Tax Administration and Compliance
Many of the challenges low-income countries face in mobilising domestic resources are related to tax administration as much as tax policy. Our research on this theme encompasses all aspects of tax administration, from technology adoption, to data management and strategies for collecting revenue from different types of taxpayers. Tax compliance is a key focus, as low-income countries struggle with widespread evasion, corruption, and limited administrative capacity. Our research on compliance includes survey-based studies of taxpayers’ perceptions and attitudes, case studies, and large-scale field experiments.
Publications:
This ICTD Research in Brief is a two-page summary of ICTD Working paper 84 by Henry Saka, Ronald Waiswa and Jalia Kangave. This series is aimed at policy makers, tax administrators, fellow researchers and anyone else who is big on interest and short on time. In the past three decades, revenue authorities in African countries…
Virtually all the literature on taxation presents it as a relationship between government and non-government taxpayers. And even though in practice government organisations are – or should be – big taxpayers, very few revenue authorities treat these organisations as a separate segment of taxpayers. Different categories of taxpayers behave differently and so need to be…
Like governments in many other African countries, the Government of Tanzania has been striving to improve the effectiveness of its value added tax (VAT) regime by reducing tax evasion through a combination of measures, including improved tax legislation and more effective administrative processes. A key initiative was the introduction of Electronic Fiscal Devices (EFDs) in…
Administrative data from tax returns have recently become available in many African countries thanks to the modernisation of revenue authorities and the digitisation of tax records. The availability of these data has opened new opportunities for policy-relevant analysis of real-life taxpaying behaviour. However, despite the increased availability of these data, a gap remains in many…
There is a growing interest among policy makers to cut red tape in government regulations in order to help improve the performance of businesses and create more jobs. However, most businesses, especially in Africa, still face challenges in meeting various government regulations that contributes to higher compliance costs. Compliance costs are the extra costs incurred…
This ICTD Research in Brief is a two-page summary of ICTD African Tax Administration Paper 1 by Giulia Mascagni and Fabrizio Santoro. This series is aimed at policy makers, tax administrators, fellow researchers and anyone else who is big on interest and short on time. Knowledge about tax can contribute to shaping attitudes towards compliance….
This ICTD Research in Brief is a two-page summary of ICTD Working Paper 82 by Giulia Mascagni, Andualem T. Mengistu, and Firew B. Woldeyes. This series is aimed at policy makers, tax administrators, fellow researchers and anyone else who is big on interest and short on time. African tax administrations have experienced rapid modernisation in…
The widespread introduction of information and communication technologies (ICTs) and digitalised data management systems is one of the most important developments among African tax administrations in recent years. However, very little evidence is available on their effectiveness in practice, and how taxpayers respond to these changes. This paper starts filling this gap by reporting three…
There is no silver bullet to strengthen the tax systems of low-income countries. Dramatic changes in tax systems and tax collection are rare. Successful improvements more often involve a great deal of hard and steady work, and the gradual construction of popular trust and (grudging) support for reform. There remains, however, space for ‘organising ideas’…
Raising a higher share of the value added in an economy for the public purpose is associated with state building, modern economic growth and development. From 2002-3 to date, low- and lower-middle income countries raised total tax and non-tax revenue from 11-12 per cent and 18-19 per cent of GDP up to 17-18 per cent…
Blogs:
Over the past decade, international attention has increasingly focused on the potential contribution of taxation to improved development outcomes. In our recent book, Taxing Africa: Coercion, Reform and Development, we offer an overview of these issues and challenges in Africa. A major objective of the book is to highlight major political questions about taxation in Africa,…
Developed countries have recently begun considering wealth taxes to raise revenue and curb rising inequality. Should developing countries follow suit? On the one hand, developing countries are often afflicted by acute income and wealth inequality (Alvaredo et al., 2018), and could thus benefit from a more progressive tax system. On the other hand, the question…
In low-income countries, small firms account for the majority of taxpayers (World Bank 2011). Yet we know little about how they navigate taxation. Existing research in the developing world focuses mostly on middle-income countries (Pomeranz 2015; Best et al. 2015; Brockmeyer and Hernandez 2018), and there is good reason to think that the tax behaviour of firms…
Research Projects:
The study focuses on assessment of presumptive taxation of small and micro enterprise in Addis Ababa City Administration. It will evaluate the standard assessment processes and procedures, the criteria used for assessment, and the equity of taxes imposed by the tax authority. Data will be collected through surveys and interviews.
VAT, as a consumption tax, can contribute huge amount of tax revenue. But it does not play this role in generating tax revenue in Ethiopia because of low VAT compliance. This can be due to inadequate commitment and capability of tax officials, weak enforcement, low awareness of tax payers, limited application of laws and complex procedures. Therefore, the researchers will use primary and secondary data to assess issues and challenges that affect VAT compliance in three federal tax branches. They will use descriptive method of analysis and based on the findings they will recommend mitigation strategy to enhance VAT compliance.
Ethiopia’s revenue collection performance remains low at 12.5% of GDP compared to the average for sub-Saharan Africa (17%). This is partly attributable to the failure of government entities to support tax administration. The public sector is vital in terms of withholding VAT payments and income taxes. However, these institutions experience little pressure from the tax administration to meet their tax obligations. This research will investigate public sector taxation in Ethiopia, employing data matching, comparative studies, textual analysis and interviews.
