Session 2: Taxation

Reforms to improve revenue collections and widen the tax base

The Taxation session was chaired by Prof. Alan Hirsch, the IGC-Zambia Country Director. Prof. Nada Eissa, Lead Academic for IGC South Sudan opened the discussion during which she presented on Tax Capacity in Africa emphasising the role of tax administration, tax policy, tax enforcement and tax payment morale in determining countries’ tax capacity. She notes that the Tax to GDP ratio in most developing countries is significantly lower than that of developed countries, even with similar tax rates. Two approaches to enhancing this would be through a Macro Policy approach or a more targeted Micro approach focusing on identifying specific problems in a given country using rigorous research to design incremental policy innovations. This approach requires close collaboration between researchers and policy makers.

Dr. Adnan Khan, the IGC Research and Policy Director presented his research on incentives for tax collectors regarding implementation of Tax Policy. He presented on the importance of taxation in state development, and the key components of tax policy focusing on Tax Enforcement, Tax Administration and Tax Morale with reference to Pakistan’s tax system. He called for enhanced research in tax policy administration which requires co-generation of knowledge with tax authorities.

Policy discussants from Zambia, Tanzania and Rwanda gave their practical experiences in taxation policy implementation. Agness Kanyangero from the Rwanda Revenue Authority discussed how tax exemptions given to investors have a serious negative revenue collection effect, due in part to misuse of these exemptions which results in lower tax collection capacity.Mr. Ezekiel Phiri, Director of Research and Planning of the Zambia Revenue Authority outlined current policy challenges and opportunities with regards tax collection enhancement in Zambia which among others included the enhancement of the mining tax unit which in part was supported by the IGC alongside other cooperating partners. He shared that the large informal sector contributed to Zambia’s low Tax/GDP ratio. The session concluded with a presentation from Mary Maganga, a policy discussant from the Tanzania Revenue Authority who discussed the Tanzania Revenue Authority’s priority areas under tax administration as being that of enhancing compliance and the need for robust research to estimate the tax gap in Tanzania.

The session left the audience to further consider the questions of the issue of ‘tax holidays’ given to investors and the optimal large scale mining tax options as well as the need to enhance governance and accountability in tax policy beyond just raising revenues.

Summary written by Herryman Moono, Country Economist, IGC Zambia