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

IntroductionRevenue collection is the principle responsibility of revenue bodies 78 and governmentsin SSA go to great lengths to monitor revenue performance, usually at the expense ofother key performance indicators. Table 15 presents data on total revenue collectionsas a percentage of GDP and the contribution of major tax heads. Detailed revenue tablefor selected countries are also presented in Annex 3. Table 16 also summarizedrevenue collection data by collection department.Survey results (Tables 15, 16 and Annex 3)• Ten of the surveyed countries have tax-to-GDP ratios higher than 16.8%, whichis the average for low-income and fragile SSA countries in 2008 (only Ethiopia,Rwanda, Sierra Leone, Tanzania and Uganda had lower tax-to-GDP ratios).• In 5 countries (Botswana, Kenya, Senegal, South Africa, and Zambia), thehighest proportion of revenue is collection from direct taxes.• In majority of the countries (Burundi, Ghana, Malawi, Mauritius, Rwanda,Tanzania and Uganda), indirect taxes contribute the highest proportion ofrevenue collection. Direct taxes account for the bulk of revenue collection in 6countries (Botswana, Ethiopia, Kenya, Senegal, South Africa and Zambia), whiletrade taxes make the greatest contribution to revenue collection in Benin andSierra Leone.• Non-tax revenue accounts for a very small proportion of total revenuecollection (less than 2% in Uganda and Sierra Leone). 79• Data from 3 revenue bodies shows that customs departments collect between6-8% of GDP in revenue accounting for between 40-50% of total revenue.Key observationsA number of revenue bodies are implementing varying tax administration reforms. 80The survey shows that despite progress that is being made in implementingreforms, there are wide disparities in revenue collection across the surveyed countries,some of which appears to reflect differences in tax structures as well as efficiency andeffectiveness in tax administration across revenue bodies. 81 Also, as already mentioned,customs departments play a significant part in revenue collection. Overall, it can bededuced that revenue bodies still face challenges. 8278 Other equally important responsibilities include implementing tax policy objectives such as welfare programs,securing the border, trade facilitation, taxpayer service and production of statistics.79 Experience shows that cost of collection of these nuisance taxes/levies can be as high as 30 to 50%.80 Key reforms—based on best practice—that have taken place in a number of these countries include: (1) integration ofdomestic tax administration, organized around key tax administration functions; (2) establishment of a LTO, as a firststep in adopting a taxpayer segmentation approach; (3) implementing systems and procedures based on selfassessment,including a taxpayer services function; (4) modernizing tax and customs laws and regulations, includingenacting a law on tax procedures (Rwanda); and (5) automation of tax and customs operations. Significant resourceshave also been dedicated to training and capacity building and infrastructure development.81 Revenue collection remains relatively low in majority of the surveyed countries (average government revenue(excluding grants) in non-resource-intensive SSA countries was 22.9% in 2008).82 A key challenge is the need to increase the tax-to-GDP ratio while at the same time reducing costs of collection.55