African Tax Outlook 2019

AFRICAN
TAX OUTLOOK
2019 edition
2019
A n ATA F P u b l i c a t i o n
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Series: ATAF’s African Tax Outlook
ISBN: 878-0-9584218-6-7 (print)

ISBN: 978-0-9584218-4-3 (pdf)
2019 edition
ATAF Secretariat
Research directorate
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Private Bag 15, Menlo Park
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Telephone: +27 12 451 8800
E-Mail: nmonkam@ataftax.org; fmbuyamba@ataftax.org
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1
Acknowledgements
The African Tax Administration Forum (ATAF) is grateful We would also like to acknowledge the work of the
to the tax authorities of the 34 countries that contributed reviewers who reviewed drafts of the report to ensure
to the 2019 edition of the African Tax Outlook (ATO). they addressed ATO focal points. The reviewers were
We would particularly like to thank them for providing Lamine Diallo (Senegal), Thabelo Malovhele and Winile
us with valuable resources, releasing their heads of Ngobeni (South Africa); Gerard Mum’palala and William
research and data collectors to take part in workshops, Malengo (DRC); Edward Groening (Eswatini); Alex
and assigning officers to draft chapters. Kombat (Ghana); Mercy Samantha Njolomole (Malawi);
OURO-ADOÏ Abdelganiou (Togo); Yamraj Rampersand
For their hard work and diligence, special thanks go to:
(Mauritius) and Asheikh Maidugu (Nigeria).
• Mr Frankie Mbuyamba (ATAF), ATO and tax statistics
The 2019 edition benefited from the internal and external
specialist. He led and coordinated the entire
quality assurance review from Lee Corrick (ATAF
process from data collection, cleaning and analysis
Tax Expert), Ezera Madzivanyka (ZIMRA and former
to developing the ATO storyline and drafting the
ATO drafter) and Momodou Foon (ATAF-WATAF ATO
publication. He also lead-managed the ATO Data
consultant) who provided useful suggestions.
Portal. He worked with close support and advice
from Dr Nara Monkam, ATAF Research Director. Special thanks go to Ken Kincaid who painstakingly
edited and restructured both the English- and French-
• Mr Mvuselelo Bryan Mdluli (Eswatini Revenue
language chapters of the report to produce the final draft.
Authority), senior analyst, revenue forecasting and
research. He provided considerable quantitative Of course, none of the above would have been possible
input, drafting the chapters on overall revenue without the unflagging commitment of the ATAF
performance, tax buoyancy, and efficient tax secretariat staff who worked tirelessly to ensure that
administration. workshops, translation and design went smoothly.
• Mr Maxime Konan Amani Brou (the Côte d’Ivoire
We also remain, as ever, grateful, for the support of
Direction Générale des Impôts [General Tax
our development partners – German International
Directorate]) statistics engineer. He provided
Development Cooperation [GIZ]; the Ministry of Foreign
quantitative analysis of revenue per tax head and
Affairs of Denmark (DANIDA); the Ministry of Foreign
drafted important sections on management aspects
Affairs of Finland; Irish Aid, Department of Foreign Affairs
of tax administration.
and Trade; the Ministry of Foreign Affairs (Minbuza) of the
• Ms Mubanga Matongo Shikombelo (Zambia Netherlands; the State Secretariat of Economic Affairs
Revenue Authority), economist, research and (SECO) Switzerland; the Society Initiative for West Africa
strategy planning. She provided research input on (OSIWA); the African Development Bank Group (AfDB);
good practice in tax administration and provided and the William and Flora Hewlett Foundation.
valuable assistance in proofreading.
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3
Foreword from the executive secretary
I wish to extend my sincere thanks and congratulations

to all those who contributed, directly or indirectly, to
the 2019 edition of the African Tax Outlook, ATAF’s
flagship publication.
The impact of the African Tax Outlook has extended

beyond African borders. It has become a valuable
source of knowledge and work of reference for tax
authorities, tax policy makers, development partners
and the academic community.
We are excited to be publishing the 2019 edition of

the African Tax Outlook (ATO). The journey began
with the inaugural 2016 edition, to which 15 countries
contributed. The 2017 edition drew six more,
increasing the number of participant countries to a
total of 21. Last year, the 2018 edition included data
from 26 countries, as another further five contributed.
This year, the 2019 African Tax Outlook has widened
its span to 34 African countries, while a growing
number continue to express their desire to participate. Mr Logan Wort
The increase in the number of countries from 15 in Executive secretary
2016 to 34 in 2019 is a tremendous achievement, and African Tax Administration Forum
one of which we are proud. But the success of the
African Tax Outlook is perhaps not surprising, for it
meets a need that had hitherto gone unmet.
Tax administrators and policy makers require

reliable statistics. However, such statistics are not
always readily available, even within revenue bodies
themselves. The ATO has filled that gap. It provides
a solid, easily accessible framework of meaningful
indicators and high-quality statistics that help
countries to compare, assess and ultimately improve
their revenue performances. Indeed, the African Tax
Outlook embodies ATAF’s mission of working with
African countries to build strong, efficient, sustainable
tax systems. It has become a benchmark.
We continue to hone our indicators and statistics in the

hope that African revenue bodies will use the African
Tax Outlook in their day to day work to broaden the tax
base, narrow tax gaps, make tax systems fairer and
build a culture of compliance.
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5
Heads of tax administrations
(as at December 2018)
Angola Benin Botswana

Dr Sílvio Franco Burity Mr Nicholas Yenoussi Mr Keneilwe R Morris
Burundi Burkina-Faso Cameroon

Mr Audace Niyonzima Mr Moumouni Lougue Mr Mopa Modeste Fatoing
Cote d’Ivoire Chad Cape Verde

Mr Ouattara SIE Oumar Ardja Tidy Mrs Liza Helena Vaz
DRC Ghana Gambia

Mr José Sele Yalaghuli Mr Emmanuel Koffi Nti Mr Yankuba Darbde
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Kenya Liberia Lesotho
Mr John Njiraini Thomas Doe Nah Mr Thabo Kapise
Madagascar Malawi Mali

Mrs Razafindrakoto Iouri Mr Tom G Malata Mr Mathias Konaté
Mauritius Mozambique Namibia

Mr Sudhamo LAL Mrs Amelia Nakhare Mr Justice Mafongwe
Niger Nigeria Rwanda

Mr Assane D N’Diaye Mr Babatunde Fowler Mr Pascal Ruganintwali
He ad s of ta x a d mi n i st r a t i o n s 7
Heads of tax administrations
(as at December 2018)
Senegal Seychelles Sierra-Leone

Mr Bassirou S. Niasse Ms Georgette Capricieuse Mr Samuel Jibao
South Africa Eswatini Tanzania

Mr Edward Kieswetter Mr Dumisani Masilela Mr Edwin Mhede
Togo Uganda Zambia

Mr Phillippe Tchodie Mrs Doris Akol Mr Kingsley Chanda
Zimbabwe
Mrs Faith Mazani
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Table of contents
Acknowledgements 2
Foreword 4
Heads of tax administrations 6
2019 ATO participating countries and their currencies 18
Executive summary 20
1. INTRODUCTION 26
2. TOTAL TAX REVENUE 29

2.1 Sizes of ATO economies by GDP and population 32
2.2 GDP and revenue growth 36
2.3 Tax revenue performance 38
2.4 Tax effort trends and comparisons 42
2.5 Analysis of tax-to-GDP ratio and GDP per capita 46
2.6 Tax structure and composition in ATO countries 48
2.7 Tax-to-GDP ratio by regional grouping 55
2.8 Conclusion 58
3. TAX REVENUES AND NON-TAX REVENUES 59

3.1 Value Added Tax 62
3.2 Excise Duties 75
3.3 Import duties 79
3.4 Personal income Tax 81
3.5 Corporate income Tax 86
3.6 Flat Taxes 88
3.7 Evaluation of Tax administrations efficiency 89
3.8 Conclusion and recommendations 92
4. TAX BUOYANCY, ELASTICITY AND STABILITY 95

4.1 What do buoyancy and elasticity measure 98
4.2 How buoyant is tax revenue in ATO countries? 99
4.3 Stability of total tax revenue in the ATO countries 104

4.4 Conclusion 105
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5. STRUCTURE AND FUNCTIONS OF TAX AND CUSTOMS ADMINISTRATIONS 107
5.1 Tax base segmentation 110
5.2 Organisational structure of ATO tax authorities 118
5.3 Cost of tax and customs administration 120
5.4 Human resources capacity in revenue administration 125
5.5 Risk management and mitigation 131
6. EFFICIENT MANAGEMENT IN REVENUE ADMINISTRATION 133
6.1 Taxpayer service and communication 136
6.2 Taxpayer education 137
6.3 Modernising tax administration for cost-effectiveness 142
6.4 Customs clearance 145
6.5 Conclusion 148
7. AUDIT AND COMPLIANCE 149
7.1 Auditing for compliance 152
7.2 Arrears Management 164
7.3 Customs interventions 166
7.4 Conclusions 169
8. DATA AND TAX AND POLICY RECOMMENDATIONS 171
8.1 Overview of missing data and indicators 174
8.2 Tax policy 175
8.3 Tax administration 177
ANNEX 180
BIBLIOGRAPHY 189
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List of tables
Table 1.1. The 34 countries who contributed data to the African Tax Outlook 2019 26
Table 2.1. Tax performance using log GDP per capita and tax-to-GDP ratio 2017 48
Table 3.1. VAT thresholds and rates in ATO countries 2017 64
Table 3.2. Annual VAT refund rates as a percentage of Gross VAT revenues 2011-2017 73
Table 3.3. PIT revenues and GDP per capita, 2017 85
Table 3.4. Tax revenue indicators by tax type 90
Table 4.1. ATO countries that have introduced VAT to their tax system since 2012 102
Table 4.2. Changes in ATO countries’ PIT marginal tax rates since 2012 102
Table 4.3. Changes in ATO countries’ CIT standard tax rates since 2012 103
Table 5.1. Taxpayer segmentation and risks associated in the ATO countries – 2017 111
Table 5.2. AFP countries with programmes in favour of the informal sector in 2017 113
Table 5.3. Active VAT, CIT and PIT taxpayers in ATO countries, 2017 117
Table 5.4. Structure and configuration of tax administrations of ATO in 2017 119
Table 6.1. The provision of taxpayer education and budgets in ATO countries 2017 138
Table 6.2. Main channels of taxpayer education in the ATO 2017 139
Table 3A.2.1. Personal Income Tax rates, 2017 181
Table 3A.2.2. Corporate Income Tax rates per ATO country and per Regional Grouping 182
List of figures
Figure 2.1. ATO country sizes by GDP and population, 2017 33
Figure 2.2. ATO country sizes by population 34
Figure 2.2. Population growth and labour participation rates in ATO countries, 2017 35
Figure 2.3. Real GDP and revenue growth in ATO countries, 2017 36
Figure 2.4. Nominal GDP and revenue growth in ATO counties, 2017 37
Figure 2.5. ATO tax-to-GDP ratios, 2017 and 2016 39
Figure 2.6. Growth in tax-to-GDP ratios, percentage points, 2016-2017 40
Figure 2.7. Tax-to-GDP ratios by type of tax administration authority, 2016 and 2017 41
Figure 2.8. Average growth in tax-to-GDP ratios, percentage points, 2012 to 2017 42
Figure 2.9. International organisations’ comparisons of tax-to-GDP ratios, 2014-2017 43
Figure 2.10. Tax-to-GDP variations in ATO countries, 2011-2017 46
Figure 2.11. Relation between tax-to-GDP ratios and log GDP per capita, 2017 47
Figure 2.12. Tax-to-GDP ratios for 2016 before and after GDP rebasing in five ATO countries 45
Figure 2.13. How the composition of total tax revenue evolved ATO-wide , 2011 2017 49
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Figure 2.14. How different taxes contributed to tax revenue in ATO countries, 2017 50
Figure 2.15. How sectors contribute to GDP and tax revenue in the ATO, 2017 51
Figure 2.16. Contribution to total tax revenue, by sector, 2017 52
Figure 2.17. Shares of domestic tax and customs revenue, 2017 54
Figure 2.18. Average ATO tax-to-GDP ratios by region, 2012 2017 55
Figure 2.19. ATO countries tax-to-GDP ratios by regional economic grouping, 2017 56
Figure 2.20. ATO countries’ revenue, by tax type and economic regional grouping, 2017 58
Figure 3.1. VAT growth rate, 2016 2017 66
Figure 3.2. VAT Revenue/per capita GDP growth ratios, 2017 67
Figure 3.3. Contribution of VAT revenues to total tax revenues, in percentage 2017 & 2016 69
Figure 3.4. VAT revenue to GDP ratios, in percentage, 2017 and 2016 69
Figure 3.5. VAT revenues as a percentage of the GDP, 2017 70
Figure 3.6. VAT revenues Growth rates, 2017 2016 70
Figure 3.7. VAT refunds to VAT revenue ratios, 2017 and 2016 72
Figure 3.8. VAT refunds to VAT revenue ratios, 2011 2017 72
Figure 3.9. C-efficiency ratios in ATO countries, 2017 75
Figure 3.10. Share of excise revenues in total GDP, 2017 and 2016 77
Figure 3.11. Excise revenue growth, 2011 2017 77
Figure 3.12. Share of excise revenue in total tax income, 2017 78
Figure 3.13. Excise revenue by taxed product, 2017 79
Figure 3.14. Share of import duty revenues in GDP, 2017 and 2016 80
Figure 3.15. Import duty revenues growth rate, 2017 and 2016 80
Figure 3.16. Evolution of revenue from import duties for the period 2012-2017 81
Figure 3.17. PIT-revenue-to-GDP ratios, 2017 and 2016 82
Figure 3.18. PIT Revenue growth, 2011 2017 83
Figure 3.19. Evolution of PIT revenues, 2017 and 2016 84
Figure 3.20. Effective PIT rates, 2017 and 2016 86
Figure 3.21. CIT-to-GDP ratio, 2017 and 2016 87
Figure 3.22. CIT-to-Tax revenue ratios, 2017 and 2016 87
Figure 3.23. Evolution of CIT revenues, 2017 and 2016 88
Figure 3.24. Average annual evolution of CIT revenues, 2012 2017 88
Figure 3.25. Flat tax-to-total domestic tax revenue ratios, 2017 89
Figure 4.1. Tax buoyancy of ATO countries’ total tax revenue, 2011 2017 100
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Figure 4.2. Buoyancy factors of the main tax types, 2011 2017 101
Figure 4.3. Stability of total tax revenue, 2011 2017 104
Figure 4.4. Stability of revenue from main tax types, 2011-2017 105
Figure 5.1. Contributions of large taxpayers in ATO countries, 2017 115
Figure 5.2. Cost of revenue collection, 2017 121
Figure 5.3. Cost of collection in semi-autonomous and ministry-based tax administration authorities 122
Figure 5.3. Tax administration operating and capital costs, 2017 123
Figure 5.5. The ratio of operating costs to tax revenue collected, 2016 and 2017 124
Figure 5.6. Percentage shares of tax administration staff in core and support functions, 2017 127
Figure 5.7. Tax revenue per tax worker in core and support functions, 2017 128
Figure 5.8. Male and female staff numbers in ATO tax administration bodies, 2017 129
Figure 5.9. The gender balance in executive positions 130
Figure 6.1. ATO countries with call centres that track response time and websites that monitor taxpayer
queries 137
Figure 6.2. Extent of online tax filing, collection and payment in ATO countries, 2012 2017 142
Figure 6.3. Imported goods by lane colour in the ATO, 2017 146
Figure 6.4. Customs clearance by lane colour and regional groupings, 2017 147
Figure 7.1. The ratio of auditors to total tax administration staff 153
Figure 7.2. Number of taxpayers per auditor, 2017 154
Figure 7.3. Number of audit cases per auditor, 2017 156
Figure 7.4. Number of audits per type of audit, selected ATO countries, 2017 158
Figure 7.5. Audit recovery rates, selected ATO countries, 2017 159
Figure 7.6. Share of revenues recovered from audits in the total tax revenues, selected ATO countries, 2017 160
Figure 7.7. Stock of arrears as a percentage of total tax revenues 165
Figure 7.8. Share of recovered arrears in the total stock arrears, 2017 166
Figure 7.9. Distribution of outstanding arrears between private and public sectors, 2017 166
Figure 7.10. Number of seizures from customs, selected ATO countries, 2017 167
Figure 7.11. Distribution of seizures from customs across selected ATO countries, 2017 168
Figure 7.12. Recoveries from customs interventions (in millions of USD), selected ATO countries, 2017 169
Figure 3A.1. Contribution of revenues from each major tax in GDP, per country, 2017 180
Figure 3A.3.1 Environmental tax revenue-to-GDP ratios, 2017 183
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List of acronyms and abbreviations
AEO Authorised economic operators