This study aims to evaluate the taxpayer education programs used to aware and educate on the tax knowledge. It may be difficult to shift tax culture without education at an early age or without citizens voluntarily embracing tax payment. So we would like to examine the content and design of mass media in the TV, Radio, national newspapers and training used by the Ethiopian Revenue and Customs Authority (ERCA) to increase awareness, tax filing, and, ultimately, tax compliance. Currently, it consists of education programs using Gebi Lelimat Radio program, Gebi Lelimat TV program, Training and newspaper. The unit of analysis is SMEs which is Category C taxpayers located in the Addis Ababa. The type of data will be the primary and secondary data obtained through a survey. Samples may obtain from a population sample that will be with a multistage method and with random sampling technique.
This study is highly motivated by the recently adjusted rate of the daily presumed income on businesses is the cause of the dispute between the business community and the Ethiopian Revenue and Customs Authority (ERCA). The main goal of introducing the presumptive tax system is to provide tax payers with equitable, efficient, quality services and bringing more firms to the tax net by promoting tax payers to voluntarily discharge their tax obligations.However, when the daily presumed income is estimated the question of fairness and just arisen that led the authority and the business to dispute. The authority claims that the turnover declared by the category “C” businesses is “understated” while the businesses argue that the presumed daily income by the authority is “overstated”. Hence, the researcher is highly interested to study the implementation process of the estimation of the daily income that caused the dispute. In studying the implementation process the case of other African countries will also be reviewed so that Ethiopia can learn from these countries in the region.
Ethiopia has undertaken various economic and foreign relations policy reforms especially after the country’s economic shift towards free market economic system since 1991. As part of such multidimensional reforms, the country has undertaken serious of tax reforms especially since 2002. This project aims at examining the policy back up of double taxation treaties in Ethiopia. In dealing with the main issue of the work, data will be collected from the main tax governing organs in Ethiopia, via data collection techniques like interviews, questionnaires, observations and document reviews.
Africa is rapidly urbanizing. The number of large African cities with populations between 5 and 10 million is also expected to increase, from three to twelve by 2030 (United Nations 2014). However, the fastest-growing urban agglomerations are medium-sized cities and cities with less than 1 million inhabitants. Durand-Lasserve (2016) provides startling projections regarding urbanization stating that between 2015 and 2050 (i.e., in only 36 years) urbanization in Africa will grow from 38 percent to 55 percent, implying an additional 790 million urban inhabitants. This likely population growth will generate a significant increase in the demand for housing, social services and public utilities. It will also require significant infrastructure investment to support business development and to keep these businesses competitive in international markets. This will likely generate an increased demand for property taxation in African urban areas, and for improving the administration of this tax (McCluskey, Franzsen & Bahl 2017).
Globally local governments are under pressure to deliver basic services to their citizens. To fund amenities such as clean drinking water, waste management, adequate power supply and basic healthcare, sub-national/city administrations are under financial stress. The development of an integrated ICT revenue collection system provides the necessary platform to support municipal administration to more efficiently collect property tax and other own source revenues. Given the rapid rate of urbanization, further stress is experienced in many African cities.
As illustrated by recent developments in a number of Tanzanian cities, the development and implementation of an integrated information and communication technology (ICT) revenue collection system can provide the necessary platform to support municipal administration to more efficiently collect property tax as well as other own source revenues.
The main aim of this project is: To evaluate the contribution of Information Communication Technology to improving the collection of property tax revenue within local government.
To support this aim the following research objectives have been identified:
• To critically evaluate the existing body of knowledge in the context of ICT in own source revenue collection;
• To assess the shortcomings of traditional revenue collection methods with a view to identifying operational gaps;
• To evaluate the performance of ICT solutions in collecting revenue in a number of selected case study areas.
Project Outputs
Working Paper
Why do firms engage in aggressive corporate tax planning and tax avoidance? (How) can self-regulation, through Corporate Social Responsibility (CSR), complement public regulation in minimising the negative impacts of aggressive corporate tax planning and tax avoidance on government tax revenues? These questions bring to the fore the tension between tax illegitimacy and legality, which can confuse actors – e.g. regulators, managers, tax accountants, lawyers, and consultants – and obfuscate tax policies (West, 2017). As such, the tension needs to be resolved to enhance tax compliance and minimise irresponsible strategic tax planning, which is an economic leakage. In addition, the questions seek to explore how the emerging field and practice of CSR in Nigeria, which has been predominantly and erroneously framed as philanthropy (Amaeshi et al., 2006; Amaeshi et al., 2015), can be leveraged, by interested actors, to address possible reductions in government tax revenues (partly as a result of aggressive strategic tax planning and tax avoidance schemes) by framing taxation as a responsible business practice. This dual mandate lies at the heart of this research project. Data collection will involve interviews and focus groups with selected tax actors. It is anticipated that the findings will contribute to practice, policy, and theory.
In 2017 the Federal Inland Revenue Service (henceforth, FIRS) introduced the Integrated Tax Administration System (ITAS) with the aim of improving ease of doing business with FIRS, enhancing voluntary compliance and boosting revenue generation. Knowing that the Nigerian private sector has had history of low adoption of technologies like the mobile money service introduced by the Central Bank in 2011, this study seeks to understand the level of awareness and rate of adoption of ITAS by both the company and personal income tax payers. It also seeks to understand the factors that drive the adoption of this system, including the firm/business characteristics, the corporate governance structure, and the external environment that surrounds the firm/business operations.