transfer funds to individuals who do not perform work for budgetary institutions, but who fall under a certain socially useful type of activity. This will provide an incentive for civilians to carry out socially useful activities and quickly receive a reward for them “without intermediaries” (Figure 5).

Figure 5. Example of transferring funds to a “non-budget” natural person

For example, you can pay for other types of activities that shape the environment, roads, green spaces, sports grounds, musicians, artists, etc. Sometimes, painting a bench and planting a tree can take months, although the cost of the paint and the work itself is not high, there is simply no convenient tool to initiate and pay for them.
Budget management can be introduced not only on state budget test stands, but also on real organizations and enterprises. They are usually close to states in structure, size and complexity. In my opinion, enterprise and state management go hand in hand, so it would be logical to test this system on them too.

Technical implementation

It is important that the system of transferring funds is transparent and does not have the ability to be controlled by the government. That is, the government is obliged to maintain this system in working order, but not to interfere with it. This should be fixed at the highest level.

Backend

To ensure transparency and non-interference, the logical choice of technology is one or another blockchain with its own currency tied to the state currency.

For stable operation of the blockchain, it should be launched on as many devices as possible, for example, you can use the idle capacity of budget institutions during non-working hours and / or devices belonging to taxpayers in the background.

Why blockchain? I constantly see that everyone is running around with it, but I do not understand why:

a) it is transparent

b) it is very difficult (theoretically possible) to falsify

c) it is difficult to change the rules of the game (in the event that from one side or the other there are those who want to change the rules, it will not be easy, although of course possible)

Frontend

Figure 6. Smartphone user interface prototype

As an interface, you can use both classic mobile and web applications, as well as direct interaction with the blockchain via API, depending on the choice of the taxpayer.

What if the statement “the taxpayer and the government are decent and honest” is FALSE?

This is associated with the emergence of a whole list of risks, which can hardly ever be considered completely complete:

1. “Dead souls” — in the literal sense, as well as artificial, fictitious (i.e. in fact, the person does not work in a budget organization, works in a different direction, performs a different type of work, etc.)
2. “In-lawship” — the taxpayer will try to redistribute funds to “his area” or “his people”. Which, in general, does not directly indicate that the quality of work will suffer, but creates favorable ground for this
3. Manipulation of the taxpayer: distortion of the results of the activities of budget organizations, limitation/formation of the information field, physical coercion, coercion on the part of the employer, government, etc.
4. Unequal number of people by level/direction of the budget, i.e. more funds per person depending on the area of ​​budget expenditure
5. Attacks on the software part: attacks on the blockchain, breaking connections between nodes, viruses, etc.
6. Attacks on the hardware part: power outages, communication lines, theft, physical destruction, etc.
7. Using blockchain makes the system transparent, this is both a plus and a minus, since taxpayer tax data becomes publicly available. Especially if it is possible to match the identity of the taxpayer and the id of his wallet
8. Cancellation/restriction by the government, for example, by changing the legislation, including the constitution;) A negative example is Porto Allegro, where Public Budgeting was held since 1989, but was canceled in 2017, due to the decisions of the political leaders in power in 2017. The goal is that the practice of Public Budgeting should be enshrined in the Constitution.
9. Difficulty of management/planning, since each billing period, the “distribution” of funds can differ dramatically. Practical absence of regulatory levers, as with a classic budget
10. Absence of the “Right to make a mistake” — The danger of forming a formal “social” rating based on “distribution” or “tip” statistics, even if it is objectively correct, but there are no options for a person/organization to “correct themselves”.

In the end, I would like to add, as an engineer at the Nuclear Safety Institute, that safety and development are on different scales, and if we want to develop, then we will have to “sacrifice” our safety in one form or another and accept additional risks.