Revenue Administration in Sub-Saharan Africa - International Tax ...

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B. Segmentation and large taxpayers administrationIntroductionRevenue patterns in most countries show that a small number of large enterprisesaccount for the majority of tax revenue (60-70% of total tax revenue). 44Theseenterprises engage in large-scale, complex/specialized, and often global operations. Inview of their unique characteristics and needs, modern revenue administrations setup an LTO to manage the tax affairs of the large taxpayers. Box 6 illustrates thecommon characteristics of large taxpayers. The survey reviewed the arrangements inplace to manage large taxpayers’ affairsSurvey results (Table 8)All revenue bodies (except Botswana) have set up a LTO.• Annual turnover is the main criterion used for assigning LTO taxpayers in allcountries.• Other factors commonly used include: (1) enterprises associated with orrelated to a large taxpayer enterprise; (2) enterprises engaged in complex orspecialized operations (such as banking, insurance, energy,telecommunication, and mining); (3) revenue contribution; and (4) number ofemployees.• In most countries, large taxpayers are typically small in number (1-5% oftaxpayers). 45• In a few revenue bodies (Mauritius, Tanzania, and Kenya) the LTO is a fullyfledged department, that is, the LTO and the small and medium taxpayers’administration are distinct departments.• In all countries with an LTO, small and medium taxpayers are, by default,administered by several tax offices spread across the respective countries.• In addition, a number of countries are implementing special programs fortaxing the small and micro enterprises..44 Revenue contribution estimates are based on IMF reports.45 Higher figures reported in Burundi and Sierra Leone could be attributed to a smaller denominator that excludessmall and micro taxpayers from the population.33
Box 6: The common characteristics of large taxpayers• Large taxpayers are very different from other categories of taxpayers andpresent certain significant risks to effective tax administration. Many revenuebodies have recognized that managing these risks requires strategies andapproaches appropriate to the unique characteristics and compliancebehaviour of these taxpayers. Key characteristics of the large businesstaxpayer segment include:• Concentration of revenue – a small number of large taxpayers have a criticalrole in revenue collection, paying and withholding taxes. The concentration oftax revenue results from the pure size of these taxpayers and the range oftaxes they are responsible for, including their role as withholding agents forlarge numbers of employees.• Complexity of their business and tax dealings – several countries describelarge taxpayers as complex for a variety of reasons, including: (1) multipleoperating entities and/or diverse business interests; (2) high volume oftransactions in day-to-day business activities; (3) large number of employees;(4) many have international dealings, often involving cross-border transactionswith related parties; (5) operate in an industry that presents unique tax issues(e.g. banking and insurance); (6) many are widely spread in geographical terms;(7) deal with complicated issues involving complex tax law and accountingprinciples; and (8) use complex financing and tax planning arrangements.• From the revenue bodies’ perspective, major tax compliance risks – forrevenue bodies, many of these large taxpayers present major tax compliancerisks due to various factors including: (1) significant offshore activities; (2)policies and strategies to minimize tax liabilities; (3) large portion of taxassessments result from audit activity of large taxpayers; and (4)growing/significant differences between financial accounting profits and theprofits computed for tax purposes.• Withholding agent or intermediary role – As well as paying taxes, largetaxpayers also play a significant intermediary‘ role in many tax systemscollecting taxes including: (1) personal or employee income tax withholdingsand social contributions, and VAT; and (2) withholding tax on certain crossborder payments such as dividends, royalties and interest.• Use of professional/dedicated tax advice – many large businesses and highincomeindividuals retain professional advisors to handle their tax planningand compliance affairs while others maintain their own in-house taxorganization.• Status - generally, most large businesses are publicly-listed corporatecompanies, and also include multinational companies and some privategroups.Source: OECD (2009)34
Page 1 and 2: INTERNATIONALTAXDIALOGUE2010Revenue
Page 3 and 4: Table 12: Total cost of collection
Page 5 and 6: PCCAPAYEPITPSVRAGBRRARTSASACUSARSSS
Page 7 and 8: Executive summaryRevenue administra
Page 9 and 10: Institutional arrangements for reve
Page 11 and 12: • All unified semi-autonomous rev
Page 13 and 14: B. Scope of revenue bodies’ respo
Page 15 and 16: C. Relative autonomy of revenue bod
Page 17 and 18: Survey results (Table 3)• All rev
Page 19 and 20: Key observationsRevenue administrat
Page 21 and 22: You are entitled to expect SARS:Box
Page 23 and 24: Box 4: An example of a codified set
Page 25 and 26: Table 2: Tax and non-tax revenues a
Page 27 and 28: Table 4: Decision making structures
Page 29 and 30: The organization of revenue bodiesC
Page 31 and 32: The ‘taxpayer segment’ model: A
Page 33: Key observationsSurvey results indi
Page 37 and 38: C. Office network and staffingIntro
Page 39 and 40: Table 7: Selected features of the o
Page 41 and 42: Table 9: Number of staff and distri
Page 43 and 44: A. Strategic planning and managemen
Page 45 and 46: Key observationsThe corporate plann
Page 47 and 48: Table 10: Selected management pract
Page 49 and 50: A. An overview of funding mechanism
Page 51 and 52: B. Revenue administration expenditu
Page 53 and 54: Table 13: Share of total wage bill
Page 55 and 56: Revenue performance 76Chapter VKey
Page 57 and 58: Table 15: Revenue collection data f
Page 59 and 60: Domestic tax return filing, assessm
Page 61 and 62: A. Taxpayer registration and design
Page 63 and 64: VAT• All the surveyed countries h
Page 65 and 66: C. Taxation of small and micro-busi
Page 67 and 68: D. Use of modern electronic applica
Page 69 and 70: Table 18: PIT filing, assessment an
Page 71 and 72: CountryHow is the final annual PIT
Page 73 and 74: Table 20: VAT filing, assessment an
Page 75 and 76: CountryTable 21: Taxation of small
Page 77 and 78: CountryBasis used todeterminetaxMal
Page 79 and 80: Use of electronic application in ta
Page 81 and 82: Legal and administrative powers of
Page 83 and 84: functions. These powers are also co
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Table 26: Information gathering pow
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CountryTable 28: Interest and admin
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CountryTable 29: Interest and admin
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CountrySouth AfricaTanzaniaUgandaZa
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CountryMalawiMauritiusRwandaSierraL
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AnnexesAnnex 1: Organization struct
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KRABoard of DirectorsCommissionerGe
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ZRABoard of DirectorsCommissionerGe
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ERCADirector GeneralAdvisory BoardE
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MauRABoard ofDirectorsInternal Audi
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Clarify SARS’operatingmodel,strea
Page 107 and 108:
Enhancethe URAcorporateimageLevel o
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KRAMissionVisionValuesTo promote co
Page 111 and 112:
ZRAMissionVisionValuesTo maximize a
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MauRAMissionVisionValuesTo continua
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GRAMissionVisionValuesTo supervise
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Source: ECRA• Cross cutting issue
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MalawiType of taxRevenue collected
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GhanaTax categoryRevenue collection
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