AEOI Automatic exchange of information
AMATM ATAF mutual assistance in tax matters
ASYCUDA Automated system for customs data
ATAF African Tax Administration Forum
ATO African Tax Outlook
BEPS Base erosion and profit shifting
BMS Block management system
CEMAC Central African Economic and Monetary Community
CIT Corporate income tax
CPCs Central processing centres
CPI Consumer price index
CRE Customs risk engine
DRU Debt recovery unit
DTAs Double taxation treaties
EAC East African Community
EBMs Electronic billing machines
ECOWAS Economic Community of West African States
ECTSs Electronic cargo tracking systems
EDI Electronic data interchange
EGMS Excisable goods management system
EMT Executive masters in taxation
ERM Enterprise-wide risk management
ERP Enterprise resource planning
ESW Electronic single window
GDP Gross domestic productt
HNWIs High net worth individuals
HRIS Human resource information system
IFFs Illicit financial flows
IGC International Growth Centre
ILO International Labour Organisation
IMF International Monetary Fund
ISIC Standard industrial classification
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JDs Job descriptions
MFEZ Ministry of Finance and Economics of Zambia
MNEs Multinational enterprises
MoF Ministries of finance
MOUs Memorandums of understanding
NT National Treasury
NSO National statistics office
OECD Organisation for Economic Cooperation and Development
OJT On-the-job training
PAYE Pay as you earn
PE Permanent establishment
PEFA Public expenditure and financial accountability tool
PIT Personal income tax
PMS Performance management system
PPP Purchasing power parity
PSI Personal services income
PSO Public sector office
RAs Revenue authorities
SACU Southern African Customs Union
SADC Southern African Development Community
SEFT Seychelles Electronic Funds Transfer
SEW Single electronic window
SIGTAS Standard integrated government tax administration system
SMEs Small and medium enterprises
TADAT Tax Administration Diagnostic Assessment Tool
TIN Tax identification number
TIWB Tax Inspectors without Borders
TMS Tax management system
TPL Transfer pricing legislation
UK United Kingdom
UNDP United Nations Development Programme
VAT Value-added tax
WCO World Customs Organisation
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2018 ATO countries and their currencies
2018 ATO countries Currency Currency code

Angola Angolan kwanza AOA
Benin CFA franc XOF
Burkina Faso CFA franc XOF
Botswana Botswana pula BWP
Burundi Burundi franc BIF
Cabo Verde Escudo CVE
Cameroon CFA franc XAF
Chad CFA franc XAF
Cote d’Ivoire CFA franc XOF
DR Congo Congolese franc CDF
Eswatini Lilangeni SZL
Gambia Dalasi GMD
Ghana Ghana cedi GHS
Kenya Kenyan shilling KES
Lesotho Loti LSL
Liberia Liberian dollar LRD
Madagascar Malagasy ariary MGA
Malawi Malawian kwacha MWK
Mali CFA franc XOF
Mauritius Mauritius rupee MUR
Mozambique Mozambican metical MZN
Namibia Namibian dollar NAD
Nigeria Nigerian naira NGN
Niger CFA franc XOF
Rwanda Rwandan franc RWF
Senegal CFA XOF
Seychelles Seychellois rupee SCR
Sierra Leone Sierra Leonean Leone SLL
South Africa South African rand ZAR
Tanzania Tanzanian shilling TZS
Togo CFA franc XOF
Uganda Ugandan shilling UGX
Zambia Zambian kwacha ZMW
Zimbabwe Zimbabwe dollar ZWD
Other adopted currency used: USD

United States dollar
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19
Executive Summary
This year’s African Tax Outlook observes the 2017 ATO countries is representing a proportion of 56.7%
tax developments of 34 African countries and their of the tax revenue compared to direct taxes. The
prospects for future reforms and priorities. The 2019 VAT accounted for the single largest share with an
ATO publication focuses in analysing the implications average of 34.4%. Then came personal income tax
of various changes implemented in mobilising the (PIT) with 17.9%, and CIT (corporate income tax) with
required revenues targets. It explores and discusses 15.7%. The contribution to revenue of import duty
all participating countries tax and customs figures in amounted to 10.7% while all other domestic taxes
cross countries analysis and in grouping them in their (9.8%) and other customs (3.8%) have been reduced
regional communities. over the period. The excise duty has an average of
7.7%. One of the changes to note here is that import
duty declined over the period, indicating a shift in tax
ATO Countries Tax Revenue Performance
policy or administration.
With no doubt, the African economy grew up to 3% in
2017 and with 0.4% below on the projected growth. The recovery of tax revenue growth has much to
Many countries have shown decline in fiscal and do with the contribution and role of VAT revenue.
current account deficits. For instance, regarding the Despite often disappointing returns, VAT allows for
ATO country participants, East Africa is the quickest an improvement in the economic neutrality of the tax
growing region (AEO, 2019). Following by West Africa. levy, as well as an increase in domestic indirect tax
Mobilising tax revenue been a daunting issue for ATO revenues in most African countries. It is the tax that
countries over the past years and the economy growth generally brings the most income to African states.
in some countries shall raise the revenue levels.
The increase in tax revenues will automatically affect VAT increase and VAT credit refunds
the tax-to-GDP ratio, therefore, will provide the The VAT generated in the ATO countries increased on
government a greater fiscal room for priority spending average with a rate of 11.7% for the year 2017. This
in areas like infrastructure, health and education. And increase is the result of many tax reforms and policies
more income is available for redistribution in support implemented by ATO countries. In addition, there
of poverty reduction. The ATO countries express very have been some higher increases in some regional
little heterogeneity in the variation of the tax-to-GDP economic communities, the largest in 2017 is with the
ratios, most of which remain close to the mean over the ECOWAS region (14.8 per cent). It is noted that VAT is
period 2011 2017. The trends over this period show a tax that improves the economic neutrality of the tax
that some countries such as Nigeria, Chad, Angola levy, as well as increasing the domestic indirect tax
experienced declines on account of volatility in the revenues in most African countries. It is the tax that
international prices of commodities. In addition to the generally brings the most income to African states.
fluctuating oil prices, we observed tax enforcement
This 2019 edition of the ATO encourages participating
issues like trade mispricing, capital flight, corruption,
countries to reduce the time taken to refund VAT
informality and tax expenditure.
credits to the international standard of one month.
Tax heads position in the Tax Revenue

The share of tax revenues in GDP remains low
Between 2011 to 2017, several countries achieved
Tax revenues represent on average more than one-
a consolidated government revenue between direct
third of GDP in OECD countries, but half as much in
and indirect tax revenues based on some reforms in
developing countries. The share of tax revenues in
specific tax heads. The indirect tax revenues in the
the GDP of the ATO countries is 15% on average,
20
insufficient to finance development. Indeed, the Though tax revenue stability has been established
United Nations estimates that developing countries for most tax types as well as total tax revenue, every
will have to collect tax revenues corresponding to tax item needs to be carefully watched in a way to
at least 20% of their GDP in order to achieve the ensure stability in the tax revenue generation in an
Sustainable Development Goals (SDGs). effort to finance expenditure. Understanding how and
why revenues react to changes in income during the
business cycle is important from the point of view of
Modernise the tax administration to improve
the government’s intertemporal budget constraint and
collection
tax smoothing objectives.
Automation and the arrival of digital technology are
accelerating the transformation of revenue collection
and supporting taxpayer services in several countries. Large taxpayers’ contribution to tax revenue
Most of the ATO countries have begun to exploit The burden of the taxpayers in the ATO countries
the enormous potential of digital technology. Many can be evaluated in different ways. In some sections
tax administrations now offer taxpayers self-service the 2019 ATO measures it in terms of direct and
options through mobile and web applications. These indirect taxes which categorize different tax heads.
applications can help taxpayers update their personal However, another way to look at this evaluation, is the
data, register for tax purposes, download electronic contribution to tax revenue of the various taxpayers.
returns and pay their taxes. Thus, by making it easier Large taxpayers again outweigh their number in the
for them to comply with their tax obligations, they taxpayer base. The ATO-wide revenue depends
make revenue collection more efficient and less costly heavily on a handful taxpayers, with 6.3% of them
for tax administrations. This practice improves the generating 77.6% of revenues. A balanced ratio is
integrity aspect of tax collection. to be found only in Niger, where 54% of taxpayers
contribute almost 80% of the country’s tax revenue.
Tax buoyancy and performance in ATO countries Africa’s skewed tax revenue distribution puts the
In the ATO countries, tax revenue is buoyant; however, burden of tax revenue on the more affluent taxpayers.
in some countries, tax components are not responsive Heavy dependence on a small number of taxpayers
to automatic change in national income. Tax policies is a risk to revenue mobilisation and budgets. Indeed,
are required to be implemented in reinforcing the should any of them experience economic difficulties,
revenue collection and these policies should intend to the entire budget balance would be endangered.
be follow-up and carry-out cautiously. Countries are Moreover, large taxpayers generally are or belong to
invited and encourage to adopt strategy in stabilizing multinationals that widely practice tax optimisation,
their tax streams by having in place reliable sources depriving states of substantial income.
of revenue.
21
1 INTRODUCTION
1 Introduction
CAPE VERDE
MALI
SENEGAL
BURKINA FASO
GAMBIA
BENIN
CÔTE D’IVOIRE
SIERRA LEONE
TOGO
LIBERIA GHANA
ATAF has already published three editions of the African Tax Outlook.
The inaugural 2016 edition drew on data from 15 countries, and the second
and third editions from 21 and 26, respectively
The 2019 ATO examines tax data from

34 African revenue bodies
NIGER
CHAD
NIGERIA
CAMEROON
UGANDA
KENYA
RWANDA
DR. CONGO
BURUNDI
TANZANIA SEYCHELLES
ANGOLA
MALAWI
ZAMBIA
MOZAMBIQUE
ZIMBABWE MADAGASCAR
MAURITIUS
NAMIBIA
BOTSWANA
ESWATINI
LESOTHO
SOUTH AFRICA
1. Introduction
The objective of the 2019 African Tax Outlook (ATO), The 2019 African Tax Outlook overviews revenue
published by the African Tax Administration Forum collection in the countries that provided tax and tax-
(ATAF), is to provide comprehensive, reliable facts relevant data for 2017 (fiscal and calendar). It also
and figures that will serve as an African benchmark considers trends since fiscal or calendar 2011.
in formulating tax policies and tax administration
ATAF has already published three editions of the
reforms across the continent. The ATO contains
African Tax Outlook. The inaugural 2016 edition drew
detailed revenue and other tax data that complement
on data from 15 countries, and the second and third
related publications.
editions from 21 and 26, respectively. The 2019 ATO
examines tax data from 34 African revenue bodies.
Table 1.1. The 34 countries who contributed data to the African Tax Outlook 2019
Countries that participated in the 2019 ATO
1. Angola 13. Ghana 25. Rwanda
2. Benin 14. Kenya 26. Senegal
3. Botswana 15. Lesotho 27. Seychelles
4. Burkina Faso 16. Liberia 28. Sierra Leone
5. Burundi 17. Madagascar 29. South Africa
6. Cameroon 18. Malawi 30. Tanzania
7. Chad 19. Mali 31. Togo
8. Cape Verde 20. Mauritius 32. Uganda
9. Cote d’Ivoire 21. Mozambique 33. Zambia
10. DR Congo 22. Namibia 34. Zimbabwe
11. Eswatini 23. Niger
12. Gambia 24. Nigeria
What are the ATO countries
Readers will notice very numerous references to the ‘‘ATO countries’’. The term is shorthand for the countries
whose revenue authorities contributed data to the African Tax Outlook (ATO). Sierra Leone, for example, is
now an ATO country because it participated in the data collection process and supplied statistics for the 2019
edition of the ATO. It was not an ATO country in 2016.
The ATO is a publication. It is not an African organisation or a regional grouping. So ATO countries should not
be considered as members, but contributors or participants.
26
The ATO 2019 data compilation • Taxpayer – determines the extent to which revenue
Data are the lifeblood of the African Tax Outlook. and tax administration reaches out to taxpayers
Accordingly, the first step in the ATO production through services such as taxpayer education and
process is data collection and compilation. awareness campaigns.
The process began in April 2018 in Accra (Ghana) Accordingly, the data collectors gathered data related
where ATAF held a capacity-building workshop. The to those indicators from the 34 participant countries.
workshop brought data collectors together to enhance To that end they used a data collection tool and
their skills and improve knowledge through peer guidebook developed by ATAF. They entered the
learning. It also sought to raise their understanding data in the ATO-dedicated online portal which ATAF
of evidence-based policy recommendations to help brought online in 2017.
them grasp the sheer importance of data collection
At the Consultative and Validation Workshop then held
and management to revenue bodies.
in October 2018 in Eswatini, the heads of research,
At the workshop, heads of research, strategic planning strategic planning and revenue statistics validated the
and revenue statistics from the revenue authorities in data input into the ATO portal.
ATO participant countries identified critical demand-
However, some countries could not provide data
driven indicators that would help give the strategic
related to certain indicators – partly because their
direction required for revenue mobilisation in Africa.
national statistics or tax administration bodies did
Five sets of tax-themed indicators were determined. not generate or have sufficient data, and partly
They are: because they lacked the resources and/or expertise
for collecting and handling the data related to the
• Tax rates – the amount of tax (as a percentage) indicators concerned. These indicators have not been
levied on the income of individuals and firms or on discarded but placed on hold until either the method
specific transactions. of data collection and/ or interpretation improves with
• The tax base – yields insight into the size and the time and experience.
structure of GDP, population size, and numbers of
taxpayers and their types. ATO portal constantly enriched with new
• Tax and non-tax revenue – the composition of total indicators
net revenue1 collected from taxable goods and ATAF and ATO countries constantly upgrade and
services and total net non-tax revenue generated introduce new indicators in response to feedback
by natural resource earnings, dividends, interests, on previous editions of the ATO. They are keen to
fines, fees and licenses. ensure that indicators reflect the fast changing tax
• Tax administration – includes indicators like environment.
organisational structure, autonomous or finance-
The 2019 edition of the ATO has introduced some
ministry based revenue bodies, cost of collection,
indicators for the first time. One such indicator is tax
tax compliance, customs enforcement and
buoyancy, which gives a measure of how responsive
declaration, tax returns, debt management, and
the tax system is to economic growth
tax audits and investigations.
1. The ATO notes that its tax-to-GDP ratios exclude social contributions, unlike ratios in OECD country statistics, for example, which include social
contributions.
CHA PTER 1: In t ro d u c t i o n 27
The collected data allow cross-country, but not cross- and United Nations Economic Commission of Africa
group, comparisons (UNECA). It is important, however, to bear in mind
that OECD averages are themselves benchmarks.
Systematic analysis of the five sets of indicators
Moreover, ATO countries cannot reasonably use
makes it possible to draw conclusions as to reasons
them as targets because of the sheer heterogeneity
for differences in revenue performance among ATO
of countries in all three country groups considered.
countries.
Furthermore, comparison with UNECA and the World
The indicators do not, however, lend themselves to Bank is complicated by the fact that statistics from
comparing ATO countries’ revenue performances both organisations refer to averages for all 54 African
with those of other groupings. There is plenty of countries. So, their average tax-to GDP ratios might
international evidence for tax bases and revenue be higher than the ATO’s over the years, because they
performance. But when it comes to groups of countries, include the Maghreb countries, who are not yet ATO
there is little systematic consideration of tax rates or countries participants.
administration. Exceptions are the Organization for
To address the issue of comparability, the 2019 edition
Economic Co-operation and Development (OECD)
of the African Tax Outlook uses purchasing power
and Latin America and the Caribbean (LAC) – and
parity (PPP)2 to compare monetary amounts, as
even the African Economic Outlook (AEO), which
market exchange rates cannot account for disparities
covers all African countries.
in standards of living. PPP has its limitations, however,
To offer some international comparison and and the 2019 edition of the ATO did not use PPP in
benchmarking, figures and tables in the 2019 comparisons between certain indicators, e.g. growth
African Tax Outlook show not only ATO averages of revenue and real GDP, both of which are expressed
but also averages from the OECD, the World Bank in national currencies only.
2. Purchasing power parities (PPPs) are defined according to the OECD as the rates of currency conversion that equalise the purchasing power of
different currencies by eliminating the differences in price levels between countries. The basket of goods and services priced is a sample of all
those that are part of final expenditures: final consumption of households and government, fixed capital formation, and net exports. This indicator is
measured in terms of national currency per US dollar.
28
2
TRENDS IN
ECONOMIC OUTPUT
AND TAX REVENUE
2 Trends in Economic
Output and Tax Revenue
Size of ATO economies and GDP growth:

