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The tax systems in

Mozambique, Tanzania and Zambia:

Achievements, challenges and recommendations for Norwegian support

Odd-Helge Fjeldstad & Kari Heggstad

Chr. Michelsen Institute & International Centre for Tax and Development

www.CMI.no

Maputo, 30 March 2011

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“We should elevate ourselves from being just tax  collectors and tax administrators to being 

state builders”

Ms. Allen Kagina, Commissioner General

Uganda Revenue Authority

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Purpose of the study:

(1) Systematise and analyse existing knowledge of  the capacity and constraints of the tax systems  in Mozambique, Tanzania and Zambia

(2) Advice Norwegian authorities on how this 

knowledge can be translated into practical, 

effective and concrete development policies 

(4)

Outline of the study:

1. Introduction

2. Tax revenues and tax structure 

3. Revenue administration

4. Political economy of tax policy and revenue  administration

5. Broadening the revenue base

6. External support

7. Conclusions and recommendations 

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Some reference points 

Mozambique Tanzania Zambia

Geographical area (sqkm) 799,380  947,300 752,618 

Population (mill) (% < 15 years)

22.9 (46%)

42.7 (42%)

13.9 (47%) Tax adm staff (2010)

(in Customs & Excise)

3010 (1776)

3727 (1236)

1500

GDP per capita($nominal) GDP per cap ($ppp) 

(2010)

473 1,000

542 1,500

1,286 1,500

Tax‐to‐GDP (2009) 15.4 14.2 15

Aid‐to‐GDP (2008) 20.2 11.2 7.4

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0 5 10 15 20 25 30 35

Africa upper middle income

Africa lower middle income

Africa lower income

Tanzania Mozambique Zambia

34

24.6

14.9

14.2 14.1

17.7

Tax revenue in percent of GDP 2007

(7)

0 2 4 6 8 10 12 14 16

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Africa: Revenue mix as share of GDP

Direct taxes Indirect taxes Non tax Resource tax Trade tax

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Zambia mining revenue as share of total tax and non‐tax  revenue (2005‐2009)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2005 2006

2007 2008

2009 5.20 %

8.04 %

13.51 %

16.98 %

12.73 %

(9)

Illicit financial flows from and development aid to Africa 2001‐

2008 (mill USD)

0 20000 40000 60000 80000 100000 120000

2001 2002 2003 2004 2005 2006 2007 2008

Total ODA

Total capital flight

(10)

Estimated capital flight from Tanzania, Mozambique  and Zambia (1970‐2008)

Units: mill USD 2002 2000‐2008  1970‐2008

Tanzania 597  2 545  7 356 

Mozambique 178  1 121  5 450 

Zambia 72  5 120  9 348 

Sub‐Saharan Africa 21 808  323 577  532 926 

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Tax policy: achievements

Mozambique  Tanzania

Zambia 

Improved tax  legislation

Simplified Tax  laws/regulations   (ISPC): VAT & 

income tax

Clearer rules for tax  administration

Tax laws updated,  harmonised, 

simplified 

Income Tax Act 2004

EAC Customs  Management Act  2005

Zambia ‘best 

reformer’ by Doing  Business 2009 due to  tax reforms

Income Tax Act & 

VAT Act have 

reduced ambiguities

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The ease of paying taxes (2009)

0 50 100 150 200 250 300 350

Tanzania Mozambique Zambia Sub‐Saharan Africa OECD

Total tax rate (% profit) Time (hours per year) Payments (number per year)

(13)

Tax policy: challenges

Mozambique  Tanzania Zambia 

Tax policy units in  MoF not strong

• Policy analysis in Ministry of Finance often an adjunct and reactive  function of the tax administration

Sub‐optimal links  MoF other public  institutions

• Ministry resp. for  Mining

• Ministry  resp. for  renewable nat. 

res. ?

• Local Gov.

• TMAA

• Min. resp. for 

renewable nat. res. ?

• BoZ on tax  payment via banks

• Min. resp. for  renew nat. res. ? 

