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.

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Publications:

Should Governments Tax Digital Financial Services? A Research Agenda to Understand Sector-specific Taxes on DFS
by Mary Abounabhan, Laura Munoz, Giulia Mascagni, Wilson Prichard & Fabrizio Santoro

Low-income countries are facing strong pressure to bring in more revenue at home. With digital financial services (DFS) rapidly expanding across Africa and other low-income countries a growing number are therefore considering new taxes on DFS. In light of the heated debate over DFS taxes, this paper explores the rationale for these taxes and their…

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June 2022
Small Nets for Big Fish? Tax Enforcement on the Richest – Evidence from Uganda
by Fabrizio Santoro & Ronald Waiswa

Appropriately taxing the richest is a priority for every government, even more so in Africa, where higher revenue mobilisation is needed to fund growth. In Uganda, the revenue authority launched a specific unit to monitor the tax affairs of the richest individuals. Thanks to a close collaboration with the Uganda Revenue Authority (URA), we evaluate…

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Tax obsessions: Taxpayer registration and the informal sector in sub-Saharan Africa
by Mick Moore

Motivation There are three puzzling features of sub-Saharan African tax systems: tax administrations maintain records on vast numbers of small enterprises that actually provide no revenue; they continually invest resources into registering even more of these “unproductive taxpayers”; and discussions about taxing small enterprises are framed by the ambiguous, misleading concept of the “informal sector”….

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Mandating Digital Tax Tools as a Response to Covid: Evidence from Eswatini
by Fabrizio Santoro, Razan Amine & Tanele Magongo

Many tax authorities changed the mode of interacting with taxpayers from physical to online as a response to the Covid-19 pandemic, to diminish the spread of the virus. Eswatini, the country under study, mandated the use of online tax filing through the e-Tax system for all income tax payers, coupled with a zero-cash-handling policy for…

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April 2022
The Economic Impact of the Pandemic in Rwanda: An Analysis of Firm-Level VAT Data
by Giulia Mascagni & Adrienne Lees

There are substantial differences in the spread of the Covid-19 pandemic and policy responses to it between high- and low-income countries. While evidence on the former is growing, there remain more unanswered questions on the latter. This paper addresses this gap by providing insights on the impact of the pandemic in Rwanda, based on firm-level…

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April 2022
Active Ghosts: Nil-filing in Rwanda
by Giulia Mascagni, Fabrizio Santoro, Denis Mukama, John Karangwa & Napthal Hakizimana

Nil-filing refers to taxpayers who report zero on all fields of their tax declaration. It is a largely ignored phenomenon in the tax literature, despite being well known to tax administrators. There is almost no evidence on the characteristics of nil-filers and the reasons for their apparently puzzling behaviour. This paper sheds light on this…

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February 2022
Innovations in Tax Compliance: Building Trust, Navigating Politics, and Tailoring Reform
by Roel Dom, Anna Custers, Stephen Davenport & Wilson Prichard

Recent decades have seen important progress in strengthening country tax systems. Yet many areas of reform have remained stubbornly resistant to major improvements. Overall, revenue collection still falls short of that needed for effective governance and service delivery. Tax collection is too often riddled with high rates of evasion among large corporations and the rich…

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February 2022
Digital financial services and digital IDs: What potential do they have for better taxation in Africa?
by Fabrizio Santoro, Laura Munoz, Wilson Prichard & Giulia Mascagni

New digital technologies are now being widely used in Africa and lower-income countries (LICs). This has had an impact on tax administration, which has been increasingly digitised. Specifically Digital Financial Services (DFS) and digital IDs can improve tax administration. They have the potential to identify taxpayers more easily, communicate with them better, enforce and monitor…

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February 2022
Should Governments Tax Digital Financial Services? A Research Agenda to Understand Sector-Specific Taxes on DFS
by Laura Munoz, Giulia Mascagni, Wilson Prichard & Fabrizio Santoro

Digital financial services (DFS) have rapidly expanded across Africa and other low-income countries. At the same time, low-income countries face strong pressures to increase domestic resource mobilisation, and major challenges in taxing the digital economy. A growing number are therefore advancing or considering new taxes on DFS. These have generated much debate and there are…

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February 2022
The Promise and Limitations of Information Technology for Tax Mobilisation
by Oyebola Okunogbe & Fabrizio Santoro

Tax revenue in many low-income countries is inadequate for funding investments in public goods and human capital. While tax systems have been adopting new technologies to improve tax collection for many years, limitations to in-person interactions due to COVID-19 have further highlighted the role of information technology in tax mobilisation. This paper examines the potential…

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Blogs:

August 2022
by Awa Diouf, Fabrizio Santoro & Mary Abounabhan

Introduced in May 2022, Ghana’s e-levy is a 1.5 per cent tax on the transfer amount of electronic transactions. The objective is to improve tax revenues by tapping into fast-growing digital financial services (DFS). However, many exemptions are applied to the tax design. A daily and cumulative exemption is fixed at 100 Ghanaian cedis for…

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August 2022
by Adrienne Lees & Philip Mader

