Presentation Transcript

1. Joint ATAF - Korea Conference Cape Town 4 – 7 April 2011 African Tax Administration Forum (“ATAF”) Presenter: Mr. Logon Wort ATAF Executive Secretary (Acting) Session 11 : Strengthening Tax Administrations – Trends in African Tax Administration Reform
2. CHALLENGES TO AFRICAN REVENUE ADMINISTRATIONS Gupta et al “Strengthening domestic revenue bases is key to creating fiscal space for Africa’s developmental needs. Expanding the tax base by capturing activities not adequately taxed because of policy or administrative weaknesses…” 2
3. CHALLENGES TO AFRICAN REVENUE ADMINISTRATIONS (Cont.) African countries face significant challenges in respect of the effectiveness of tax systems: Compliance costs high Under-resourcing and skills gap Tax-customs coordination need to improve Compliance strategies (audit, dealing with hard-to-tax) under-developed Corruption IT and processing systems 3
4. CHALLENGES TO AFRICAN REVENUE ADMINISTRATIONS (Cont.) Informal Sector is large – between 40% - 60% of GDP Reliance on MNEs with Aggressive tax planning schemes VAT non compliance established @ 50-60% in developing countries Trade Reform; Regional Integration – Pressure on trade taxes Limited linkage with Financial Sector 4
5. CURRENT REFORM TRENDS OF AFRICAN REVENUE ADMINISTRATIONS Establishment of independent Revenue Authorities driven by need for maximum efficiency and effectiveness. However, success of IRA’s not demonstrated as reforms are at multiplelevels and results vary. In addition, no major revenue collection to boost the economy Tax to GDP not growing fast enough Tap gaps remain wide Tax efforts vary 5
6. SEGMENTATION Increased segmentation of the tax base Focus on high revenue yield areas of the tax base LTOs have been established throughout the African continent Potential industry specialist and enhanced relationships However, capacities also needed in the middle and small segment of taxpayers. Problem: well-qualified staff “drawn” to the LTOs – affecting efficiency of other areas of the administration negatively. LTO average between 30-60% of total collections. 6
7. MODERNISATION Some Modernisation processes underway Redesign of org structures, business processes and systems In Tanzania, the Tax Modernization Programme consists of four core elements : (i) improving the legal framework; (ii) broadening the tax base; (iii) strengthening the TRA to increase the efficiency and effectiveness of the tax administration; (iv) improving the administrative infrastructure. Automation of tax functions: introduction of IT systems can substantially improve efficiency. However, these systems can only support tax administrations functions. It has to support a sound business strategy. 7
8. INTRODUCTION OF VAT VAT, especially as a substitute for declining revenue from tariffs, has been introduced in most African countries. From >5 in 1980 to <30 by 2009. VAT contributes to a large extent to tax revenue – about 25% Better collection efficiency VAT also imposes new challenges: Administrative processes to effectively manage VAT refunds have to be improved Despite reduced rates for special consumptive goods, VAT has a tendency to be regressive. Without appropriate pro-poor spending or redistribution of direct taxes in place, the tax system imposes a relatively large burden on the poor and might be perceived as unfair, thereby lowering tax morale . Refunds make VAT especially vulnerable to fraud. 8
9. TAXPAYER EDUCATION Taxpayer service and education: much as been done to improve taxpayer service and education. Efforts should continue in this direction to (re)establish trust and build a tax compliance culture. Changing the culture of taxation will, however, take time and results will only be visible in the long run. Quality of tax spend, service experience – important outflows here 9
10. ADDRESSING THE CHALLENGES THROUGH TWO CHANNELS Learning from international experiences Common challenges exist, e.g. tax evasion of multinationals (TIEAs, TP) regional integration (Double Tax Agreements) basic tax administration functions (e.g. audit techniques) partnering with international organizations, regional initiatives as well as bilateral donors to learn from international best practices. BUT: there are limits to this due to unique characteristics of African countries: Large informal sector in most African countries; Tax mix is skewed towards indirect taxes, which is especially troublesome in presence of poverty; Culture of taxation: trust in well functioning state institutions still needs to be established. 10