Growth in real GDP, or output, is used worldwide to measure economic activity.
In 2017, it exceeded 15%

in two ATO countries
21.6% 18.3%
ANGOLA ZIMBABWE
Tax-to-GDP ratios generally low in ATO countries:
16.4% 2016
Drop in the average

ATO-wide tax-to-GDP ratio
from 2016 to 2017
15.2% 2017
Countries with high negative growth
in real tax revenue in 2017:
BENIN BOTSWANA CAPE VERDE MALAWI
12.2% 21% 13,9% 14,5%
SEYCHELLES MALI ZAMBIA ESWATINI
15,5% 27,1% 14,2% 11,6%
Tax composition by regional grouping:
VAT was the largest

VAT contributor to tax revenue
34%
Personal income taxes
were the second largest
contributor
CIT CIT account for 15% of

15% PIT total tax revenue
17%
2. Trends in Economic Output and Tax Revenue
This chapter overviews the fundamental facts and 2.1. Sizes of ATO economies by GDP
figures relating to the ATO countries’ size, economic
and population
output and tax revenue. It scrutinises shares of tax
revenue in GDP to assess trends and identify reasons The most commonly used metrics for country size are
for good and bad tax performance, To that end, it population and GDP.
does not, however, restrict itself to tax-to-GDP ratios,
Population is the standard yardstick for many economic
but also considers log GGP per capita which take into
and social indicators, enabling proportionate,
consideration factors that influence tax performance,
meaningful comparisons between countries (ATAF-
such as levels of development, non-tax revenue and
ATO, 2016). Population and GDP vary widely from one
fiscal governance.
country to another but are of related magnitude when
The chapter goes on to look at tax composition and individual countries are considered (Figure 2.1).
structure and ways in which countries could widen
Nigeria, for example, accounted for about one-quarter
their tax bases. It considers the taxes and sectors
of the total ATO population from 2011 to 2017 and
that yield the most revenue and addresses the issue
34% of GDP. At the other end of the scale, Seychelles
of agriculture, which contributes so much to GDP and
and Cabo Verde, which have the smallest populations,
so little to revenue.
also have the lowest GDP. Overall, the five most
populous countries – 53.8% of the ATO population
– accounted for 67.9% of total ATO GDP in 2017.
The five least populous countries were also those with
the smallest economic output.
32
Figure 2.1. ATO country sizes by GDP and population, 2017
Panel A. ATO country sizes by GDP, percentage shares of total GDP
Panel A
Benin Madagascar Tanzania Rwanda Burundi
Namibia Botswana Kenya Malawi Gambia
Chad Senegal Ghana Niger Liberia
Mauritius Zambia Angola Togo Cape Verde
Zimbabwe Uganda South Africa Sierra Leone Seychelles
Burkina Faso Cameroon Nigeria Eswatini
Mali Côte d’Ivoire Other Lesotho
Mozambique DRC
CHA PTER 2: Tre n d s i n E c o n o mi c Ou t p u t a nd Ta x R e v e nue 33

Figure 2.2. ATO country sizes by population
Panel B. ATO country sizes by population, percentage shares of total population
Panel B
Benin Burkina Faso Uganda Sierra Leone Mauritius
Burundi Niger Kenya Togo Eswatini
Rwanda Cameroon Tanzania Liberia Cape Verde
Chad Côte d’Ivoire South Africa Namibia Seychelles
Zimbabwe Madagascar DRC Botswana
Senegal Mozambique Nigeria Gambia
Zambia Angola Other Lesotho
Malawi Ghana
34
2.1.1. Population and labour participation rate Population expanded in almost all ATO countries in
2017, falling in only three Benin, Nigeria and Uganda.
The literature suggests that population growth is an The population growth rate in 2017 averaged 1.8% in
important factor not only in overall economic growth, the ATO countries that provided data. At over 4%, it
but in the growth of per capita output in some cases was fastest in Lesotho and Niger, while Benin saw the
(Peterson, 2017). In developing countries, however, largest contraction, at 8%.
rapid population growth can be detrimental to income
per capita in the short and medium term because it As for real GDP growth, it averaged 5.3%, so
translates into large numbers of dependent children. outstripping population growth – a positive signal for
In the long run, though, it may yield a demographic economic development.
dividend as those children become productive
The labour force participation rate– a determinant of
adults. They swell the labour force and thereby
economic output – is the number of people available
stimulate economic growth on condition that they are
to work as a percentage of the total population.
economically active (Figure 2.2).
It averaged 45.5% ATO-wide in 2017, ranging from
61% in Botswana to Benin’s 28.6%.
Figure 2.2. Population growth and labour participation rates in ATO countries, 2017
Labour Participation Rate

0% 10% 20% 30% 40% 50% 60% 70%
Benin
Botswana
Cape Verde
Cameroon
Eswatini
Ghana
Madagascar
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
South Africa
Tanzania
Togo
Uganda
Zambia
ATO Average (20)
-10% -8% -6% -4% -2% 0% 2% 4% 6%
Population Growth Rate
Labour Participation Rate Population Growth Rate

2.2. GDP and revenue growth
Growth in real GDP, or output, is used worldwide to Revenue performance, however, was less robust, since
measure economic activity. In 2017, it exceeded a number of countries experienced negative growth in
15% in two ATO countries – Angola, with 21.6%, and real tax revenue in 2017 (Figure 2.2). Those where it
Zimbabwe, with 18.3%. In 11,1 it was above 5%. Only was high were Benin (12.2%), Botswana (21%), Cabo
one ATO country, Namibia, recorded negative real Verde (13.9%), Eswatini (11.6%), Malawi (14.5%), Mali
GDP growth in 2017. (27.1%), Seychelles (15.5%) and Zambia (14.2%).
Figure 2.3. Real GDP and revenue growth in ATO countries, 2017 4
Angola
Benin
Botswana
Burkina Faso
Burundi
Cape Verde
Cameroon
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (33)
-15% -10% -5% 0% 5% 10% 15% 20% 25% 30%
Real GDP Real Tax Revenue
3. Benin, Burkina Faso, Cabo Verde, Cote d’Ivoire, Ghana, Kenya, Mali, Niger, Senegal Seychelles and Tanzania.
4. Chad was omitted from the analysis in Figure 2.3 and Figure 2.4 because it did not provide nominal GDP data for 2016.
36
When it comes to nominal revenue, it rose in most Seventeen ATO countries enjoyed tax buoyancy
ATO countries. Exceptions were Angola, Lesotho, as nominal revenue outstripped nominal GDP –
Liberia, and Togo. The countries with significant GDP a desirable development indicating the automatic
and revenue growth in real terms also tended to boast response of tax revenue to growth in GDP, the proxy
large nominal increases – an indication of low inflation. tax base (see Chapter 4).
Figure 2.4. Nominal GDP and revenue growth in ATO counties, 2017
Angola
Benin
Botswana
Burkina Faso
Burundi
Cape Verde
Cameroon
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (33)
-10% 0% 10% 20% 30% 40%
Nominal GDP Nominal Tax Revenue

2.3.Tax Revenue performance 2.3.1. Tax-to-GDP ratios generally low in ATO
countries
Total tax revenue is the share of a country’s income
collected by the government through taxes. The average ATO-wide tax-to-GDP ratio in 2017
The tax-to-GDP ratio is the percentage of a country’s was 15%, down from 16.4% in 2016 (Figure 2.5).
tax revenue to its economic output and reflects the The decline was due to significantly lower ratios in
government’s share of national savings. It is a clear Gambia, Namibia, Senegal, and, even more so, in
pointer to the direction of a country’s tax policy and Angola, Liberia, Mozambique, Togo and Zimbabwe,
the efficiency of its tax administration, and may also where they fell by over 1 percentage point. Moreover,
serve as a proxy for the level of economic growth and some of the countries that became ATO participants
development. between 2016 and 2017 (boosting the number from
26 to 34) had lower tax-to-GDP ratios than the ATO
Policy makers and analysts use the tax-to-GDP ratio average. They were Chad, the Democratic Republic of
to compare tax receipts from year to year and across the Congo (DR Congo), Madagascar and Sierra Leone.
countries. There is a close correlation between taxes
and income, measured by GDP. So, as GDP grows, The lowest ratios in 2017 were those of Angola (6.3%),
so does tax revenue. However, tax-to-GDP ratios vary Chad (7.2%), the DR Congo (4.8%) and Nigeria (5.1%),
from year to year. There are many reasons why. To all of which rely heavily on non-tax revenue from oil to
explain them would require an in-depth analysis that finance their budgets.
is beyond the scope of this report. Generally speaking,
Sixteen countries did, however, boast ratios above the
however, the chief reasons are:
ATO average. Seychelles recorded the highest in both
• changes in economic activity, income or GDP all of 2016 and 2017 with 30.1% and 28.5% respectively,
which affect levels of employment, sales of goods while Mali and Botswana enjoyed the fastest growing
and services, etc.; ratios at 2.8% and 2%, respectively.
• changes in tax policy, which affect tax rates, the The overall tax effort was hampered by income levels
tax base, thresholds, exemptions, etc.; lower than in other parts of world. The ATO average
• changes in tax administration. tax-to-GDP ratio in 2017 was 19 percentage points
lower than the OECD’s 34.2%, and below the Africa-
wide average of 19.3% published by the World Bank
(2017). In fact, it actually fell between 2016 and 2017.
Angola, Liberia, Mozambique, Togo and Zimbabwe
saw significant declines of more than 1 percentage
point, and ratios dropped year on year in 16 countries,
driven by falls in revenues from corporate tax, excise,
customs, and export duties.
38
Figure 2.5. ATO tax-to-GDP ratios, 2017 and 2016 5
Angola
Benin
Botswana
Burkina Faso
Burundi
Cape Verde
Cameroon
Chad
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (34)
LAC Average (24)
OECD Average (35)
Africa-World Bank
0% 5% 10% 15% 20% 25% 30% 35% 40%
2017 2016
5. Chad did not provide nominal GDP data for 2016.

Figure 2.6. Growth in tax-to-GDP ratios, percentage points, 2016-2017
Angola
Benin
Botswana
Burkina Faso
Burundi
Cape Verde
Cameroon
Chad
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (33)
-4% -3% -2% -1% 0% 1% 2% 3%
Autonomous versus ministry tax administration ratio in countries where finance ministries handle tax
administration (Figure 2.7). It may be inferred that
Another factor in levels of tax-to-GDP ratios was tax
SARAs administer revenue collection more efficiently
administration. Countries with semi-autonomous
and that more countries should switch to them.
revenue authorities (SARAs) averaged ratios of
15.6% in 2017 – significantly higher than the 13.9%
40
Figure 2.7. Tax-to-GDP ratios by type of tax administration authority, 2016 and 2017
Panel A. Ratios in countries with semi-autonomous revenue authorities
Angola
Botswana
Burundi
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Malawi
Mauritius
Mozambique
Nigeria
Rwanda
Seychelles
Sierra Leone
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (22)
0% 5% 10% 15% 20% 25% 30% 35%
2017 2016
Panel B. Tax-to-GDP ratios in countries where finance ministries administer tax collection
Benin
Burkina Faso
Cape Verde
Cameroon
Chad
Côte d’Ivoire
DR. Congo
Madagascar
Mali
Namibia
Niger
Senegal
ATO Average (12)
0% 5% 10% 15% 20% 25% 30% 35%
2017 2016

2.4. Tax effort trends and comparisons example, contracted tax revenue in Nigeria (ATAF-
ATO, 2018), so ushering in an economic recession.
Trends over a longer timeline paint a different picture,
however. Between 2012 and 2017, 19 ATO countries Other factors, too, were at play. They included tax
showed increases in their average tax-to-GDP ratios enforcement issues – like evasion, low rates, the
(Figure 2.8). Others, though – chiefly ECOWAS use of tax expenditure – together with headline
countries – experienced average declines over the risks like capital flight, corruption and informality,
same period on account of volatility in the international and inadequate human and institutional capacity for
prices of commodities. Fluctuating oil prices, for managing taxation.6
Figure 2.8. Average growth in tax-to-GDP ratios, percentage points, 2012 to 2017
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (32)
-2% -1,5% -1,0% -0,5% 0% 0,5% 1,0% 1,5% 2%
6. For a fuller discussion of taxation in ECOWAS, refer to the 2019 West African Tax Outlook.
42
2.4.1. ATO assessments lower than OECD and • A number of countries rebased their GDP figures
World Bank estimates substantially upwards (see Box 2.1).
African Tax Outlook estimates of tax-to-GDP ratios for • Growth in tax revenues has been slower in recent
the period 2014 - 2017 differ from OECD and World years.
Bank findings, but are similar to those of the UN UNECA’s Economic Report on Africa (2019) shows
Economic Commission for Africa (UNECA) (Figure 2.9). that tax-to-GDP ratios in selected African countries
trended downwards between 2014 and 2016, before
The African Tax Outlook, for example, finds that ATO
recovering in 2017.
ratios have been on a downward trend since 2015.
The reasons are: The assessments of OECD Revenue Statistics in
Africa and the World Bank may not match the African
• New ATO participants in 2017 – such as Chad, DR.
Tax Outlook’s perception because of differences in the
Congo, Madagascar and Sierra Leone – had ratios
number and range of countries considered and the
lower than the ATO average (see Section 2.3.1).
definitions of indicators used.
Figure 2.9. International organisations’ comparisons of tax-to-GDP ratios, 2014 - 2017 7
25%
20% 18 21 16 20 18 10
21
15 21 26 33
15%
10%
5%
0%
2014 2015 2016 2017
ATO OECD Revenue Stats World Bank UNECA
Source: OECD Revenue Statistics in Africa (2016 to 2018); UNECA; World Bank
7. The figures above each bar show the number of countries used when computing the tax-to-GDP ratio by the publication in the given year

Box 2.1:
How rebasing GDP affects tax-to-GDP ratios
Rebasing GDP is the practice of replacing an old base year with a new, more recent base year. The base year
is the yardstick against which future (and past) GDP values are then measured. GDP rebasing is standard
practice, which countries’ statistics offices undertake to ensure that national accounts reflect the state of the
economy as accurately as possible. The UN Statistical Commission recommends that countries rebase their
GDP (or review their national accounts) every five years. What renders rebasing necessary is that economies
are in a constant state of change:
• changes in production structures
• structural changes in the relative prices of various products
• changes in consumption patterns
• change driven by technological innovation
• change prompted by the dynamics of international relations.
GDP rebasing is beneficial in many ways, three of which are:
• It improves evidence-based decision-making as it provides policy makers and analysts with statistics that
reflect current economic realities more accurately.
• It yields a more accurate estimate of the size and structure of the economy as it incorporating new economic
activities not captured in the previous computational framework.
• It provides governments with better tools for tackling the challenges of growing the economy and fighting
poverty.
However, a number of consequences may arise from rebased GDP. It influences such key ratios as debt to GDP,
fiscal deficit to GDP, trade to GDP and tax to GDP, all of which impact policy design and implementation and
affect cross-country comparisons. For example, a post-rebasing lower tax-to-GDP ratio increases pressure
on tax administration authorities to raise greater revenue from the newly estimated larger economy. A lower
deficit-to-GDP ratio, for its part, gives a government more room to borrow. Rebasing GDP may reduce the
previously estimated ratios of the years between the new base year and the year the government decided to
rebase. In that event, the government will realise that it needs to better harness the economy’s tax-revenue-
generating capacity if is to improve the tax-to-GDP ratio.
Between 2012 and 2017 several ATO countries rebased their GDP to improve their statistics: Angola and Togo
rebased to 2017, Gambia, Ghana and Rwanda to 2013, Lesotho to 2012, and Senegal to 2014. There have
been consequences for the ATO-wide tax-to-GDP ratio, as the rebased GDP figures were substantially higher
than those that arose from the previous bases. Gambia saw a 46.3% rise in its 2016 GDP, Rwanda 2.2% in
2015, Senegal 31.2% in 2016, Ghana 65% in 2017, and Togo 2.2% in 2015. Since tax revenues did not change
in those years, there was a decline in those countries’ tax-to-GDP ratios and, consequently, in ATO-wide ratios.
44
Figure 2.12. Tax-to-GDP ratios for 2016 before and after GDP rebasing in five ATO countries
25% -0.04%
4.90%
20% 5.78%
3.80% 0.46%
Tax-t-GDP Ratio
15%
10%
5%
0%
Gambia (2013) Ghana (2013) Rwanda (2014) Senegal (2014) Togo (2017)
Old Base Year New Base Year
Note: The new base year is the year in brackets.
Economies generally undergo a structural shift after rebasing – i.e. the different sectors’ contributions to GDP
may change. And, as the rebased GDP incorporates more economic sectors, it becomes more diversified –
a desirable development, as diversity plays a key role in stabilising the economy, making it less exposed to
external shocks.
Revised GDP also widens the tax base, as more sectors spells more revenue-generating potential. The tax
structure changes, too. Tax authorities should therefore consider recasting their tax net, systematically seeking
out and plugging tax gaps in the sectors not included or underestimated in the previous GDP base. They
should conduct pre- and post-rebasing revenue-by-sector analysis of previous years to identify revenue-
generating sectors that underperform and priority areas on which to focus for improved revenue collection.
2.4.2. Little variation in tax-to-GDP ratios Congo, Madagascar and Sierra Leone – experienced
points to little improvement little variation. Conversely, those with high mean ratios
– Liberia, Mozambique, Senegal, Seychelles, Togo
ATO countries showed little variation in their tax-to- and Zimbabwe – tended to show greater variation.
GDP ratios, most of which remained close to the mean The sole exception was South Africa.
over the period 2011 2017 (Figure 2.10). The greatest
variation comes in Cote d’Ivoire, Mozambique and Updated data reveal that the average ATO tax-to-
Zimbabwe and, to a lesser extent, in Gambia, Ghana, GDP ratio was, in fact, very steady over the period,
Liberia, Niger, Senegal and Togo. which points to very little improvement in the tax
revenue performance.
ATO countries with relatively low mean tax-to-GDP
ratios over the period – Angola, Democratic Republic of