Since the pioneering mobile money service M-PESA was launched in Kenya in 2007, helping to drive impressive gains in financial inclusion, mobile money has been widely seen as a new engine for global development. But since these services also tend to be engines of profit, governments in Africa are increasingly eyeing mobile money and other…

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June 2022
by Giulia Mascagni

As leaders meet at the Commonwealth Heads of Government Meeting (CHOGM), this week in Kigali, Rwanda, they have an opportunity to focus their attention on the big development challenges of our time. Taxation might not be the first thing that comes to mind as business, civil society and governments discuss this year’s theme “Delivering a…

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Research Projects:

Current Project
Evidence Gap Map on Digital Financial Services: Enablers, Barriers, and Impacts
Project Researchers: Philip Madar, ICTD, Maren Duvendack, Adrienne Lees, ICTD, Aurelie Larquemin & Keir Macdonald, IDS

Many governments are considering taxing digital financial services (DFS), but to tax them properly we need to understand what enables or prevents people using DFS, and what impact DFS usage has. Our Evidence Gap Map (EGM) brings together all the evidence-based research available on these enablers, barriers and impacts. An EGM serves to pinpoint where…

Project Outputs

Working Paper
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Past Project
The Promise and Limitations of Information Technology for Tax Administration
Project Researchers: Oyebola Okunogbe & Fabrizio Santoro, ICTD

This research has been conducted in partnership with the World Bank. The paper examines the potential of technology in transforming tax administration by helping to identify the tax base, facilitate compliance, and monitor compliance. It also identifies possible limitations to the use of technology arising from inadequate connectivity infrastructure, lack of adoption (or resistance) by…

Project Outputs

Working Paper
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Current Project
Understanding Retail CBDC’s and their Potential Role for Revenue Authorities
Project Researchers: Laura Munoz Perez, ICTD & Moyosore Arewa, ICTD

This research assignment focuses on exploring the potential role of Central Bank Digital Currencies (CBDC) on taxation regimes and RAs in developing countries. This research will outline the concept of CBDC and its various potential designs, an overview of current testing or CBDC implementation plans across the developed and developing world, possible taxation use cases…

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Current Project
Inter-Institutional Data Sharing and Cooperation for Better Tax Administration – Evidence from Uganda
Project Researchers: Fabrizio Santoro, ICTD, Moyosore Arewa, ICTD, Ronald Waiswa & Jane Nabuyondo

Building on background work from Arewa (forthcoming) and connecting with recent evidence on gaps in URA administrative data (Mayega et al 2019, 2021) this study attempts to address the three following interrelated questions: How is the integration with other public institutions’ databases taking place in Uganda? Which are the challenges both URA and other institutions…

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Current Project
Leveraging DFS and Digital IDs for Improved Tax Collection in the Togo Revenue Authority (OTR)
Project Researchers: Dorothy Kang’oro, Ignatius Odongo & Fidèle Kanyarugero Ngerero

This research will primarily seek to answer how the Togo Revenue Authority (OTR) can harness the potential of DFS to improve tax administration in the country?

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Current Project
Examining Digital Payments in Rwanda as a Medium for Tax Compliance
Project Researchers: Ludovic Bernad, Yves Nsengiyumva, Benjamin Byinshi & Fabrizio Santoro, ICTD

This study explores how digital payment data can be used to solve tax compliance challenges in Rwanda by identifying the potential that digital transactions can have on tax compliance, perceptions, and the tax administration’s efficacy.

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Current Project
Tax Revenue in Emerging Markets and Developing Countries: Do Mobile Financial Services Matter?
Project Researchers: Alphonse Noah, Martine Tania Azoa Balengla, Joseph Keneck Massil & Bernard Clery Nomo Beyala

This research project plans to investigate whether and how the rapid expansion of mobile financial services (mobile money, mobile credit, mobile savings) influences domestic resource mobilisation in emerging markets and developing countries (EMDCs).

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Current Project
Extent of Adoption and Effective Data Utilisation from Digitalised Tax Payment Systems and Digital IDs among States’ Taxing Authorities in Nigeria
Project Researchers: Abdulsalam Mas’ud, Sani Mohammed Damamisau & Yusuf Abdu Gimba

This research project will assess the extent of the adoption of these technologies among states’ taxing authorities and how the data from these technologies is being used in strengthening tax administration effectively.

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Current Project
Impact of Compulsory e-Payments on Compliance in Eswatini
Project Researchers: Fabrizio Santoro, ICTD, Razan Amine, ICTD & Tanele Magongo

This paper spurs from the interest of the Eswatini Revenue Authority (partners in the study) and evaluates the impact of the mandate of electronic filing for income taxes, as implemented in Eswatini in September 2020 in response to the COVID emergency. By relying on a rich set of taxpayer-level administrative data from the revenue authority,…

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Current Project
Review of Tax Payment Technologies: Uses, Benefits, Drawbacks, and Future Options
Project Researchers: Moyosore Awera, ICTD, Laura Munoz, ICTD & Fabrizio Santoro, ICTD

This is the first report in a series focusing on digital payments and ID technologies. It will examine how tax administrations use digital payment systems – including mobile money technologies – to bolster tax collection and improve the provision of key taxpayer services. Relying on a review of existing evidence, it will also assess the…

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