Tax exemptions 

extensive 

Foreign‐owned mega  projects:

• 12% of GDP

• <3% of tax rev

Exemptions  (09/10): 

• 2.3% of GDP 

• 15% of TRA net‐

collection

Special tax regimes:  

‘a race to the  bottom’

Rapid Dev. 

Zones

EPZ

Mining

Export of 

non‐trad

prod. 

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Tax administration: Achievements   

Mozambique ATM  (2006)

Tanzania TRA (1996)

Zambia  ZRA (1994)

Revenue 

enhancement

Dramatic increase  in Tax/GDP since  2005 

Substantial increase in  T/GDP

Stable (17%) until  2008, then drop >2%

Broadened tax  base

(reg. taxpayers)

2006: 382,000  2009: 960,000

2002/03: 190,000 (TIN) 2007/08: 398,080 (TIN) 2002/03: 13,634 (VAT) 2007/08: 9,036 (VAT)

Informal sector 

taxation

35,000 new small  taxpayers 2009/10

Block Management  System

Tax adm.

modernisation

3 LTUs (regional) to  become integrated

• TMP

• Integration of tax  depts.

• ICT 

Zambia best

performer by ‘Doing  Business 2009’ due to  tax reform

ICT Customs 

Scanners 

Itax, TIN, TISS, Motor  vehicle reg. system,  ASYCUDA++, DIS

ASYCUDA++

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Tax administration: challenges   

Mozambique ATM (2006)

Tanzania TRA (1996)

Zambia  ZRA (1994)

Integration of  departments 

Integration  Domestic Tax  Dept. & Customs 

Specialised capacity

Hard(er) to recruit, develop, retain specialists in areas such  as ICT, accounting, auditing, and legal issues

Transfer pricing and  capital flows 

Capital flight is seriously eroding the tax bases

Tax adm expertise in short‐supply

ICT

Introduction and application of ICT at different stages of  implementation.

Performance  indicators 

Need for better balance between revenue and service  targets

Integrity

Procedures and practises must filter down throughout the 

organisation to be fully functional and effective

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Accountability: achievements & challenges 

Mozambique  Tanzania Zambia 

Taxpayer‐tax  administration  relations 

Regular +  occasional

meetings ATM & 

bus. ass. 

Formal and 

informal forums

Taskforce for Tax  Policy Reform

• Citizens can submit  tax and exp. prop to  Gov. 

• Formalised 

consultative process  Gov‐priv. sector

Taxpayers’ rights

Important element of administrative accountability 

Tax appeals boards and tax tribunals 

Fair and transparent procedures to address tax disputes  Customer 

friendliness

Window dressing?

Civil society 

CIP

Revenue Watch

NCA

• Caritas

• Revenue Watch

• NCA

EITI

All 3 countries candidate countries 

Validation May 2011

(17)

Action matrix for Norwegian support: what and who

(i) Support to  tax policy  reform 

(ii) Capacity building  of ATM, TRA, ZRA 

(iii)Support to  civil society

(iv) Build 

research capacity  on taxation

(a) Capital flight IMF, Central  Banks, ATAF,  AfDB, OECD 

NTA (specialised  capacity building); 

ATAF

Internat. and  domestic  NGOs; TJN‐

Africa; media

Research Inst; 

ATAF, ICTD, 

Research Depts. 

in ATM, TRA,ZRA (b) Natural 

resource  taxation 

MoF, IMF, ATAF,  EITI, OfD, RAs & 

NGOs

NTA (specialised tax  audits); ATAF; EITI; 

OfD

Caritas, NCA  RWI, CIP;

media

ICTD in coll. with  ATM, TRA, ZRA,  ATAF, AERC

(c) 

Accountability

Bus. 

associations,  Taxpayer ass,  CBOs, EITI 

NTA (technical  support to tax

compliance); ATAF

Caritas, NCA, RWI, CIP; 

media,bus.as

& taxpayer  ass; media

ICTD in coll. 

with ATM, TRA,  ZRA, ATAF, 

AERC (research 

on compliance)

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M uito obrigado !

THANK YOU FOR YOUR ATTENTION!

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