11. ADDRESSING THE CHALLENGES THROUGH TWO CHANNELS (Cont.) Learning from African experiences Interact more strongly with members and provide a platform for exchange through: Working groups of members on transfer pricing and exchange of information; Provide a platform to exchange African perspectives and reform experiences, Bridging this at the same time with international experiences. 11
12. ATAF STRATEGY Strengthen African Tax Administrations to improve domestic resource mobilisation for economic development. Enhance the professionalism of African Tax Administrations through capacity development, international dialogue and interaction. Innovate, develop, share and implementbest practices in African Revenue Administration. Combat tax evasion & avoidance through mutual cooperation between African Administrations and international institutions. Develop key relations with civil society, improve good governance& accountability between state and citizens. Ensure greater synergy & cooperation in capacity development among all relevant stakeholders in order to reduce duplication and give greater support to African Tax Administrations. Provide a mechanism for African perspectives on tax issues to inform and influence the global dialogue on tax issues. 12
13. ATAF RESEARCH Objective of the research project is to develop an African perspective on Tax issues, and provide guidance to ATAF members for reform processes. ATAF’s flagship 2-3 year research project is to be conducted on “An Analysis of Current African Tax Administrations, the Possible Gaps and Proposed Framework for the Future”. 13
14. ATAF RESEARCH Strategy is to prevent duplication of work by building on existing studies. Partnering with International organisations Interacting with ATAF members Needs Assessment Analyse trends and priorities Regional approach Diagnostic workshops with members Diagnostic Tool Benchmark performance Guide reform strategies Monitor impact of reforms over time Facilitation of Reforms Formation of working groups Develop African perspective Provide well targeted products (eg. manuals) 14
15. ATAF Website (www.ataftax.net) Intended to be a modern and regularly updated communication mediumto establish a knowledge management and knowledge sharing culture. Given the geographical challengesfaced by ATAF members, the website will become a focal point and a one-stop service for information. The objectives of the website: To present up-to-date content on the web, e.g: news, announcements, events, minutes from meetings and events, technical documents, newsletters and ad hoc information. To facilitate real-time, online discussions between members through the secure discussion forum. To facilitate questions and queries through the ATAF mailbox on the website and act as a broker between a requirement and a solution thereto. To establish an online knowledge library and encouragesubject matter experts to contribute to this library. 15
16. Development of an African Tax Centre (“ATC”) Electronic Resource Centre (e-Resource Centre) is the first step towards the establishment of an African Tax Centre as the hub of all ATAF and tax-related information. Intended to be a web portal on the ATAF website. Online discussion forumfor sharing experiences and best practices on tax matters. Process and review of a Preliminary Report of a Feasibility Study on the establishment, sustainability, financing, management and location(s) of (an) African Tax Centre(s) (ATC). 16
17. CAPACITY DEVELOPMENT PROGRAMMES As part of ATAF’s 2011 Work Programme, we will be hosting 7 technical events, conducted in collaboration with various partners. Based on complementing the ATAF Projects as well as the areas most requested by administrations, the proposed topics for 2011 are: Feb - Large Business Units - Kenya May - Developing Tax Information Exchange Agreements – South Africa June - Taxpayer Services - Liberia July - Transfer Pricing for Policy Makers - Cameroon August - Organisation and Management of Tax Administrations – Mauritius September - Transfer Pricing - Rwanda November - Exchange of Information: Policy design, legal, administrative and operational aspects - Nigeria 17
18. CAPACITY DEVELOPMENT PROGRAMMES (Cont.) ATAF will also be hosting additional seminars on: Stakeholder Management, Communications, Media, Marketing and Branding in Tax Administrations; Financial Management and Good Governance in Tax Administrations 18
19. PLANNED FORTHCOMING ATAF INSTITUTIONAL MEETINGS 3rd ATAF Council Meeting - Rwanda 1st ATAF General Assembly Meeting - Mauritius 4th ATAF Council Meeting 19
20. Contact Details of ATAF Secretariat Mr. Logan Wort ATAF Executive Secretary e-mail: lwort@sars.gov.za www.ataftax.net 20