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

B. Revenue administration expendituresIntroductionCost of collection ratios provide a crude but crucial measure of how efficiently andeffectively resources are used to administer revenue collection. Revenue bodies wereasked to provide information on aggregate cost of collection and details ofexpenditures on salary and IT related costs. Detailed information was not available andmost revenue bodies faced difficulties providing disaggregated expenditure data. Thedata and analysis presented in this section is therefore for indicative purposes only.Survey results (Tables 12, 13 and 14)• Cost of collection ratios varies widely; from a low of about 1% (which is in linewith OECD countries’ limit of 1%) to a high of close to 4%).71• The majority of revenue bodies have cost of collection ratios averaging 2-3%.• During the period 2006 to 2008, cost of collection ratios either remainedstagnant or declined for the majority of the revenue bodies.• Salary and related expenditures account for the largest portion of the budget,ranging between 60 to 80% of the expenditure.• Revenue bodies’ expenditures on IT in 2008 ranged from about 0.8% to 8% ofaggregate administrative expenditures.Key observationsCost of collection is influenced by a number of factors, ranging from optimality of taxpolicy and system, distribution and structure of the taxpayers, effectiveness of revenueadministration systems and procedures, tax administration arrangements between thecentral and local government, to economic and environmental factors existing in acountry. The scope and breadth of responsibilities placed on revenue bodies (such ascollection of a wide range of non-tax revenues) also varies widely and this tooinfluences the cost of collection. These factors may explain the wide variation in coststructure of revenue bodies. 72 It was not possible, with the available data, to fullyassess the cost structures of revenue bodies and draw meaningful lessons/conclusions.In addition some revenue bodies are funded separately by their respective ministries offinance for infrastructure development projects (such as huge IT investments orpurchase of buildings). Funding by development partners also accounts for asignificant portion of resourcing for a number of revenue bodies. This notwithstandingcost of collection ratios seem to be, relatively, on the high side. Salary and relatedexpenditures account for the largest portion of the budget (up to 80%), which seems tobe consistent with estimates for most revenue bodies in the OECD. However, as alreadymentioned, maintaining an appropriate balance in staff allocation, for examplebetween headquarters and field operations, can be challenging and 30% of staff inmost of the surveyed revenue bodies are based at the headquarters and supportfunctions departments. Another area worth noting is the disparity in resourcing the IT71 Survey data was found to be inconsistent and unreliable. In addition, it is not clear that the figure captured totalexpenditure, including donor funded projects.72 Low ratios in Botswana and South Africa may also be attributed to the inclusion of resource taxes in the total revenuecollection figure, while the credibility of the low ratio in Benin could not be explained and may be doubtful.50