PRESENTED BY: Bakary K. Sanyang Commissioner for Domestic Taxes Republic of The Gambia

1. COMPLIANCE STRATEGIES FOR THE INFORMAL SECTOR: THE GAMBIAN EXPERIENCEInternational Tax Dialogue ConferenceKigali, Rwanda, 22 – 24 April 2009 PRESENTED BY: Bakary K. Sanyang Commissioner for Domestic Taxes Republic of The Gambia

2. INTRODUCTION • The Gambia Revenue Authority Act of 2004 created a semi-autonomous revenue authority called The Gambia Revenue Authority (GRA). • GRA is the amalgamation of the former Central Revenue Department and the Department of Customs & Excise. • In its present structure, GRA constitutes two main Departments: The Department of Domestic Taxes and the Department of Customs & Excise. • The Department of Domestic Taxes is responsible for mobilizing tax revenues from domestic economic activities. The piece of legislation supporting the taxation of individuals and firms operating in the economy is the Income and Sales Tax Act (2004).

3. Introduction Cont. • The taxation of the small and medium enterprises most of which are in the informal sector is under the purview of the Department of Domestic Taxes. • The Department of Domestic Taxes is organized on functional basis under the three principal Units of Large Taxpayers, Branch Offices, and Tax Office Operations. • The informal sector has enormous revenue potential given the range of commercial activities that are undertaken in this sector. Hence, the need to bring it within the tax net as part of efforts to enhance domestic revenue mobilization

4. SMALL & MEDIUM ENTERPRISES • The informal sector in The Gambia is huge. Its activities are concentrated across the country. • The sector is generally unorganized and characterized by a high cost of collection. Enforcement of tax laws in this sector is very difficult. • The informal sector has enormous revenue potential given the range of commercial activities that are undertaken in this sector. Hence, the need to bring it within the tax net as part of efforts to enhance domestic revenue mobilization & encourage fair play.

5. STEPS TAKEN TO IMPROVE COMPLIANCE OF SMALL & MEDIUM ENTERPRISES • LEGAL STEPS: • : The introduction of the Income & Sales Tax ACT (2004) mandating the use of a unique Taxpayer Identification Number (TIN) for the following transactions: • Department of Customs & Excise – Importation or exportation of goods, etc. • Department of Domestic Taxes – Registration for sales tax, general business, and the issue of tax clearance certificates

6. LEGAL STEPS CONT. • Registrar General’s Office – Incorporation of companies, registration of businesses, title deeds, and stamping of legal instruments. • Department of Lands & Surveys – Approval of plans, allocation of government leases and approval for transfer and leases of freehold land. • Police Department – Registration, licensing, and transfer of ownership of motor vehicles. • Department of Immigration – Application for or renewal of passports, national/alien identification cards, work & residential permits.

7. LEGAL STEPS CONT. • Municipal Councils – Trade licenses, contracts for goods & services • Utility Companies – Application for services • Banks & Financial Institutions – Opening of accounts • Department of state & Public Bodies – All contracts for supply of goods & services • Penalty & Interest: • Penalty calculated monthly from 5% to a maximum of 25% for noncompliance. • Interest calculated at 5 percentage points above the Central Bank discount rate.

8. LEGAL STEPS CONT. • Back duty for a period of up to six years. • Withholding taxes and recovery through third parties. • Seizure and sale of properties of defaulters. • Legal action • The revised Income and Sales Tax Act has the following features that encourage voluntary compliance: • Self Assessment: • Quarterly Instalment: • Tax Tribunal: Gives taxpayers a cost effective way of seeking redress. Taxpayers can turn to the tribunal for arbitration if they feel that they have been wrongly assessed for taxes.

9. Voluntary Compliance Strategies • Income and Sales Tax Act (2004): • Self Assessment • Quarterly Instalment • Informal Sector Regulation – Minimum tax on different sectors. • Tax Tribunal: Gives taxpayers a cost effective way of seeking redress. Taxpayers can turn to the tribunal for arbitration if they feel that they have been wrongly assessed for taxes.

10. INSTITUTIONAL STEPS • GRA enjoys a semi-autonomous status which allows it to adopt its own independent recruitment policy based on merit. This has allowed the recruitment of highly qualified and dedicated personnel. The dividends from the revenue administration reforms include: • A sound organisational culture that emphasize • Professionalism • Dedication • Integrity • Fairness • Accountability

11. INSTITUTIONAL STEPS CONT. B. A private sector orientation which focuses on customer satisfaction thus improving the quality of the services we deliver to our customers. C. Taxpayer Education Program: GRA has launched a vigorous and proactive taxpayer education program using the media to reach out to its esteemed taxpayers. These program allows direct exchanges between the tax authority and taxpayers on tax issues of concern to both parties. This program is also used as a vital tool to disseminate tax information.

12. INSTITUTIONAL STEPS CONT. D. Tax Clinics E. Revnews Magazine published quarterly, Brochures, and other print materials. F. Expanded Geographical Outreach: Tax offices with modern facilities have been established in all the administrative regions of the country. This has greatly enhanced tax administration and created better access to tax offices for taxpayers.

13. INSTITUTIONAL STEPS CONT. G. Use of ICT Tools (GAMTAXNET): The GAMTAXNET has so many modules aimed at enhancing tax administration such as audit, enforcement, etc. This tool combined with TIN now strengthens audits by linking all taxable incomes to their unique TINs. H. Beginning in 2008, the Department of Domestic Taxes introduced a “shop-to-shop” campaign. This campaign is well targeted to ensure that the benefits outweigh the costs.

14. Conclusion • In view of the GRA’s core values which include fairness it is our view that the informal sector which includes the SMEs should be brought into the tax net. Even if not for the amount of revenue to be collected, the tax burden on the few complying taxpayers can be reduced. Failure to make the SMEs tax compliant can be an incentive for the complying group to behave likewise. • Finally, granting tax amnesties can encourage more noncompliance in expectation of similar amnesty in the future.