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

functions. These powers are also common in a majority of revenue bodies indeveloped countries and countries in transitions (OECD, 2009). 114• Third party information from informers can be useful in tax administration andsome revenue bodies have designed procedures to receive, process anddisseminate this information. In addition, 9 countries reported they havepowers to provide incentives/rewards to informers to encourage provision ofcredible tax information.Penalties and interest (Tables 28, 29 and 30)• Almost all revenue bodies impose both interest charges and administrativepenalties on non-filers, late filing, late payment of taxes, and incorrectdeclaration of tax liabilities across PIT, CIT and VAT.• The design of administrative penalties is based on a combination of both fixedand ad valorem rates in some countries.• Interest and penalty regimes differ for the same offence across tax-type andspecifically for CIT and PIT on one hand and VAT on the other. 115Key observationsEffective utilization of enforcement powers available to revenue bodies can go a longway in addressing the revenue arrears and evasion challenges they face. The surveyindicates that all countries have sufficient powers to enter a business premises and/ortaxpayers dwelling, seize documents, gather information from third parties such asfinancial institutions, and generally enforce payment of tax. The survey also indicatesthat all countries have penalty regimes that prescribe sanctions that apply to noncomplianttaxpayers. 116 However, interest and penalties are not uniformly appliedacross taxes. 117114 However, in Zambia, the recent Banking and Financial Services Act restricts Zambia Revenue Authority’s access tothird party information from commercial banks and other financial institutions. Tax officials have to obtain high levelcourt warrants to access such third party information and this is usually granted in serious investigations of tax fraudand other criminal transactions. It is important that third party information from commercial banks is easily accessiblefor tax officials to enable them to enforce tax laws effectively.115 In Zambia for instance, penalties are more punitive under the VAT than PIT and CIT. Consequently, the penaltyregime is currently being reviewed and harmonized as part of the on-going modernization.116 Overall, the fundamental features of an effective penalty regime are that they should be sufficiently punitive to deternon-compliance and uniform for similar offences across all taxes. The penalty regime should also be perceived to befair and commensurate with the tax offence. In addition, the penalty regime should be progressive, providing for higherpenalties for gross omissions and repeat offenders. These issues were not fully accessed due to the poor nature ofavailable data.117 This is typically addressed by undertaking a comprehensive review of interest and penalty regimes, preferably aspart of a larger harmonization of administrative procedures exercise—enactment of a TPC.82