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

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B. Filing, assessment and payment obligationsIntroductionEffective domestic tax administration is important not only to collect revenue but alsopromote government social objectives, such as, in the case of PIT, equity and welfaregoals. In this section, PIT, CIT, and VAT systems in the surveyed countries are reviewedto identify common features. Tables 18, 19 and 20 summarize information compiled onthe registration, filing, and payment systems.Survey resultsPITCIT• In most countries, individuals earning an income are obligated to assess taxliability, file a return, and pay tax—self-assessment system.• However, this requirement is not strictly applied in many countries andmajority of countries rely heavily on the use of withholding systems (PAYE) toadminister individuals in formal employment (who are normally expected tofile a tax return).• Payment periods for PIT vary considerably, with some revenue bodies requiringpayments to be made on a provisional basis. Seven countries (Kenya, Ghana,Malawi, Rwanda, Sierra Leone, Tanzania, and Uganda) reported requiringindividuals to file their PIT returns and make payment of tax on a quarterlybasis.87 Six other revenue bodies require returns to be filed and payment madeon a monthly basis while the remaining 2 have systems based on intervals of 3months.• All countries have a clear definition of who is liable for CIT—corporate bodiesand a registration threshold are set in a few countries.• The majority of surveyed revenue bodies reported they administer CIT on thebasis of self-assessment principles.• However, a sizeable number of the revenue bodies indicated they rely onoutmoded administrative assessment procedures to administer CIT. 88• A number of revenue bodies indicated they conduct risk-based tax audits.• All revenue bodies’ CIT systems are based on payment of provisional tax,mostly on a quarterly basis (except South Africa – bi-annual). Provisional tax isdetermined largely on the basis of past year profit/turnover/tax and/or businessprojections. Punitive penalties are applied on taxpayers that grossly understatetheir provisional taxes.• Majority of the revenue bodies require businesses to file their final CIT returnswith audited accounts a few months after the end of their accounting year. 8987 In Kenya, owners of vehicles in transport business are expected to pay predetermined fixed amounts (i.e. advancetax) and file a return at the end of the year. This is meant to encourage compliance in this difficult sector. Filingcompliance results indicate the system has had little success.88 Six revenue bodies surveyed conduct administrative assessments.61
VAT• All the surveyed countries have implemented a VAT. 90• A VAT registration threshold is set to define who is liable to tax. The VATregistration threshold varies across countries—ranging from a low of US$ 9,453in Ghana to a high of US$ 80,000 in Burundi.• The VAT system also has provisions for voluntary registration—those who donot meet the mandatory registration threshold but who meet theadministrative requirements for voluntary registration. 91• Three countries (Benin, Sierra Leone and Senegal) have 2 thresholds for VATregistration (covering sale of goods and services).• The VAT system in 2 countries (Ghana and Kenya) comprises of multiple taxrates.• Three revenue bodies (Ghana, Senegal and South Africa) have designedsimplified VAT filing requirements for small enterprises.• Six countries (Benin, Mauritius, Senegal, South Africa, Uganda and Zambia)have put in place specific VAT filing requirements for selected taxpayers toenhance filing and payment compliance and/or to expedite payment of VATrefunds.• Five countries (Benin, Ethiopia, Kenya, Senegal and Zambia) have implementeda VAT withholding system (a taxpayer is assigned to withhold VAT payable to asupplier and remit it to the revenue body). 92• In addition, 7 revenue bodies require selected taxpayers to submit a detailedschedule of purchases and/or invoices with their VAT return. Theseadministrative arrangements are intended to assist in the verification of VATreturns.•All revenue bodies have set an administrative or legal timeframe within whichVAT refund claims should be settled . 93• The VAT assessment period is 30 days in most countries. 94Taxpayers arerequired to submit returns and payments within an average of 21 days in thesurvey countries.89 In Rwanda, this requirement is subject to taxpayers falling above a set turnover threshold. In South Africa, taxpayersare required by law to avail accounts to SARS on request.90 VAT is a relatively new tax, having been introduced in most SSA countries in the 1990s to replace more narrowlybased and often cascading sales taxes in a bid to improve revenue collection (VAT is generally considered to be a broadbased tax).91 Criteria for qualifying for voluntary VAT registration are not the same across revenue bodies although the generalguiding principles are the same.92 In Zambia, this arrangement involves mining companies.93 Some revenue bodies have segmented their taxpayers on the basis of compliance risk for purpose of quickening theprocessing of VAT refunds, with refunds for low risk taxpayers fast-tracked and focus put on verifying unknown andhigh risk taxpayers. For example, Zambia and Tanzania categorize their taxpayer into 3 broad groups based oncompliance levels—gold (low risk), silver and bronze (high risk). Fast-tracked VAT refunds are paid within 10, 20 and 30days in Mauritius, Uganda and Zambia respectively. Despite these reforms, most revenue bodies are believed toconsistently fail to meet set targets, thus affecting businesses’ cash-flow62
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INTERNATIONALTAXDIALOGUE2010Revenue
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Table 12: Total cost of collection
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PCCAPAYEPITPSVRAGBRRARTSASACUSARSSS
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Executive summaryRevenue administra
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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 and 34: Key observationsSurvey results indi
Page 35 and 36: Box 6: The common characteristics o
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: A. Taxpayer registration and design
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
Page 85 and 86: Table 26: Information gathering pow
Page 87 and 88: CountryTable 28: Interest and admin
Page 89 and 90: CountryTable 29: Interest and admin
Page 91 and 92: CountrySouth AfricaTanzaniaUgandaZa
Page 93 and 94: CountryMalawiMauritiusRwandaSierraL
Page 95 and 96: AnnexesAnnex 1: Organization struct
Page 97 and 98: KRABoard of DirectorsCommissionerGe
Page 99 and 100: ZRABoard of DirectorsCommissionerGe
Page 101 and 102: ERCADirector GeneralAdvisory BoardE
Page 103 and 104: MauRABoard ofDirectorsInternal Audi
Page 105 and 106: Clarify SARS’operatingmodel,strea
Page 107 and 108: Enhancethe URAcorporateimageLevel o
Page 109 and 110: 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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