Figure 2.10. Tax-to-GDP variations in ATO countries, 2011 2017
Angola
Benin
Botswana
Burkina Faso
Burundi
Cape Verde
Cameroon
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (33)
0% 5% 10% 15% 20% 25% 30% 35%
Country Average (2011 - 2017) 2011 2012 2013 2014 2015
2016 2017
2.5. Analysis of tax-to-GDP ratio and 2015). Moreover, some schools of thought argue
that, as GDP rises, so does taxpayer demand for
GDP per capita
government-provided services, from which it may be
It is common practice to use tax-to-GDP ratios to inferred that the ratio of tax paid to GDP usually rises
compare countries’ tax performance. It may not as GDP itself rises.
be the best practice, however, as the tax-to-GDP An approach that takes into account different levels
ratio is a broad metric. It does not, for example, of development and other influencing factors, such
factor in the positive, well established relationship as non-tax revenue and fiscal governance, should be
between a country’s ability to collect taxes and its used to measure and compare countries’ tax revenue
level of development (Haldenwang and Ivanyna, performance.
46
2.5.1. Tax-to-GDP ratios and log GDP per increases ATO countries’ tax-to-GDP ratios by an
capita additional 0.02 percentage point. The trendline with
upper and lower bounds at 95% confidence intervals
One such approach is to relate a country’s tax-to-GDP for each ATO country’s tax-to-GDP ratios yields this
ratio to its per capita GDP. For ease of comparison, the tax performance rating:
log of per capita income may be plotted. A trendline is
established and the distance of each country from the • low tax performers – countries with tax-to-GDP
line denotes its tax performance. ratios below the trendline’s 95% confidence interval;
Figure 2.11 shows a scatter plot of tax revenue • average tax performers – countries whose tax ratio
relative to log GDP per capita in the ATO countries. lies within a 95% confidence interval of what may
Between log GDP per capita and tax-to-GDP ratios be expected from their log GDP per capita;
there is a positive correlation that is statistically • high tax performers – countries with tax ratios
significant at 95% confidence interval. Regression above the trendline’s 95% confidence interval of
shows that an increase of 1% in log GDP per capita the trendline.
Figure 2.11. Relation between tax-to-GDP ratios and log GDP per capita, 2017
35%
SYC
30%
RWA
ZWE
ZAF
25% KEN
MOZ TGO
BEN
CPV NAM
Tax-to-GDP Ratio
20%
MWI LBR CIV
LSO SEN MUS
ATO
15%
UGA
BDI NER BWA
ZMB SWZ
10% MDG TZA GHA
BFA GMB
SLE
CMR
TCD
5%
AGO
NGA
COD
0%
3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000
Log GDP per Capita
ATO Country Plot Lower Bound Lower Bound Lower Bound
Ten ATO countries are low tax performers, 13 are performers have high non-tax revenues, mainly from
average, and 10 high performers, characterised by natural resources like oil and royalties, which only
strong tax-to-GDP ratios (Table 2.1). Most of the poor partly offset their low tax revenue.

Table 2.1. Tax performance using log GDP per capita and tax-to-GDP ratio, 2017
Low Average Top Low Average Top

Performers Performers Performers Performers Performers Performers
Angola Burkina Faso Cabo Verde Ghana Niger South Africa
Botswana Benin Kenya Nigeria Rwanda Togo
Cameroon Burundi Liberia Sierra Leone Senegal Zimbabwe
Chad Cote d’Ivoire Malawi Uganda
DR. Congo Lesotho Mozambique Tanzania
Eswatini Madagascar Namibia Zambia
Gambia Mauritius Seychelles ATO Average
2.6. Tax structure and composition in direct tax falls on the same person, whereas that of
indirect tax affects more than one person (Arodoye
ATO countries
and Ighodaro, 2018).
Tax structure, defined as the composition of tax
revenue by type of tax, is an important indicator as
different taxes have different economic and social 2.6.1. Tax contributions to revenue
effects (OECD, 2018).
A breakdown of the composition of tax revenue
Tax revenue can be grouped into two main types: ATO-wide from 2011 to 2017 shows that it remained
relatively stable (Figure 2.13). With an average of 56.7%
• Revenue from indirect taxes that are levied on
ATO-wide, indirect taxation contributed more to tax
consumption and imports (e.g. VAT, import duties).
revenue than direct tax. VAT accounted for the single
• Revenue from direct taxation levied on income and largest share – 33%. Then came personal income tax
wealth. (PIT) with 17.9%, and CIT (corporate income tax) with
The burden of paying direct taxes cannot be shifted to 15.7%. The contribution to revenue of other domestic
other parties easily, while who ends up paying indirect and customs taxes increased in 2017 over 2016, while
taxes depends solely on the price elasticities of supply that of import duty declined, indicating a shift in tax
and demand. In a word, the incidence and impact of policy or administration.
48
Figure 2.13. How the composition of total tax revenue evolved ATO-wide , 2011 2017
100%
4% 4% 4% 4% 4% 3% 4%
7% 7% 7% 8% 8% 8% 8%
90%
11% 10% 9% 8% 9% 10% 11%

80%
11% 11% 11% 11% 11% 11% 10%

70%
60% 16% 16% 16% 16% 16% 15% 15%
50%
17% 18% 18% 19% 18% 18% 17%

40%
30%
20%
34% 33% 35% 35% 35% 34% 34%
10%
0%
2011 2012 2013 2014 2015 2016 2017
VAT PIT CIT Import Duty Other DT Excise Other Customs
There were, however, wide variations in the make- except Angola, Botswana, Chad, Kenya, Nigeria, and
up of tax revenue between countries, reflecting Sierra Leone. Revenue from PIT and CIT varied widely,
different policy choices, tax administration capacity, while CIT accounted for the largest shares of revenue
and economic structure and conditions. VAT was the in Botswana and Nigeria.
major contributor to total tax revenue everywhere

Figure 2.14. How different taxes contributed to tax revenue in ATO countries, 2017
Angola
Benin
Botswana
Burkina Faso
Burundi
Cape Verde
Cameroon
Chad
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (34)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
VAT PIT CIT Excise Import Duty Other Customs Other DT
2.6.2. Revenue-generating sectors revenue than to GDP are deemed productive revenue
generators, as their value added yields more revenue.
A country’s economic structure determines its ability
to raise revenue. Sectors dominated by informal Twenty-seven ATO countries provided data on the
activity are more difficult to tax, so generally contribute contributions of sectors8 to value added and GDP,
less to revenue than to GDP. Analysis of revenue by while only 18 did so for their shares of total tax revenue.
sector helps identify the productive and unproductive The secondary and tertiary sectors are productive
revenue-generating sectors in an economy. Those revenue generators, their contribution to total tax
that contribute proportionately more to total tax revenue being greater than to GDP (Figure 2.15).
8. Sector classification draws on International Standard Industrial Classification, 4th Revision (ISIC, Rev 4)– Agriculture: agriculture, forestry and fishing;
Mining: mining and quarrying; Secondary: manufacturing, construction, electricity and water, Tertiary: all services.
50
As for agriculture, it is not productive because informal sector’s tax productivity is inhibited by concessions
activity is so rife that the sector is difficult to tax, while and exemptions designed to promote investment in
tax exemptions and input incentives further reduce this labour-intensive sector. It is also capital-intensive,
its revenue-generating capacity (Box 2.2). The mining so returns on investment take time.
Figure 2.15. How sectors contribute to GDP and tax revenue in the ATO, 2017
2%
9%
22%
Sector’s Sector
contributions 7% contribution 29%
53% to GDP** to tax
revenue*
60%
18%
Agriculture, Forestry & Fishing Mining & Quarrying Secondary Tertiary
Note: Single asterisk (*) denotes 18 ATO countries. Double asterisk (**) denotes 30 ATO countries
The tertiary sector was the major contributor to total tax shares. Burkina Faso and Tanzania, together with
revenue in most countries. Exceptions were Burkina Ghana and Zambia also enjoyed significant levels of
Faso, Cameroon, Niger, Tanzania, and Zimbabwe, revenue from the mining sector (Figure 2.16).
where the secondary sector accounted for the biggest

Figure 2.16. Contribution to total tax revenue, by sector, 2017
Burkina Faso
Cameroon
Eswatini
Ghana
Lesotho
Liberia
Madagascar
Mauritius
Mozambique
Nigeria
Rwanda
Seychelles
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (18)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Agriculture, Forestry & Fishing Mining & Quarrying Secondary Tertiary
Note: Data for Nigeria relate only to locally collected tax revenue
52
Box 2.2:
Taxation of the agriculture sector in developing countries
There is a sharp contrast between the low tax revenues that agriculture generates and the value added that it
creates. As a result, taxation of the sector has come under heavy scrutiny, particularly in developing countries, where
it plays a vital role in employment (both formal and informal), poverty reduction and food security. So important is
the sector that governments need to strike a careful balance between keeping it vibrant and taxing it.
Nevertheless, tax revenue from agriculture could help countries finance public expenditure. It would also
provide resources (drawn from agricultural surpluses) that could be:
• transferred to non-agricultural sectors,
• redistributed within the sector,
• used to promote more efficient, diversified production.
Explicit and implicit taxation

There are two main types of agricultural taxation in developing countries – explicit and implicit (Khan, 2001):
• Explicit taxes are levied on land, output, and inputs such as water and fertilizer.
• Implicit tax refers to taxes and/or subsidies in non-agricultural sectors which change the terms of trade for
agriculture. Income tax, too is explicit, though seldom used in countries with underdeveloped administration
and information systems.
Taxing output or marketed surplus

Could taxes on agricultural output be levied on gross output or marketed surplus? Newbery and Stern (Stern,
1987) show that a tax on gross output would be superior to a tax on marketed surplus. Although that may be
true, it is “practically impossible for governments to tax gross output in developing countries as they would
have to get involved in household consumption decisions” (FAO, 1994). So ATO governments could feasibly
tax only marketed surplus. They would, however, struggle to tax marketed surplus in non-traded commodities
such as staple foods, because they would have to institute a monopoly on all domestic marketing to tax all
marketed commodities (ibid.). Moreover, since trade liberalisation, trade and consumption taxes have been on
the decline in agriculture, with most basic commodities being zero-rated or tax-exempt.
Problems with taxing agriculture Possible ways forward

Taxation has too many contradictory objectives with Ensure that macroeconomic policies do not unfairly
ill-defined, unclear priorities impinge on agriculture
Some tax instruments have perverse effects on both Explore a system of land taxation as it is one of the
efficiency and equity most efficient methods not only of taxing agriculture
but of incentivising the modernisation and use of idle
land
There are serious political and administrative Raise tax revenues in a way that will not distort
constraints incentives in the economy, including the agricultural
sector
Source: Newbery, D.M.G. and N.H. Stern, 1987

2.6.3. Revenue from domestic taxes and to state revenue and/or protects domestic industries
customs duty from more efficient or predatory competitors from
abroad. Import duties, VAT and excise on imports are
Tax revenue in ATO countries can be divided into two examples of customs revenue.
main categories: domestic taxes and customs revenue.
A breakdown of ATO countries’ tax revenue shows that
Tax authorities levy domestic taxes on the manufacture, most rely on domestic taxes, which accounted for an
sale, or use of a commodity in the home country. PIT, average 65% of revenue in 2017. The largest shares
CIT and domestic VAT are all domestic taxes. came in Lesotho and Eswatini at 85%, while Cote
Customs revenue is raised from duties and taxes levied d’Ivoire, with 49.6%, Gambia with 56.3%, and Mali with
on imports (and sometimes on exports). It contributes 52.9%, had the highest shares of customs revenue.
Figure 2.17. Shares of domestic tax and customs revenue, 2017
Angola
Benin
Botswana
Burkina Faso
Burundi
Cape Verde
Cameroon
Chad
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (34)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Domestic Tax Revenue Customs Revenue
54
2.7. Tax-to-GDP ratio by regional With 9.8%, the Economic Community of East African
States (ECCAS) was the region with the lowest average
grouping
tax-to-GDP ratio from 2012 to 2017. Countries in the
The Southern African Development Community grouping over-relied on mineral resources.
(SADC) and the Southern African Customs Union
As for the East African Community (EAC) and
(SACU) have been the regional groupings with the
Commission of the Economic Community of West
highest tax-to-GDP ratios since 2012. Both boasted
African States (ECOWAS), they respectively showed
ratios of over 17%, compared to the ATO average of
averages of 13.8% and 14.4% over the period.
15.1% between 2012 and 2017. Indeed, some SADC
countries have enjoyed tax-to-GDP ratios of over
15% since 2012.
Figure 2.18. Average ATO tax-to-GDP ratios by region, 2012 2017
2017
2016
2015
2014
2013
2012
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
ATO Average SADC SACU ECOWAS ECCAS EAC

In 2017, the tax-to-GDP ratios of ATO countries in The EAC and ECOWAS regions recorded tax-to-
the SADC and SACU regions were higher than those GDP ratios of 14.2% and 14.3%, respectively,
of all the other regional groupings. They benefited in 2017. ECOWAS saw declines in the ratios of
from substantial growth in the ratios of some Gambia, Liberia, Niger, Senegal, Sierra Leone and
member states who recorded increases of over Togo. As for the ATO countries in ECCAS, they had a
1 percentage point from 2016 to 2017 – Botswana, lower average ratio in 2017 than those of all the other
Eswatini, Malawi, Mauritius, Seychelles, and Zambia. regional groupings: Cameroon had 13.6%, Chad
The SACU region was boosted by Namibia and South 7.2%, and D.R. Congo 4.8%.
Africa’s high tax-to-GDP ratios, which rank second
and fourth in the ATO.
Figure 2.19. ATO countries tax-to-GDP ratios by regional economic grouping, 2017
EAC
ATO Average 15,0%
AEC Average 14,2%
Uganda 13,7%
Tanzania 13,2%
Rwanda 15,2%
Kenya 16,9%
Burundi 12,1%
0% 5% 10% 15% 20%
ECOWAS
ATO Average 15,0%
ECOWAS Average 14,3%
Togo 20,6%
Sierra Leone 10,2%
Senegal 14,8%
Nigeria 5,1%
Niger 13,0%
Liberia 17,2%
Ghana 13,2%
Gambia 11,4%
Côte d’Ivoire 15,7%
Cape Verde 20,3%
Burkina Faso 13,6%
Benin 14,3%
0% 5% 10% 15% 20% 25%
56
ECCAS
ATO Average 15,0%

ECCAS Average 8,5%
DR. Congo 4,8%
Chad 7,2%
Cameroon 13,6%
0% 5% 10% 15% 20%
SADC
ATO Average 15,0%
SADC Average 17,3%
Zimbabwe 19,7%
Zambia 15,8%
South Africa 25,9%
Seychelles 30,1%
Namibia 20,5%
Mozambique 18,0%
Mauritius 18,1%
Madagascar 11,5%
Lesotho 15,9%
Eswatini 13,7%
Botswana 13,6%
Angola 6,3%
0% 10% 20% 30% 40%
SACU
ATO Average 15,%

