Tax Administration and Compliance

Image credit: © Uganda Revenue Authority, Vanessa van den Boogaard

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:

October 2018
Taxing Government: The Case of the Uganda Revenue Authority’s Public Sector Office
by Henry Saka , Ronald Waiswa & Jalia Kangave

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…

Read more
October 2018
The Customer is King: Evidence on VAT Compliance in Tanzania
by Odd-Helge Fjeldstad, Cecilia Kagoma, Ephraim Mdee, Ingrid Hoem Sjursen & Vincent Somville

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…

Read more
Are There Any Reliable Data on Wages in Low-Income Countries? Observations and Lessons from Ethiopia
by Andualem Mengistu & Giulia Mascagni

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…

Read more
September 2018
Regulatory Burdens in Tax Administration and Firms’ Compliance Costs in Africa
by Merima Ali

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…

Read more
Why is Tax Education Important for Compliance?
by Giulia Mascagni & Fabrizio Santoro

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….

Read more
Can ICTs Increase Tax? Experimental Evidence from Ethiopia
by Giulia Mascagni , Andualem T. Mengistu & Firew B. Woldeyes

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…

Read more
July 2018
Can ICTs Increase Tax? Experimental Evidence from Ethiopia
by Giulia Mascagni, Andualem T. Mengistu & Firew B. Woldeyes

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…

Read more
June 2018
Tax Reform for Low Income Countries: Five Ideas for Simplifying Tax Systems to Fit Local Realities
by Wilson Prichard & Mick Moore

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’…

Read more
Tax in Development: Towards a Strategic Aid Approach
by Olav Lundstøl

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…

Read more
Taxing Africa: Coercion, Reform and Development
by Mick Moore, Wilson Prichard & Odd-Helge Fjeldstad

Taxing Africa is an accessible and comprehensive introduction to the crucial debates around taxation and development in Africa. Taxation has been seen as the domain of charisma-free accountants, lawyers and number crunchers – an unlikely place to encounter big societal questions about democracy, equity or good governance. Yet it is exactly these issues that pervade…

Read more

Blogs:

December 2018
by Mick Moore, Odd-Helge Fjeldstad & Wilson Prichard

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,…

Read more
December 2018
by Juliana Londoño-Vélez

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…

Read more
December 2018
by Gabriel Tourek

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…

Read more

Research Projects:

Current Project
Where the Gap Lay: Presumptive Income Tax Assessment for Micro and Small Enterprises, A Case for Addis Ababa City Administration
Project Researchers: Amanuel Mekonnen, Addis Ababa University & Endalkachew Mulugeta, Addis Ababa University

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.

Read more
Current Project
Perceptions of Value Added Tax Compliance in Ethiopia: Filing and Invoicing
Project Researchers: Gebregziabher G. Tsadik, Ethiopian Revenue and Customs Authority (ERCA), Assefa Gezae, Ethiopian Revenue and Customs Authority (ERCA) & Worku Tamire, Ethiopian Revenue and Customs Authority (ERCA)

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.

Read more
Current Project
Practices, challenges and prospects of public sector taxation in Ethiopia
Project Researchers: Sebsbie Fekade , Ethiopian Revenues and Customs Authority (ERCA), Asnakech Lake , Ethiopian Revenues and Customs Authority (ERCA) & Ronald Waiswa, Uganda Revenue Authority

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.

Read more
Current Project
An Assessment of ERCA’s Taxpayer Education Programs and How They Can be Improved
Project Researchers: Azime A. Hassen, Ethiopian Revenue and Customs Authority (ERCA)

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.

Read more
Current Project
The Implementation of Presumptive Tax in Ethiopia
Project Researchers: Abis Getachew, Ethiopian Development Research Institute

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.

Read more
Current Project
Ethiopia’s Double Taxation Avoidance Treaties: A Quest for Policy Guide
Project Researchers: Tesafay Assefa

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.

Read more