Personal Income Tax Corporation, African Tax Administration, International Center For Tax Development discussed on The Economist: The Intelligence


In Nigeria which is some of the lowest tax rates the country which has three hundred times as many people as Luxembourg it collects less taxed taxed in Luxembourg another example Ethiopia. The tax revenues collected Equally citizen would just get around. Eighty dollars was a year at market exchange rates so so basically governments have very money to provide the services that citizens need in demand. And if you go to the Democratic Republic of Congo for example the government spends so little person on healthcare each year that money would buy a copy of the economist. And so how has it become a problem of this size continental-scale tax problem so since the nineteen eighties. Really Economic Policy in Africa has been quite heavily influenced twins by the IMF World Bank and part of that agenda his being slashing trade taxes which used to be one of the largest source of income for African governments. It's the same time as reductions in top rights of Personal Income Tax Corporation tax. That has been new kinds of taxes. AXES VAT is increasingly popular across the continent. But the result is being a huge surge in an overall tax take and in fact over half of tax revenues In Africa map comes from taxes on goods and services things like the cost is those taxes are regressive and the poor and they're paying Moore's abortion of their income and they are often quite unpopular as well but what kind of rates of tax are we talking about here. These are what we would expect for the size of of these economies so although tax rates like had been falling least direct. Taxation is still higher than any other parts of the world but the problem you have is it as so many loopholes calls within that the loss of people and governments Actually pain one thing was crazy poses tax treaties share treaty. He signed between governments their originally intended for the noble purpose of eliminating double taxation but in practice often happens. Is there a way full for multinational corporations to limit taxation of cross-border income. Things like royalties says phase in Soham some analysis by the IMF suggests the African countries signed tax treaties with Mauritius Doug an extra investment but lose our by about fifteen percent of the corporate tax revenue on average at a second. Problem is the government's grown very generous exemptions party to try and lure investment some of those exemptions essense the policies bill lots of them not really any evidence basis suggests that they're achieving. Will they set out to do and estimates are up to forty percent of revenues in some cases aces. The government's could be collecting their forbearing through these kinds of exemptions so if the tax rates are falling and a lot of people are finding ways to get around the anyway who's paying the tax that he's coming in so the complaint that comes from big business is that they are the ones who are fitting. The bill does some evidence. That's right the the African Tax Administration Forum which is a club of tax collectors. They estimate among the member countries about six percent tax paying firms a pay almost eighty percent of total tax proceeds. But it's a bit more complicated than that. Because for example some analysis of effective tax rates in jobs suggests that actually the smallest firms paying the highest effective rights in fact when you talk to ordinary people in many countries as they say look. This system is rigged survey results. Show the IVA. Half of Africans considerate very likely rich. People could use a personal connections so pay a bribe. In order to dodge taxes there was a study published by the International Center for Tax Development. They work with Ugandan tax collectors to examine Zaman records for seventy one government officials in two thousand fifteen fourteen and they found that just one if officials have paid any individual taxes. And so although it's true that the big firms are paying a significant proportion of the bill is also the case that wealthy individuals and nausea corporations are escaping much. They should probably be paying so it seems like there's a lot of of contributing factors here not not least the sort of good old fashioned tax avoidance business but. I mean how how to fix it if it's continental scale problem. What's the continental-scale fix? Well of course. It's a continental scour problem but in fifty four different countries so it'll be very different from country to country but broadly speaking the first thing is a package of quite boring technocratic performances things like strengthening new it systems uh-huh making sure tax payers have vacation numbers creating special units to focus on sets in classes tax payers like wealthy individuals will big business so so in Uganda. For example the Tax Authority has has done that they focus more on those wealthy individuals who went paying that tax when a list of one hundred in seventeen very rich people and started meeting them they found the beginning. Only thirteen percent of those were filing tax returns by the end. Seventy eight percent of them were in fact. Fat One pastor started preaching his congregation about the importance of paying tax so those kind of tax administration reforms of the first part of the pitch at a second pies to reassess tax policies are going back to tax treaties. Some countries have started renegotiating them. Some countries have also started thinking afresh about some of the exemptions. Ah Giving to foreign investors and so if these countries did that and Did the the the boring stuff and the obvious stuff and the bureaucratic stuff. How how much more money money could they collect? That's a very difficult question tonight for sure but but one way of thinking about. It is the IMF approach which is to look at things such as how rich countries resolve to trade governance inequality Friday these variables into a modal. Then try estimate how much those countries it could be collecting when you do that. The IMF estimates that most sub Saharan African countries could increase revenues by about three to five percent of GDP. You pay that much. But that's more than that. Currently receiving in for a night and there there is examples of countries which have started to share increases the revenues to GDP ratio is the challenges to sustain of the lung. Liam thank you very much for joining us.

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