SACU Average 17,9,9%
South Africa 25,9%
Namibia 20,5%
Lesotho 15,9%
Eswatini 13,7%
Botswana 13,6%
0% 5% 10% 15% 20% 25% 30%
Note: Tanzania has been classified as an EAC member state in the 2019 edition of the African Tax Outlook. It was considered a
member of SADC in the 2018 edition

2.7.1. Tax composition by regional grouping 22% for those that are members of SADC and 29% in
SACU. ECOWAS depends mostly on customs taxes
Tax composition analysis by regional grouping shows and import duties, which make up 22% of average
that VAT was the largest contributor to tax revenue in ATO revenue in the region.
all region groupings, particularly in SADC and SACU
with shares of 37% and 39%, respectively. EAC’s ATO countries had the lowest average
proportion of CIT revenue (11%), compared to 17%
Although personal income taxes were the second for those in SADC and 21% in SACU, while excise
largest contributor to tax revenue in ATO countries, taxes accounted for a larger share of total tax revenue
they accounted for a lower average share in those in ATO EAC countries – 16% compared to less than
that belong to ECOWAS, at only 13%, compared to 10% in other groupings.
Figure 2.20. ATO countries’ revenue, by tax type and economic regional grouping, 2017
ATO Average 34% 17% 15% 8% 10% 4% 11%
ECOWAS 33% 13% 14% 6% 16% 6% 13%
EAC 33% 17% 11% 16% 8% 9% 6%
SACU 39% 29% 21% 7%
SADC 37% 22% 17% 9% 5% 9%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
VAT PIT CIT Excise Import Duty Other Customs Other DT
2.8. Round-up and ways forward The tax-to-GDP ratio averaged 15% ATO-wide in
2017, down from 16.4% in 2016.9 Sixteen countries
Most ATO countries boasted increases in their nevertheless registered ratios above the ATO average.
nominal and real tax revenue and GDP in 2017. Those Ratios in countries with semi-autonomous revenue
whose real GDP and real revenue grew significantly authorities were generally higher than in those where
also tended to benefit from greater growth in nominal finance ministries administer taxation. This trend
GDP and nominal revenue. Nominal revenue grew at suggests that semi-autonomous revenue authorities
a faster rate than nominal GDP tax revenue in 2017, collect revenue more efficiently and that countries
with 17 countries enjoying buoyancy and tax revenue should introduce them.
responsiveness to growth in GDP (the tax base).
On a regional footing, there were disparities between
The tertiary sector was the largest contributor to total the tax-to-GDP ratios of ATO countries in different
tax revenue in most ATO countries. Agriculture was economic groupings. The highest average ratios came
the smallest, which emphasises the need for policies in the ATO countries of SADC and SACU, and the
to raise more revenue from the sector. lowest in those that are members of ECCAS.
9. It should be noted that the number of countries in the ATO has increased from 26 in the 2018 edition of the African Tax Outlook to 34 in this edition.
58
3
TAX REVENUES
AND NON-TAX
REVENUES

3 Tax revenues and non-tax Revenues
ATO countries in 2017 with the

highest VAT thresholds
MAURITIUS SEYCHELLES BURKINA FASO
$367,557 PPP $273,747.6 PPP $249,140.7 PPP
Tax Refunds:
All PFA countries had lower

refund rates than the OECD
average in 2017.
SOUTH AFRICA
This rate falls to less than 2% in
38.6% Nigeria, Gambia and Tanzania.
The best paying countries after South Africa:
ZAMBIA ESWATINI LESOTHO BOTSWANA
32.1% 28.7% 27.9% 26.8%
60
Ratios of SSCs to GDP and tax revenue:
The average ratio of Social Security Contributions

to GDP in ATO countries was 0.85% in 2017,
slightly up on 2016’s 0.79%
2016 2017
0.79% 0.85%
Countries with the highest ratios of SSCs to GDP
and tax between 2012 - 2017
BURKINA FASO CÔTE D’IVOIRE GHANA
NIGERIA SIERRA LEONE TOGO
Non-tax income in resource-rich countries:
Non-tax revenue accounted for

2017 an average of 13% of total
revenue in 27 ATO countries.
NTR
13% Individual country shares varied
widely from less than 1% in Eswatini
to 57% in Angola.
61
3. Tax revenues and non-tax Revenues
This chapter focuses on the revenues of the ATO pays it when he/she buys goods or services. There are
member countries. The revenues covered here fall into two types of VAT: Domestic VAT and VAT on imports.
two broad categories: tax and non-tax revenues. ATO countries entrust their administration either to
a joint directorate or to two separate departments,
Tax revenues come from taxes collected by the tax
each focusing on one or the other of the two types
authorities and paid by the individual and corporate
of VAT. However, several studies (Ananou, 2017)
taxpayers. These revenues are comprised of the so-
called direct taxes which are levied on the income of conducted by development partners point to the need
individuals and companies, and indirect taxes which for African tax administrations to streamline their VAT
derive from consumption taxes, value-added tax, administration in order to draw more resources from it.
excise duties and customs duties.
As for non-tax revenues, they refer to all other fiscal 3.1.1. Vat rates and thresholds
revenues that are not derived from taxes. Non-tax
revenues come from dividends from state enterprises, Vat rates
royalties and similar other sources such as the sales VAT rates in the 33 ATO countries range from 5% in
of goods and services, income from properties, Nigeria to 20% in Madagascar. The average rate is
interests from loans and fees charged for the use of 16% higher than the Central America benchmark, on
public services. par with the 16% international benchmark (Gallagher,
2004), and inferior to the 19.2% OECD average (with
more than half of the countries recording standard
PART I. R
EVENUE FROM MAJOR TAX rate of more than 20%).
HEADS In 2017, 13 ATO Countries10 recorded standard VAT
rates inferior to the ATO average and 19 presented
3.1. Value added Tax
figures above the average (Table 3.1). The DRC and
The Value-added tax (VAT) was implemented in Europe Kenya’s standard rates were identical to the ATO
in the 1960s, before reaching Latin American, and average and to the international benchmark. It is
gradually spreading to Africa in the 1990s. Indeed, in worth noting that Ghana and Liberia increased their
their bid to liberalise global trade and advance their standard rates from 12.5% to 17.5% and from 7%
regionalisation strategies, faced losses in customs to 10% respectively, between 2016 and 2017. Seven
revenues. VAT served as a solution to progressively ATO countries namely Burundi, Ghana, Lesotho,
make up for those losses.
Liberia, Niger, Cote d’Ivoire and Senegal, have
VAT is highly valued by States. It is easy to collect multiple VAT rates or at least a special rate in addition
and less expensive to administer for tax authorities to the standard rate. However, according to Bogetie
because it is collected by companies and supported and Hassan (1993), VAT generates higher revenues in
by the consumers. For the latter, it is a transparent countries which apply single rates compared to those
tax: the consumer knows what he/she pays and only with multiple rates.
10. Mauritius, Namibia, Seychelles, Zimbabwe, Botswana, Lesotho, Liberia, Nigeria, South Africa, Eswatini, Cape Verde, The Gambia and Sierra Leone.
62
Vat thresholds Overall, eleven ATO countries of which five from
the West African Economic Community (ECOWAS)
Some scholars (Bird and Gendron, 2007) recommend
and four from the Southern African Development
setting VAT thresholds as low as possible. This
Community (SADC) have VAT thresholds exceeding
however poses a challenge with regard to collection
USD 200 000 (Table 3.1). These countries also
costs, especially in developing countries. Therefore,
recorded the highest VAT revenues as a percentage of
Keen and Mintz (2004) suggest that the optimal
GDP: 10,9 % in Seychelles, 8,5 % in Mauritius, 9,3 %
threshold can be set by basing on the ratio between the
in Togo, 8,3 % in Zambia and 7,1 % in Burkina Faso.
collection costs and the marginal value of additional
tax revenues, in order to collect taxes from the largest Eight ATO countries set thresholds of less than USD
number of taxpayers. It is however equally true that a 100 000. The lowest VAT thresholds were recorded in
higher threshold allows a more efficient collection by Malawi (USD 48 635,3), Tanzania (USD 56 463) and
focusing on medium and large taxpayers who account Ghana (USD 58 479,5). Nigeria is the only country
for most of VAT revenues. without any set VAT threshold which gives it a larger
tax base. It is worth also noting that the VAT revenues
The following ATO countries recorded the highest VAT
thresholds in 2017: only contribute 0,9% to GDP in Nigeria.
• Mauritius – 367 557 USD PPP
• Seychelles – 273 747,6 USD PPP
• Burkina Faso – 249 140,7 USD PPP
CHA PTER 3: Ta x re v e n u e s a n d n o n -t a x R e v e nue s 63

Table 3.1. VAT thresholds and rates in ATO countries, 2017
Region Country VAT thresholds in US$ PPP converted VAT rates

SADC DRC 104 731,8 16,0 %
Madagascar 221 929,8 20,0 %
Malawi 48 635,3 16,5 %
Mauritius 367 557,0 15,0 %
Mozambique NC 17,0 %
Namibia 75 267,2 15,0 %
Seychelles 273 747,6 15,0 %
Tanzania 56 463,0 18,0 %
Zambia 225 479,1 16,0 %
Zimbabwe 115 830,1 15,0 %
Botswana 220 799,3 12,0 %
Lesotho 178 533,9 14,0 %
South Africa 164 582,0 14,0 %
Eswatini 98 814,2 14,0 %
SADC Average 165 566,9 15,5 %
EAC Burundi 139 299,1 18,0 %
Kenya 105 369,6 16,0 %
Rwanda 65 422,3 18,0 %
Uganda 131 179,4 18,0 %
EAC Average 110 317,6 17,5 %
ECOWAS Benin 235 072,9 18,0 %
Burkina Faso 249 140,7 18,0 %
Cape Verde NC 15,0 %
Côte d’Ivoire 215 869,9 18,0 %
The Gambia 76 167,3 15,0 %
Ghana 58 479,5 17,5 %
Liberia 62 044,2 10,0 %
Mali NC 18,0 %
Niger NC 19,0 %
Nigeria 0,0 5,0 %
Senegal 225 522,9 18,0 %
Sierra Leone 146 228,8 15,0 %
Togo 218 469,4 18,0 %
ECOWAS Average 165 221,7 15,7 %
CEMAC Cameroon 219 336,7 19,3 %
Chad NC 18,0 %
CEMAC Average 219 336,7 16,2 %
ATO Average 159 258,3 16,0 %
Note: NC means « not communicated ».

Source: ATO database, 2019.
64
3.1.2. Evolution of VAT revenues • The decline of copper and cobalt prices in 2016
caused by China’s economic slowdown,
On average, the VAT revenues to Total Gross Revenues
• Government decision to support mining companies
ratio in ATO countries has increased from 5.8% in
by suspending the collection of VAT on imports.
2015 and 2016 to 11.7% between 2016 and 2017
(Figure 3.1).11 The highest growth rates in 2017 were These individual evolutions are reflected in the
recorded in Mali (66,3 %), Malawi (35,2 %), Zambia regional communities. As a result, the Central Africa
(32,5 %) and Benin (26,1 %). Economic and Monetary Community (CEMAC) which
Chad is part of, is the only region to have suffered VAT
The highest decreases were recorded in Chad (
revenue declines in 2016 (-6.2%) and 2017 (-9.4%).
35,5%) and Mozambique ( 7,3 %). Affected by the
The other regional economic communities recorded
collapse of world oil prices and a fragile socio-political
hikes in VAT revenues in 2016 and 2017, with the
environment, Chad is also the only country to have highest percentage increase of 2017 being recorded
recorded consistent declines of VAT revenues from in the ECOWAS region (14.8%).
2015 to 2017.
As for the countries where domestic VAT and VAT on
Mali and the DRC on the other hand recorded imports are managed separately, their average growth
impressive performances in 2017, after severe drops rate was 11.4%, slightly below the average growth rate
in 2016. In the DRC, the decline was due to: of country with integrated VAT management (11.9%).
11. Namibia’s 2017 VAT data were problematic and were therefore not taken into account in the indicators relating to the evolution of VAT.

Figure 3.1. VAT growth rate, 2016 2017
Angola
Benin
Botswana
Burkina Faso
Burundi
Cape Verde
Cameroon
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (33)
Total
-40% -20% 0% 20% 40% 60%
Prog 2016/2015 Prog 2017/2016
3.1.3. VAT to GDP growth ratio In 2017 for instance, Malawi’s VAT revenues increased
by 35.2% and its per capita GDP by 3.4%, whereas in
There is a positive relationship between VAT growth Zimbabwe VAT revenues increased by 11.1% against
and per capita GDP growth on the one hand, and a 18.8% increase in the per capita GDP. However, this
consumer expenditure (see Figure 3.2 where the positive correlation is not reflected in all ATO countries
adjusted lines between these variables shows positive and the data points to specific cases. In 2017 for
lines). Indeed, studies show that an increase in the per instance, Mozambique recorded a significant decline
capita GDP translates into an increase in consumer of its VAT revenues – 7.3% - compared to the previous
expenditure. This, in turn causes an increase in the year, whereas its per capita GDP increased by 5.3%.
revenues derived from consumption taxes, amongst Indeed, Mozambique accumulated exceptional
which VAT. The extent of these knock-on effects varies revenues from VAT by consolidating ownership
from country to country. structures in the Gas reserves of the Rovuma Basin.
66
Figure 3.2. VAT Revenue/per capita GDP growth ratios, 2017
VAT Revenue
Growth
40%
35%
30%
25%
20%
y = 0,3814x +0,0995
15%
10%
5%
Per capita
GDP Growth
0%
0%
-10% -5% 5% 10% 15% 20% 25%
-5%
-10%
Average ATO Madagascar Tanzania Rwanda Burundi
Benin Botswana Kenya Malawi Gambia
Mauritius Senegal Ghana Niger Liberia
Zimbabwe Zambia Angola Togo Cape Verde
Burkina Faso Uganda South Africa Sierra Leone Seychelles
Mozambique Cameroon Nigeria Eswatini
Côte d’Ivoire Lesotho
DRC
Source: World Bank database, 2016

Note: 2016 GDP data of Mali and Chad were not available
Source: World Bank database, 2016
Note: 2016 GDP data of Mali and Chad were not available.

3.1.4. VAT contribution to tax revenues and the As was the case in 2016, the highest VAT revenue
GDP to GDP ratios in ATO countries were recorded in
Seychelles and South Africa, where they exceed 10%.
In the case of South Africa, besides its economy being
Vat contribution to Tax Revenues
the most advanced of ATO countries, the tightening
Despite often disappointing returns, VAT allows an of VAT tax incentives (zero tax rate and exemptions)
improvement in the economic neutrality of the tax has increased VAT revenues as a percentage of the
levy, as well as an increase in indirect domestic tax GDP. The lowest percentage was observed in Nigeria,
revenues in most African countries. It is the tax that where it is below 1% in both 2016 and 2017. This result
usually yields the most revenue for African states. suggests that a no-threshold VAT regime, combined
with a very low rate, reduces VAT revenues.
VAT represented, on average, 36.3% of the total tax
revenues of ATO countries in 2016, a percentage
higher than that observed in OECD countries, with
20.2% in 2016 (Figure 3.3). It is in Madagascar 3.1.5. Domestic vat and vat on imports
(56.2%), Zambia (52.6%) and Burkina Faso (52.5%)
In terms of VAT, tax administrations operate differently
that VAT represented the largest share of the total tax
from country to country. In Madagascar, Burkina Faso
revenues in 2017. This was the same in 2016, with yet
and Chad, for example, the management of domestic
fewer percentages of 55.1% in Madagascar, 49.5% in
VAT is done separately from that of customs, while
Zambia, and 50.8% in Burkina Faso.
South Africa, Seychelles, Zambia, Nigeria and Angola,
On the other hand, the lowest VAT/Total tax revenue apply an integrated management. The former seems
ratios of 2017 were recorded in Chad (16.4%), Nigeria more efficient as far as the contribution of VAT to total
(16.8%) and Angola (18.9%). While the last two also revenues is concerned with 38.0% against 33.5%.
came last in 2016, it was not the case for Chad where the However, when it comes to the VAT revenues as a
VAT/Total tax revenue ratio was 37.9%. As for Nigeria, percentage of GDP, an integrated management shows
the low VAT/Total tax revenue ratio could be explained a higher average - 5.6% versus 5.0%.
by its low VAT rate, the lowest in ATO countries, 5%
It should be noted that, despite the different
on average vs 16% ATO average. Furthermore, Nigeria
management types of the two VATs, tax administrations
operates a no-threshold VAT regime.
apply the same tax rate.
Vat revenue to GDP ratios

