Afronline – The Voice Of Africa

PARIS – African countries should deepen their tax bases to collect more revenues to finance their development, build state institutions and to improve national dialogue and, more generally, their social contracts with citizens.

These are some of the conclusions in two new studies on the taxation systems in Africa.

The 2010 African Economic Outlook, by the Organisation for Economic Cooperation and Development (OECD), which represents rich countries, concludes that African countries’ deepening of their tax bases does not necessarily mean increasing tax rates.

Instead, taxes must be applied to different economic activities, from the extraction industries to personal income, while exemptions must be systematically eliminated.

In the long term, Jean-Philippe Stijns, main author of the OECD study, told IPS that, “African countries must create a highly qualified, well-paid, and honest tax administration elite to make sure that the state can collect the financial resources it needs to pay for development programmes”.

Stijns, an economist with the Africa and Middle East desk at the OECD Development Centre, named two examples of African countries that have succeeded in creating such elites.

“Uganda and Rwanda, two of the countries with the lowest income in the African continent and which suffered devastating civil wars in the recent past, have been able to put in place a qualified, efficient tax administration consisting of an elite of public servants isolated from political struggles,” Stijns said.

If low income countries have accomplished that, every other country in Africa can do it, Stijns pointed out.

But the tax administration reform “must also create a modern system based on voluntary compliance by taxpayers, backed by risk-based selective audits to enforce compliance,” he added.

Moreover, in low income states where technical capacities in both the public and private sectors are weak, tax systems must be relatively simple and transparent, easy for taxpayers to understand and payment procedures for taxpayers should be simplified.

Stijns said that eliminating the myriad of exceptions that make present systems so cumbersome is essential for efficiency. “A good example of the benefits and the feasibility of eliminating exceptions is Morocco,” he told IPS.

Continue reading on IPS Africa

By Julio Godoy – IPS