Comparison of Revenues from the two Vat Types
The importance of VAT is also measured by its revenue
As a general rule, it is recommended that domestic
as a percentage of GDP (Figure 3.4). In ATO countries,
VAT revenues represent 100% or more of the revenue
this percentage has hardly changed between 2016
generated by VAT on imports (Gallagher, 2004).
(5.5% on average) and 2017 (5.4%) and remains
ATO countries adhere to this recommendation: their
significantly lower than the OECD average, estimated
domestic VAT revenue constitutes on average 117%
at 6.8% in 2016 (OECD, 2017). There are two main
of customs revenue. Of the 33 ATO countries that
reasons for this state of affairs:
submitted data, 17 exceeded the 100% threshold.
• large parts of economic activity, particularly in the Nigeria and Eswatini, whose VAT is closely dependent
agricultural sector and the informal sector, are not on domestic goods, are in the lead with 381% and
or are very little subject to VAT; 300%, respectively.
• certain exemptions are granted without any real Five countries, on the other hand, are far below
justification of their economic efficiency. the 100% mark, with percentages lower than 70%.
68
Figure 3.3. C
ontribution of VAT revenues to total Figure 3.4. V
AT revenue to GDP ratios, in
tax revenues, in percentage, 2017 percentage, 2017 and 2016
and 2016
Angola Angola
Benin Benin
Botswana Botswana
Burkina Faso Burkina Faso
Burundi Burundi
Cape Verde Cape Verde
Cameroon Cameroon
Chad Chad
Côte d’Ivoire Côte d’Ivoire
DR. Congo DR. Congo
Eswatini Eswatini
Gambia Gambia
Ghana Ghana
Kenya Kenya
Lesotho Lesotho
Liberia Liberia
Madagascar Madagascar
Malawi Malawi
Mali Mali
Mauritius Mauritius
Mozambique Mozambique
Niger Niger
Nigeria Nigeria
Rwanda Rwanda
Senegal Senegal
Seychelles Seychelles
Sierra Leone Sierra Leone
South Africa South Africa
Tanzania Tanzania
Togo Togo
Uganda Uganda
Zambia Zambia
Zimbabwe Zimbabwe
ATO Average (33) 35,3% ATO Average (33) 35,3%
0% 10% 20% 30% 40% 50% 60% 0% 2% 4% 6% 8% 10% 12%
2017 2016 2017 2016
These are Burundi (67%), The Gambia (59%), Share of the two VATs as a percentage of GDP
Mali (63%) and Liberia (38%), whose VAT collected As far as the share of domestic VAT in the GDP of
remains dependent on border taxation. The two VATs ATO countries in 2017, it varies between 0.7% and
contribute almost equally to the tax revenues of three 7.3%, with an average of 2.9% (Figure 3.5). With
countries very close to the 100% mark, but without 7.3%, South Africa has the highest ratio (where overall
quite reaching it - Uganda (98%), Senegal (97%), and VAT revenues are already the largest as a percentage
Botswana (93%). of GDP). Next come Seychelles (6.4%), Zimbabwe
At the regional communities’ level, imports account (5.1%) and Zambia (5.0%). With less than 1%, Nigeria,
for most of the VAT revenue in ECOWAS alone, where Angola, Chad and the DRC have the lowest ratios.
the domestic revenue to customs revenue ratio is The analysis shows that, in ATO countries where
86%. In CEMAC, however, this ratio is 238%. GDP per capita is estimated at approximately USD

10 000 or more (South Africa, Eswatini, Mauritius, Revenue growth from the two types of VATs
Seychelles), the VAT to GDP ratio is above 4%. Only
A comparison of the growth rates of the two VATs over
Botswana derogates from this observation with a ratio
the 2016-2017 period (Figure 3.6%) shows a higher
of 2.3%. Indeed, a high GDP per capita indicates
increase in the domestic VAT in Zambia, with a growth
high disposable income, which allows consumers to
of 60.8%. Eight other ATO countries have rates above
purchase goods subject to VAT.
20 percent, ranging from 20.9 percent in Seychelles
As for the VAT on imports to GDP ratio, only Togo to 42.8 percent in Malawi. Five countries, on the other
exceeds (by little) 5%. It is lowest in Nigeria (0.2%), hand, show a decrease in domestic VAT revenues,
with ratios below 2% in 11 countries. with an average growth rate of around 14%.
Figure 3.5. V
AT revenues as a percentage of Figure 3.6. V
AT revenues Growth rates,
the GDP, 2017 2017 2016
Domestic VAT and VAT on imports Domestic VAT and VAT on imports
Angola Angola
Benin Benin
Botswana Botswana
Burundi Burundi
Cameroon Cameroon
Chad Chad
DR. Congo DR. Congo
Eswatini Eswatini
Gambia Gambia
Ghana Ghana
Kenya Kenya
Lesotho Lesotho
Liberia Liberia
Malawi Malawi
Mali Mali
Mauritius Mauritius
Niger Niger
Nigeria Nigeria
Rwanda Rwanda
Senegal Senegal
Tanzania Tanzania
Togo Togo
Uganda Uganda
Zambia Zambia
Zimbabwe Zimbabwe
ATO Average 2,5%
2,9% ATO Average (33)
-0,5% 1,5% 3,5% 5,5% -80% -30% 20% 70% 120%
TVA sur les importations TVA interieure TVA interieure TVA sur les importations
70
Revenues from VAT on imports increased by 103.5% Several developed countries - including New Zealand,
in Mali - the highest growth rate, far ahead of Angola Canada and European Union countries - allow a
with 34.3%. It should be noted that in Liberia, full refund of any tax surplus, while developing
Senegal and The Gambia VAT on imports increased countries often use a hybrid credit repayment and
while domestic VAT declined. The reverse has been carry-forward systems. However, without effective
observed in Botswana, Seychelles, DRC, Cameroon refunds, VAT becomes a tax on turnover, which
and South Africa. Mozambique and Chad, for their distorts the economic development of a country
part, recorded a significant decline in both VATs, by penalizing in particular the exports sectors. The
probably due to numerous exemptions or a less stakes are enormous for companies’ cash flows and,
favourable economic environment. consequently, for their development.
3.1.6. VAT refunds

Long Delays, Insufficient Amounts
The VAT is based on the principle that a business can
African countries seem to overlook the economic
deduct downstream VAT from upstream VAT.12 Should
benefits of VAT refunds for companies. Indeed, the
the VAT collected exceed the VAT paid out to its
repayment terms are very long. According to an IMF
suppliers, the difference shall be paid to Government.
study, refunds take on average, months or even more
However, in the opposite scenario, the positive
than a year, while the international standard is one
credit shall constitute an excess tax credit vis-a-vis
month. The IMF qualifies this repayment period as the
Government, which is refundable in some cases.
“Achilles’ heel” of VAT.
VAT thus follows the mechanism of split payments
The amounts of VAT refunded correspond on average
in that the taxpayer is only supposed to pay the
to 30% or more of the gross VAT collected (Krever,
Government VAT on its own value added. VAT must
2008). And in some economies, they can reach up to
not constitute a cumulative tax.
50% (Harrison and Krelove, 2005). When compared
VAT credits are mainly the result of export-related to gross VAT revenues, the VAT refunded in ATO
activities and investments. In a more transient manner, countries is well below the OECD average of 39%
inventory replenishments are also likely to lead to net (Figure 3.7). The average figure for the 26 countries that
credit situations. Moreover, in multi-rate countries (for provided the related statistics was 12.6% in 2017. This
example, Côte d’Ivoire and Senegal), the application of percentage is slightly higher, 13.8%, in the 2011-2017
higher rates on intermediate consumption compared period (Figure 3.8).
to sales also leads to the formation of credits.
12. Upstream VAT is the VAT collected by a business during sales. Downstream VAT is paid during the procurement of goods and services.

Figure 3.7. V
AT refunds to VAT revenue ratios, Figure 3.8. V
AT refunds to VAT revenue ratios,
2017 and 2016 2011 2017
Botswana Botswana
Burundi Burundi
Cameroon Cameroon
DR. Congo DR. Congo
Eswatini Eswatini
Gambia Gambia
Ghana Ghana
Kenya Kenya
Lesotho Lesotho
Malawi
Malawi
Mali
Mali
Mauritius
Mauritius
Mozambique
Mozambique
Nigeria
Nigeria
Rwanda
Rwanda
Senegal
Senegal
Seychelles
Seychelles
South Africa
South Africa
Tanzania
Tanzania
Uganda
Zambia Uganda
Zimbabwe Zambia
ATO Average (26) 12,6% Zimbabwe
ATO Average, 26 13,8%
0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50%
2017 2016
With the exception of South Africa, which refunds Over the 2011/2017 period, the same group of countries
38.6% of its VAT revenues, all ATO countries had as in 2017 has the highest refund rates, but Zambia
refund rates below the OECD average in 2017. This rate leads the pack with 40.7% (Table 3.2). This exceptional
falls under 2% in Nigeria, The Gambia and Tanzania. result is attributable to a reform implemented in 2014.
After South Africa, the best paying countries are also The lowest rates are again those of Nigeria (0.3%)
members of the SADC region - Zambia, whose rate and The Gambia (1.7%), while that of Tanzania is, on
is 32.1%, Eswatini, 28.7%, Lesotho, 27, 9%, and average, 11% over the period under reporting, which
Botswana, 26.8%. With 19.9%, SADC has, moreover, suggests that particular events are responsible for
a rate well above the 8% average observed in other decline of its rate down to 1.6% in 2017.
regional groupings - EAC, CEMAC and ECOWAS.
72
Table 3.2. Annual VAT refund rates as a percentage of Gross VAT revenues, 2011 2017
2011 2012 2013 2014 2015 2016 2017 Average
South Africa 36,1 % 40,7 % 39,2 % 39,8 % 38,3 % 37,3 % 38,6 % 38,6 %
Botswana 26,9 % 38,1 % 29,1 % 36,8 % 30,3 % 33,1 % 26,8 % 31,6 %
Burkina Faso 8,2 % 9,7 % 9,7 % 18,8 % 12,8 % 13,7 % 13,8 % 12,4 %
Burundi 3,0 % 3,4 % 4,6 % 4,9 % 8,8 % 4,3 % 2,8 % 4,5 %
Cameroon 11,0 % 9,6 % 8,1 % 6,8 % 7,8 % 5,7 % 7,1 % 8,0 %
Cape Verde 0,0 % 6,5 % 5,0 % 7,0 % 4,2 % 8,1 % 5,0 % 5,9 %
Côte d’Ivoire 20,2 % 7,5 % 7,0 % 8,5 % 12,0 % 12,1 % 10,9 % 11,2 %
Eswatini NC NC 25,6 % 27,8 % 32,5 % 31,4 % 28,7 % 29,2 %
The Gambia NC NC NC 1,5 % 1,6 % 2,1 % 1,4 % 1,7 %
Ghana 4,0 % 4,7 % 4,6 % 2,8 % 9,9 % 8,6 % 8,1 % 6,1 %
Kenya 7,0 % 6,9 % 6,6 % 5,9 % 5,3 % 4,8 % 3,8 % 5,8 %
Lesotho 18,6 % 21,2 % 25,0 % 20,3 % 18,6 % 25,6 % 27,9 % 22,5 %
Madagascar 17,0 % 11,5 % 3,3 % 2,1 % 2,6 % 8,4 % 8,4 % 7,6 %
Malawi 5,7 % 5,4 % 7,6 % 4,4 % 5,3 % 3,9 % 6,8 % 5,6 %
Mali 11,5 % 16,6 % 18,1 % 16,6 % 19,6 % 21,0 % 16,3 % 17,1 %
Mauritius 21,7 % 20,4 % 18,2 % 20,7 % 15,8 % 17,3 % 15,8 % 18,6 %
Mozambique 10,2 % 11,0 % 9,1 % 7,0 % 11,2 % 15,0 % 21,9 % 12,2 %
Nigeria 0,1 % 0,0 % 0,1 % 0,1 % 0,6 % 0,0 % 1,3 % 0,3 %
Uganda 5,3 % 6,7 % 5,5 % 4,5 % 4,5 % 3,8 % 3,6 % 4,8 %
DRC NC 22,3 % 33,5 % 45,0 % 41,3 % 10,6 % 7,9 % 26,8 %
Rwanda 10,0 % 10,0 % 10,0 % 10,0 % 10,0 % 10,0 % 10,0 % 10,0 %
Senegal 2,3 % 1,8 % 4,4 % 2,8 % 2,1 % 2,8 % 3,0 % 2,7 %
Seychelles NC NC 3,4 % 3,9 % 8,4 % 9,7 % 6,1 % 6,3 %
Tanzania 7,0 % 6,7 % 9,8 % 17,3 % 18,6 % 16,1 % 1,6 % 11,0 %
Zambia 48,8 % 51,2 % 36,2 % 25,8 % 42,3 % 48,5 % 32,1 % 40,7 %
Zimbabwe 11,1 % 12,3 % 9,6 % 18,4 % 22,1 % 18,1 % 17,4 % 15,6 %
ATO Average, 26 13,6 % 14,1 % 13,3 % 13,8 % 14,9 % 14,3 % 12,6 % 13,8 %
Note: The following seven countries do not have data on VAT credit refunds: Angola, Benin, du Chad, du Liberia, Niger, Sierra
Leone and Togo.

The VAT refund performances for the 2011 to 2017 collection lower than budget forecasts. This shortfall
period generally confirms those of 2017. may be due to operational deficiencies, insufficient
capacity or tax evasion. Although the C-efficiency has
Indeed, over the six-year period, Nigeria and The
its limits (Keen, 2013), it remains a useful indicator.
Gambia generally recorded rates below 2% and
South Africa, Botswana, Eswatini and Zambia are
still above the 25% mark. Annual average rates for C-EFFICIENCY IN ATO COUNTRIES
all ATO countries range from 14.9% to 12.6% for an On average, the C-efficiency is 43.7% in the 13 ATO
average of 13.8%. Of the 26 countries, only nine have
countries that provided the necessary data (Figure
VAT refund rates above the ATO average over the
3.9). It rises to 90% in South Africa, which is hardly
entire period. In addition to Mali and the DRC, these
surprising the country being one of the most developed
countries all belong to the SADC region.
in Africa, its administration is normally effective. Only
These findings confirm the findings of Harrison and three other countries are more than 50% efficient -
Krelove (2005) according to which VAT refunds are Cape Verde (68.4%), Mauritius (63.6%) and Botswana
lower in developing economies. (57.6%). The least efficient in VAT collection are three
ECOWAS member countries - Niger (28.2%), Côte
d’Ivoire (28.0%), and Ghana (27.5%) - as well as the
3.1.7. VAT COLLECTION EFFICIENCY DRC (14%).
THE C-EFFICIENCY The case of the DRC is significant. Indeed, a study

carried out by the World Bank in 2017 found that the
The most commonly used measure of VAT return
tax gap in the DRC for VAT was 875 billion Congolese
in the tax literature is the C-efficiency proposed
francs (530 million USD), or 2.9% of the GDP. 49%
by Ebrill et al. (2001). This ratio is obtained by
of this gap was due to tax expenditure and the
relating the actual VAT revenue to what it would
rest, by VAT management challenges experienced
be if the tax were levied at the standard rate on
by the country’s tax and customs administrations.
all final consumption. It ranges from 0% to 100%,
where 100% is the recovery of the whole tax on the This finding is a measure of the efforts needed to make
entire final consumption. Any deviation from 100% tax administrations in ATO countries more efficient
indicates inefficiency in recovery due to poor tax and provide them with the resources they lack.
policy or non-compliance (Cnossen, 2015).
It is however worth noting that the concentration of
A weak tax policy can, for example, give rise to tax missions within a single structure could improve
multiple differentiated rates, too many exemptions the efficiency of VAT collection. Indeed, countries
and too many zero or reduced rates. Non-compliance, which apply an integrated tax management display
on the other hand, refers to the weaknesses of the an average C-efficiency ratio of 52% against 30% in
administration of the VAT which result in a revenue other countries.
74
Figure 3.9. C-efficiency ratios in ATO countries, 2017
Botswana
Cape Verde
Côte d’Ivoire
DR. Congo
Ghana
Malawi
Mali
Mauritius
Niger
Rwanda
Senegal
South Africa
Zimbabwe
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
The efficiency indicator of VAT collection has technical specific duties (quantity related) or duties ad valorem
shortcomings that may have influenced the above (fixed according to the value of a good).
results. In this regard, Keen (2013) noted the lack of
In principle, excise duties narrowly target certain
uniformity in the definition of consumption from one
goods in order to internalize negative externalities – in
country to another, the treatment of non-resident
other words, to transfer social costs (health, pollution,
purchases and the public sector consumption, which
traffic jams, etc.) to tobacco, alcohol, fuel users etc.
could lead to overestimation of VAT and jeopardize
(Tanzi and Zee, 2000). However, some excise duty
comparison between countries.
systems also target luxury items such as perfumes,
jewellery, pleasure boats, works of art, as well as
firearms and ammunition (Cnossen, 2006).
3.2. EXCISE DUTIES
In several ATO countries, excisable goods include
Excise duties are an indirect tax levied on the sale or tobacco, alcoholic beverages, petroleum products
consumption of certain goods produced or imported and motor vehicles. Collected revenues remain low,
into a country. It is levied on a limited number however, and there is significant room for improvement.
of products, such as tobacco, alcohol, vehicles, In this regard, Ghana which has increased its excise
petroleum products, games of chance, etc. Collected revenues by introducing an excise tax stamp system,
from the producer, excise duties take the form of could serve as an example (Box 3.1).

Box 3.1.
Ghana launches excise tax stamp
On September 1, 2017, the Ghana Revenue Authority (GRA) launched a tax stamp policy under the 2013
Excise Tax Act. Indeed, the provisions of this law, which the GRA intends to enforce, make it possible to affix
tax stamps on certain excise goods.
The purpose of the excise tax stamp system is to:
• protect and increase tax revenues;
• monitor the under-declaration of goods;
• fight illegal trade practices, smuggling and counterfeiting of excise goods.
Goods that must be marked with an excise tax stamp are cigarettes, soft drinks, alcoholic beverages, spirits
and bottled water, whether locally produced or imported.
In general, any company that produces, sells or imports excise goods must be registered with the GRA.
And as they receive their stamps, they must commit to affix them. Since the implementation of the excise
tax stamp policy, more than 295 companies have registered with the GRA for stamps.
The share of domestic excise tax revenue in Ghana’s GDP increased from 0.3% in 2016 to 1% in 2018. In
addition, the growth rate of this revenue between 2017 and 2018 was 19%, while it was 17% for the five
years between 2011 and 2016.
The excise stamp policy has brought other gains, the main ones being:
• better compliance with excise tax obligations since the quantities of products subject to tax are accurately
accounted for and the exact amounts are collected;
• the reduction of tax evasion thanks to fake stamp detection devices,
• a better control of declarations, since the stamps obtained by the companies are the replicas of tax
declarations.
Share of Excise Duties in GDP in GDP in 2017 were recorded in Botswana (0.2%),
Ghana (0.2%), Benin (0.3%) and Chad (0.3%).
As in 2016, the share of excise revenue in GDP is
highest in 2017 in the Seychelles (6.4%), Namibia It should be noted, once again, that the proceeds
(4.8%), Mauritius (4.4%), Zimbabwe (3.8%) and from excise duties are higher in countries where VAT
Burundi (3.4%) (Figure 3.10). In fact, this share administration is integrated, compared to those where
increased in these same countries (except in it is managed by separate structures.
Zimbabwe) between 2016 and 2017, while it There are disparities at the regional level. In 2017, excise
decreased in 18 of the 32 countries that provided revenues represented 2.1% of GDP in SADC, 2.2% in
data. Overall, however, it remained stable at 1.6% of the EAC, 1.4% in the Southern African Customs Union
GDP on average. The lowest shares of excise duty (SACU) and 1% in ECOWAS and CEMAC.
76
Figure 3.10. S
hare of excise revenues in total Figure 3.11. Excise revenue growth, 2011-2017
GDP, 2017 and 2016
Benin Benin
Botswana Burkina Faso
Burkina Faso Burundi
Burundi Cape Verde
Cape Verde Cameroon
Cameroon Chad
Chad Côte d’Ivoire
Côte d’Ivoire DR. Congo
DR. Congo Eswatini
Eswatini Gambia
Gambia Ghana
Ghana Kenya
Kenya Lesotho
Lesotho Liberia
Liberia Malawi
Madagascar Mali
Malawi Mauritius
Mali Mozambique
Mauritius Nigeria
Mozambique Niger
Namibia Rwanda
Niger Senegal
Rwanda Seychelles
Senegal Sierra Leone
Seychelles South Africa
Sierra Leone Tanzania
South Africa Togo
Tanzania Uganda
Togo Zambia
Uganda Zimbabwe
Zambia ATO Average, 30 9,3%
Zimbabwe
ATO Average (32) -100% -70% -40% -10% 20% 50% 80%
0% 2% 4% 6% 8%
2017 2016
Evolution of Excise Duties Share of Excise Revenue in Total Tax Income

With the exception of Senegal, Lesotho and Nigeria, The contribution of the excise revenue to total tax
the share of GDP in excise revenue increased in all revenues of ATO countries (Figure 3.12) was 9.1% on
ATO countries over the period 2011 2017 (Figure average in 2017. Burundi (28.2%), Mauritius (24.2%),
3. 11) at an average rate of 9.3%. The strongest Seychelles (21.4%) and Zimbabwe (19.2%) have
the highest contributions and Nigeria (0.7%), Ghana
growth was 77%, in Côte d’Ivoire, followed by 41.9%
(1.4%) and Botswana (1.8%) the lowest.
in Chad and 34.8% in Sierra Leone. Côte d’Ivoire’s
performance is due to the post-election crisis of As for regional economic groups, ATO countries from
2011 which had a major impact on economic activity the EAC lead with 15.5%, followed by SADC with
that year. Low growth rates, on the other hand, were 10%. Overall, the share of excise revenue in total tax
observed in Benin (0.6%), Cape Verde (1%), Ghana revenues declined between 2016 and 2017, a pattern
(1.3%) Malawi (1.7%). confirmed by 18 out of 33 ATO countries. Among the
15 countries that saw increases was Sierra Leone,
where the share of excise revenue doubled from 7.3%
in 2016 to 15.1% in 2017.

Figure 3.12. Share of excise revenue in total tax income, 2017
Benin
Botswana
Burkina Faso
Burundi
Cape Verde
Cameroon
Chad
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (33)
0% 5% 10% 15% 20% 25% 30%
2017 2016
Excise tax revenues vary significantly from country to The same trend is observed at the regional grouping
country depending on the taxed product (Figure 3.13). level. The only exception is CEMAC, where alcoholic
However, a few general patterns can be observed. beverages, with 56%, outpace fuel with 42%.
With an average rate of 55.6% across all ATO countries, Of the ATO countries, Mauritius has the most balanced
excise duties on fuel account for the largest share of distribution of excise revenue on each product. Each
total excise revenue. This predominance is driven by a is between 22% and 30% of the total revenues. Some
96% contribution in Sierra Leone, 92% in Mali, 87% in countries, on the other hand, rely heavily on a single
Côte d’Ivoire, 79% in Zimbabwe and 78% in Ghana. product. This is the case, for example, of Côte d’Ivoire,
Then come alcoholic beverages with an average Mali and Sierra Leone for fuel, and Namibia, where
share of 23.6%, followed by tobacco products, which alcohol accounts for more than 97% of revenues.
contribute 10.1% of total excise revenue. The extreme case is Eswatini where alcohol accounts
for all the excise revenues.
78
Figure 3.13. Excise revenue by taxed product, 2017
Botswana
Burkina Faso
Burundi
Cameroon
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Liberia
Madagascar
Mali
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (28)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Tabacco Alcohol Fuel Other Products
3.3. Import Duties to 1.6% in 2017. The same trend is observed in all
regional economic groupings and in 17 out of 32 ATO
Import duties were originally designed for protectionist countries. The largest decreases were registered
(Hamilton, 1791) and, therefore, non-neutral purposes. in Togo (0.6 percentage point), Seychelles and The
Consequently, they should not be a major source of Gambia (- 0.5 percentage point).
tax revenue. In practice, however, they are a source
of revenue in the absence of any other adequate tax
Evolution of Import Duties
treatment. The share of import duty revenues in GDP
was low everywhere in 2017, and still below 5% (Figure Revenue from import duties were up by 9.6%
3.15). The highest shares were recorded in Liberia between 2016 and 2017 in ATO countries; more than
(4.4%), Cape Verde (4%) and Togo (3.2%), which were double the percentage increase between 2015 and
the only countries above the 3% mark. Botswana 2016 (Figure 3.16). This trend is mainly due to large
(0.1%), Eswatini (0.2%) and Mauritius (0.3%) had the increases in Zambia (52.6%), Angola (40.2%) Malawi
lowest rates. (32.0%), and to a lesser extent Chad, Ghana, Burundi
and Sierra Leone. Indeed, these three countries
Moreover, the contribution of revenues from custom all show increases of almost 30%. Eight countries
duties to GDP in 2017 was almost the same as in recorded growth rates of 11% to 20%, and eight others
2016, or even slightly down, from 1.7% in 2016 of less than 10%.

Some countries, however, recorded large revenue (3.1%), Mauritius (2.2%), the DRC (1.8%) and South
losses. These were Botswana (24.9%), Seychelles Africa (1%). 3%). The highest increase was observed in
(19.7%), Eswatini (15.5%) and Togo (11.9%). Togo’s poor Malawi with 32% growth, followed by Ghana, Tanzania,
performance is explained by the economic slowdown Gambia, Madagascar, Uganda, Sierra Leone and
in the second half of 2017 due to socio-political unrest. Rwanda with growth rates of over 15%.
The Gambia, South Africa, Mozambique, Liberia and
Burkina Faso also recorded declines of less than 10%. Furthermore, customs duties revenues growth
For Mozambique and Togo, they are consecutive to between 2012 and 2017 seemed less sustained in
those already recorded between 2015 and 2016. countries where they are administered by a separate
structure from the general tax administration. Indeed,
Import duty revenue’s evolution was on the rise it was 6.9% against 9.3% for countries with integrated
over the period 2012 to 2017 (Figure 3.17). Only five management.
countries declined - Seychelles (6.2%), Zimbabwe
Figure 3.14. Share of import duty revenues in Figure 3.15. Import duty revenues growth rate,
GDP, 2017 and 2016 2017 and 2016
Angola Angola
Benin Benin
Botswana Botswana
Burundi Burundi
Cameroon Cameroon
Chad Chad
DR. Congo DR. Congo
Eswatini Eswatini
Gambia Gambia
Ghana Ghana
Kenya Kenya
Liberia Liberia
Malawi Malawi
Mali Mali
Mauritius Mauritius
Niger Nigeria
Nigeria Niger
Rwanda Rwanda
Senegal Senegal
Tanzania Tanzania
Togo Togo
Uganda Uganda
Zambia Zambia
Zimbabwe Zimbabwe
ATO Average (32) ATO Average, 33 9,6%
0% 1% 2% 3% 4% 5% 0% -30% -10% -10% 10% 30% 50%
2017 2016 2017 2016
80
Figure 3.16. Evolution of revenue from import duties for the period 2012-2017
Malawi
Ghana
Tanzania
Gambia
Madagascar
Uganda
Sierra Leone
Rwanda
Mali
Kenya
Mozambique
Côte d’Ivoire
Average ATO, 31
Zambia
Botswana
Burundi
Benin
Senegal
Niger
Nigeria
Togo
Cameroon
Cape Verde
Liberia
Burkina Faso
Chad
Angola
South Africa
DR. Congo
Mauritius
Zimbabwe
Seychelles
-10% -5% 0% 5% 10% 15% 20% 25% 30% 35%
Note: Namibia, Lesotho and Eswatini did not provide data for the entire period.
3.4. Personal income tax ATO Developed

Countries countries
Personal income tax (PIT) in developing countries,
particularly in Africa, generates very little revenue Share of revenue from 95 % 80 %
considering its assumed potential. This is partly due public sector and
to lower tax rates than OECD countries, but also to large businesses PAYE
the narrow base of the PIT (Modi etal.,1987):
Share of the 5% 50 %
population who pay
income tax
Percentage of taxed 15 % 57 %
income

3. Non-tax Revenue
Personal income tax’s contribution to GDP (5.7%), the only two countries to exceed 5% in 2017.
They are followed by Seychelles, Eswatini, Kenya and
With an average of 2.8% in 2017 (Figure 3.18), the PIT-
Malawi, whose PIT-to-GDP ratio is above 4%.
to-GDP ratio is still relatively low. In 2016, it was 3%
compared to 8.2% for OECD countries. Moreover, this The lowest PIT-to-GDP ratios in ATO countries are
average is driven upwards by SACU countries with an observed in Nigeria (0.6%), the DRC (1.0%), The Gambia
average PIT-to-GDP ratio of 6.1%, while it is below (1.1%), Niger (1.1 %), and in Burundi (1.1%). All of them
4% in all other regional groupings. apply lower marginal tax rates which are very low (below
10%), with the exception of Burundi (20%).
In 2017, PIT accounted for 9.7% of GDP in South
Africa - the highest ratio in the ATO countries and Thus, it is clear that the PIT marginal rates influence its
above the OECD average (as was the case in 2016, performance as a share of GDP (see Annex).
at 9.4%). Far behind are Namibia (6.8%) and Lesotho
Figure 3.17. PIT-revenue-to-GDP ratios, 2017 and 2016
South Africa
Namibia
Lesotho
Seychelles
Eswatini
Kenya
Malawi
Rwanda
Mozambique
Botswana
Zambia
Liberia
Average ATO, 32
Zimbabwe
Sierra Leone
Senegal
Tanzania
Uganda
Ghana
Mauritius
Burkina Faso
Cote d’Ivoire
Mali
Chad
Cameroon
Togo
Cape Verde
Madagascar
Benin
Angola
Burundi
Niger
Gambia
DR. Congo
Nigeria
0% 2% 4% 6% 8% 10%
2017 2016
82
Evolution of PIT revenues • 7 SADC countries: Malawi - 29.8%, Mozambique
In absolute terms, revenues from PIT were on the - 18.7%, Angola - 17.8%, DRC - 15.7%; Botswana
increase in all ATO countries between 2011 and - 14.5%, Namibia - 14.5%, Mauritius - 11.6%.
2017. The only exceptions are Zimbabwe (3.0%)
As for the regional economic communities, the
and Cape Verde (11.8%). This overall upward trend
average PIT revenue growth is as follows:
varies, at the country level, from 2.2% (Burundi) to
29.8% (Malawi). In total, more than half of the ATO • EAC 12.7%
countries (17) show growth above the ATO average, • SADC 12.5%
(i.e. 11.5%.) These include:
• SACU 11.9%
• 4 EAC countries: Uganda - 16.8%, Kenya - 15.1%, • CEMAC 10.9%
Tanzania - 15.0%, Rwanda - 14.0%; • ECOWAS 10.1%.
Figure 3.18. PIT Revenue growth, 2011 2017
Malawi
Ghana
Mozambique
Angola
Sierra Leone
Uganda
DR. Congo
Niger
Togo
Kenya
Tanzania
Côte d’Ivoire
Botswana
Namibia
Rwanda
Chad
Mauritius
Average ATO, 34
Zambia
Nigeria
Burkina Faso
South Africa
Eswatini
Mali
Liberia
Lesotho
Cameroon
Madagascar
Seychelles
Senegal
Gambia
Burundi
Benin
Zimbabwe
Cape Verde
-15% -10% -5% 0% 5% 10% 15% 20% 25% 30%

The evolution of the performance of the PIT in the last On the other hand, several countries show successive
two periods (2015 - 2016 and 2016 - 2017) confirms increases over the two periods, as well as strong
the trends observed over the entire 2011-2017 period increases in 2016 - 2017. These are Ghana, Burkina
for certain countries: Faso, Eswatini, Botswana, Uganda and Mali.
• Zimbabwe: 33.5% decrease between 2016 and 2017 Finally, it should be noted that some countries have
(the highest) and 8.5% between 2015 and 2016. experienced very high growth rates in 2016-2017 after
decreases between 2015 and 2016. These are:
• Seychelles: successive decreases over the two
• Nigeria 39%
periods of 2016-2017 and 2015-2017.
• DRC 28.8%
• Benin and Senegal: respective declines of 23% and • Cape Verde 22.5%
10.5% between 2016 and 2017, despite increases • Burundi 15.5%
of 10.8% and 19% between 2015 and 2016. • Chad 14.1%
Figure 3.19. Evolution of PIT revenues, 2017 and 2016
Nigeria
Ghana
DR. Congo
Burkina Faso
Cape Verde
Eswatini
Botswana
Uganda
Mali
Burundi
Chad
Lesotho
Rwanda
Madagascar
Mozambique
Mauritius
South Africa
Malawi
Average ATO, 34
Niger
Kenya
Côte d’Ivoire
Zambia
Namibia
Cameroon
Togo
Sierra Leone
Gambia
Angola
Seychelles
Tanzania
Liberia
Senegal
Benin
Zimbabwe
-40% -30% -20% -10% 0% 10% 20% 30% 40%
PIT Growth Rate 2017/2016 PIT Growth Rate 2015/2016
84
On average, PIT revenues of ATO countries increased Country PIT revenues GDP per capita
by 8.6% between 2016 and 2017 against 9.8%
Namibia 1 677 11 213
between 2015 and 2016.
Niger 38 1 057
Nigeria 81 5 754
Revenue per work unit
Uganda 102 2 111
Income taxes per work unit are the amount of revenue
to be collected from any employee, assuming that DRC NC 1 084
everyone earns the same income. In general, revenues Rwanda 134 1 997
collected on personal income in 2017 increased as Senegal 165 3 705
high incomes per capita increased (Table 3.4). Seychelles 2 656 28 976
Sierra Leone NC 1 538
Table 3.3. PIT revenues and GDP per capita, 2017 Tanzania 133 2 870
Country PIT revenues GDP per capita Chad 2 940 1 907
South Africa 3 179 12 850 Togo 53 1 668
Angola NC 6 597 Zambia 484 4 221
Benin 113 2 532 Zimbabwe NC 2 369
Botswana 1 065 17 642 Note: NC means « not communicated »

Burkina Faso NC 1 822
Burundi NC 773
Cameroon 107 3 836 High-income per capita countries also tend to have
high incomes per work unit (Seychelles, South Africa
Cape Verde 216 6 397
and Eswatini). Mauritius, however, whose income per
Côte d’Ivoire 196 3 892 capita is the second highest in the ATO countries,
Eswatini 1 776 9 948 has a lower income per work unit than the rest of the
The Gambia NC 2 538 region. This is due to the lowering of its tax rate. This
rate is obtained by relating per capita income to GDP
Ghana 244 5 759
per capita (Figure 3.21). It is an indirect measure of the
Kenya NC 3 413
effectiveness of an IRPP system.
Lesotho NC 3 417
At over 10%, South Africa, Eswatini, Namibia and
Liberia NC 916
Zambia have the highest tax rates per work unit,
Madagascar 41 1 575 although their marginal rates are not the highest
Malawi NC 1 234 amongst ATO countries. At the other end of the scale,
Mauritius 993 22 275 the effective income per capita tax rates are the lowest
Mozambique 116 1 399 in Nigeria, Madagascar and Cameroon.

Figure 3.20. Effective PIT rates, 2017 and 2016
Benin
Botswana
Burundi
Cape Verde
Cameroon
Côte d’Ivoire
Eswatini
Ghana
Kenya
Lesotho
Madagascar
Mauritius
Mozambique
Namibia
Nigeria
Niger
Rwanda
Senegal
Seychelles
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (25) 6,9%
0% 5% 10% 15% 20% 25%
2017 2016
3.5. Corporate Income Tax SACU is the most CIT-dependent economic group –
with approximately 22%, compared to 18% in SADC,
According to the OECD, the corporate income tax 15% in ECOWAS, and 12% in the other regions.
(CIT) represents higher shares of tax revenues and
GDP in developing countries than in rich countries. Generally speaking, the CIT-to-GDP ratio remains
In fact, tax levies on companies are higher in ATO very low in ATO countries with 2.4% on average.
countries - 16% of total tax revenue compared to 9% Apart from Botswana (6.1%), Mozambique (5.7%)
in OECD countries (Figure 3.23). and Seychelles (5.5%), all countries have ratios of
less than 5%, with five of them even scoring as low as
1% (Benin, Uganda, Chad, Angola and Sierra Leone)
Share of corporate income tax in GDP and total (Figure 3.22). At the regional level, SACU recorded
tax revenues 4.1% followed by SADC (3.1%). The lowest ratio,
It is in Botswana that the CIT generated the highest 1.4%, was observed in the CEMAC region.
revenues with 45.1%. Next are Nigeria (37.5%) and
Mozambique (31.9%). The lowest CIT-to-GDP ratios
Evolution of corporate income tax revenues
were found in Uganda (6.1%), Namibia (5.8%) and
Sierra Leone (3.2%) (Figure 3.23). The majority of ATO countries, 22 out of 33, recorded
growth in CIT revenue between 2016 and 2017 (Figure
3.24). However, there are still variations from one
country to another:
86
• the highest growth - 66.4% in the DRC and 51.6% The growth rates of the ATO countries by regional
in Chad;13 grouping are:
• the lowest growth - 2.4% in the Gambia, 4.4% in • above 10%: CEMAC - 21.1%, SADC - 16%, EAC
Uganda, 4.5% in Mauritius. - 11.3%
• the strongest decline - 31.5% in Sierra Leone, • below 10%: SACU, 6.9%, and ECOWAS, 3.1%.
31% in Benin, 26.6% in Angola.
Looking at the annual average, only three countries
As a general trend, CIT revenue growth is faster in showed declines over the 2012/2017 period (Figure
countries that manage domestic taxes and customs 3.25): Liberia (14.5%), Nigeria (9.6%) and Cameroon
taxes and duties separately. Their growth rate is (0.2%). The most prominent upward trend was
14.3% against 8.3% in the countries with integrated observed in Malawi (28%), followed by Ghana (21.1%)
management systems. and Rwanda (19%).
Figure 3.21. CIT-to-GDP ratio, 2017 and 2016 Figure 3.22. CIT-to-Tax revenue ratios, 2017 and 2016
Angola Angola
Benin Benin
Botswana Botswana
Burundi Burundi
Cameroon Cameroon
Chad Chad
DR. Congo DR. Congo
Eswatini Eswatini
Gambia Gambia
Ghana Ghana
Kenya Kenya
Lesotho Lesotho
Liberia Liberia
Malawi Malawi
Mali Mali
Mauritius Mauritius
Namibia Namibia
Niger Nigeria
Nigeria Niger
Rwanda Rwanda
Senegal Senegal
Tanzania Tanzania
Togo Togo
Uganda Uganda
Zambia Zambia
Zimbabwe Zimbabwe
ATO Average (34) ATO Average (34)
-1% 1% 3% 5% 7% 0% 10% 20% 30% 40% 50%
2017 2016 2017 2016
13. In Chad, this upward trend is partly explained by the entry into force of a law which provides for the increase of the fixed duty and land tax.

Figure 3.23. Evolution of CIT revenues, 2017 and 2016 Figure 3.24. Average annual evolution of
CIT revenues, 2012 2017
Angola Angola
Benin Benin
Botswana Botswana
Burundi Burundi
Cameroon Cameroon
Chad Chad
DR. Congo DR. Congo
Eswatini Eswatini
Gambia Gambia
Ghana Ghana
Kenya Kenya
Lesotho Lesotho
Liberia Liberia
Malawi Malawi
Mali Mali
Mauritius Mauritius
Namibia Namibia
Niger Nigeria
Nigeria Niger
Rwanda Rwanda
Senegal Senegal
Tanzania Tanzania
Togo Togo
Uganda Uganda
Zambia Zambia
ATO Average (33) 10,5% Zimbabwe
ATO Average (34) 8,9%
-50% -30% -10% 10% 30% 50% 70%
-15% -5% 5% 15% 25% 35%
2017/2016 2016/2015
Corporate income tax rates 3.6. Flat Taxes

Tax rates differ from one ATO country to another, The flat tax, also known as “synthetic tax” in some
but generally range from 15% in Mauritius to 35% in countries, is a tax paid by small and micro-taxpayers
Zambia and Chad (Table 3.5). and natural or legal persons who, regardless of the
nature of the activity carried out, have a relatively low
In addition to this diversity of rates, several countries
turnover. Such turnover is placed in a certain category
apply different rates depending on the sector of
which determines the tax amount. The flat tax
activity. This confirms the findings of Tanzi and Zee
releases other taxes, including VAT, business license
(2000), according to whom developing countries tend
and income tax.
to have multiple, differentiated sector-based rates.
This practice is often criticized: on the one hand, it Data provided by 17 ATO countries shows that the
derogates from the principle of tax fairness and, on flat tax contributes only 1.5% on average to domestic
the other hand, distorts the market and increases the tax revenues. This average is strongly influenced by
costs of tax administration. Sierra Leone where the flat tax contribution is about
88
15%. Far behind are Tanzania (2.1%), Mali (2.1%) and The following trends emerge:
Ghana (1.6%). In the other ATO countries, the flat tax
Tax revenue-to-GDP ratios
contributes less than 1% to domestic tax revenues.
- Higher than the ATO average in 4 out of 5 taxes:
Taxpayers falling under this tax regime are generally Lesotho, Mozambique, Rwanda, Seychelles and
the most numerous in ATO countries. Yet their tax Zimbabwe
contribution remains marginal. For the sake of efficiency,
the debate that arises in tax administrations is whether These are the best performing countries in 2017
the management of these taxpayers should not be local
- Higher than the ATO average for 3 taxes out of 5:
(municipalities, prefectures, regions, provinces, etc.).
South Africa, Burkina Faso, Cameroon, Cape
Verde, Eswatini, Mali and Mauritius
3.7. Evaluation of tax administrations - Below the ATO average for the 5 taxes:
efficiency Uganda, DRC and Chad
How efficient are the tax administrations in ATO These are the worst performing countries in 2017.
countries? Three indicators make it possible to better
Collection growth rate by tax type in 2017 and
assess them in terms of the revenue collected across
the five taxes studied in this chapter (Table 3.6). 2016
- Above the ATO average for 4 taxes out of 4
The three indicators are, for each of the taxes:
Ghana, Madagascar, Malawi, Mali and Nigeria
• the tax-to-GDP ratio
• Tax-to-Total tax revenue ratio,
• changes in revenue collected in 2017 compared to These are the best performing countries in 2017
2016. - Above the ATO average for 3 taxes out of 4
The five types of taxes are, as a reminder: the value- Burundi and Chad
added tax (VAT), the personal income tax (PIT), the - Below the ATO average for 4 taxes
Corporate Income Tax (CIT), customs duties, the The Gambia, Liberia, Niger and Togo. These are
excise duties. the worst performing countries.
Figure 3.25. Flat tax-to-total domestic tax revenue ratios, 2017
Sierra Leone 14,980%

Tanzania 2,104%
Mali 2,091%
Ghana 1,574%
Liberia 0,782%
Uganda 0,717%
Benin 0,675%
Chad 0,554%
Cote d’Ivoire 0,500%
Burundi 0,353%
Seychelles 0,326%
Niger 0,244%
Zimbabwe 0,200%
Togo 0,166%
Kenya 0,011%
Malawi 0,003%
South Africa 0,002%
0% 2% 4% 6% 8% 10% 12% 14% 16%

Table 3.4. Tax revenue indicators by tax type
Above the ATO average Below the ATO average

Country VAT PIT CIT Import duties Excise duties
VAT-to- VAT-to-total Progression PIT-to- PIT-to-Total Progression CIT-to- CIT-to-Total Progression Import Import duties- Progression Excise Excise
GDP revenues rate 2017- GDP revenue rate 2017- GDP revenue rate 2017- duties-to- to-Total rate 2017- duties-to- duties-to-Total
ratio ratio 16 ratio ratio 16 ratio ratio 16 GDP ratio revenue ratio 16 GDP ratio revenue ratio
ATO average 5,4 % 35,3 % 11,7 % 2,8 % 17,5 % 8,6 % 2,4 % 15,6 % 10,5 % 1,6 % 11,2 % 9,6 % 1,6 % 9,1 %
South Africa 10,7 % 41,1 % 5,0 % 9,7 % 37,2 % 9,4 % 4,7 % 18,1 % 7,1 % 0,7 % 2,8 % -4,5 % 1,2 % 4,6 %
Angola 1,2 % 18,9 % 17,9 % 1,2 % 18,7 % 0,9 % 0,6 % 9,0 % -26,6 % 0,6 % 9,8 % 40,2 % NC NC
Benin 5,9 % 41,1 % 26,1 % 1,3 % 8,9 % -23,0 % 1,0 % 6,8 % -31,0 % 2,5 % 17,2 % 3,9 % 0,3 % 2,3 %
Botswana 4,7 % 34,4 % -0,7 % 3,7 % 27,0 % 18,8 % 6,1 % 45,1 % 34,3 % 0,1 % 0,7 % -24,9 % 0,2 % 1,8 %
Burkina Faso 7,1 % 52,5 % 16,2 % 2,0 % 14,7 % 22,6 % 2,4 % 17,8 % 6,3 % 2,2 % 16,4 % -0,1 % 0,8 % 5,8 %
Burundi 4,4 % 36,6 % 21,4 % 1,1 % 9,4 % 15,5 % 1,5 % 12,3 % 9,2 % 0,8 % 6,4 % 28,2 % 3,4 % 28,2 %
Cameroon 5,6 % 41,5 % 16,7 % 1,6 % 11,6 % 3,7 % 2,1 % 15,1 % -9,4 % 1,8 % 13,6 % 13,5 % 1,6 % 11,8 %
Cape-Verde 7,7 % 37,8 % 11,0 % 1,3 % 6,5 % 22,5 % 2,4 % 12,0 % 13,3 % 4,0 % 19,6 % 5,9 % 1,3 % 6,4 %
Côte d’Ivoire 4,0 % 25,7 % 11,4 % 1,9 % 12,4 % 6,8 % 1,4 % 8,8 % 18,3 % 2,2 % 14,1 % 5,9 % 2,4 % 15,4 %
Eswatini 5,6 % 40,9 % 7,9 % 4,6 % 33,5 % 21,9 % 2,6 % 19,0 % 9,2 % 0,2 % 1,1 % -15,5 % 0,4 % 2,6 %
Gambia (The) 3,4 % 29,8 % 4,0 % 1,1 % 9,7 % 1,4 % 1,1 % 9,4 % 2,4 % 2,8 % 24,8 % -6,6 % 1,0 % 9,1 %
Ghana 3,8 % 28,7 % 25,0 % 2,1 % 15,7 % 36,8 % 2,6 % 19,3 % 21,7 % 2,2 % 16,6 % 29,7 % 0,2 % 1,4 %
Kenya 4,6 % 27,5 % 14,6 % 4,6 % 27,1 % 7,5 % 2,4 % 14,2 % 18,2 % 1,2 % 6,8 % 7,3 % 2,2 % 12,8 %
Lesotho 6,5 % 41,1 % 2,0 % 5,7 % 35,8 % 13,2 % 2,8 % 17,9 % -12,6 % NC NC NC 0,4 % 2,3 %
Liberia 4,2 % 24,6 % 4,3 % 3,3 % 19,3 % -7,5 % 1,4 % 8,3 % -8,3 % 4,4 % 25,8 % -0,2 % 0,6 % 3,6 %
Madagascar 6,2 % 56,2 % 23,0 % 1,3 % 11,9 % 10,6 % 1,5 % 13,3 % 16,5 % 1,4 % 12,4 % 19,7 % 1,1 % 9,7 %
Malawi 5,1 % 31,6 % 35,2 % 4,3 % 26,5 % 9,1 % 1,9 % 11,4 % 48,8 % 1,5 % 9,3 % 32,0 % 1,5 % 9,3 %
Mali 6,4 % 37,7 % 66,3 % 1,7 % 9,9 % 17,1 % 2,8 % 16,2 % 23,6 % 2,2 % 13,0 % 14,4 % 0,5 % 3,0 %
Mauritius 8,5 % 47,2 % 7,3 % 2,1 % 11,5 % 9,7 % 2,7 % 14,9 % 4,5 % 0,3 % 1,6 % 14,7 % 4,4 % 24,2 %
Mozambique 6,8 % 37,9 % -7,3 % 3,7 % 20,5 % 10,4 % 5,7 % 31,9 % 23,7 % 1,5 % 8,3 % -2,9 % 1,7 % 9,3 %
Namibia NC NC NC 6,8 % 9,0 % 4,8 % 4,4 % 5,8 % -3,7 % NC NC NC 4,8 % 6,4 %
Niger 4,4 % 34,0 % 2,3 % 1,1 % 8,7 % 8,4 % 3,9 % 29,7 % -6,7 % 1,2 % 9,3 % 1,6 % 0,4 % 3,1 %
Nigeria 0,9 % 16,8 % 17,4 % 0,6 % 12,6 % 39,0 % 1,9 % 37,5 % 35,7 % 0,5 % 9,2 % 15,5 % NC 0,7 %
Uganda 4,5 % 32,7 % 9,5 % 2,3 % 16,9 % 17,3 % 0,8 % 6,1 % 4,4 % 1,1 % 8,4 % 11,0 % 1,2 % 8,5 %
Above the ATO average Below the ATO average
Country VAT PIT CIT Import duties Excise duties
VAT-to- VAT-to-total Progression PIT-to- PIT-to-Total Progression CIT-to- CIT-to-Total Progression Import Import duties- Progression Excise Excise
GDP revenues rate 2017- GDP revenue rate 2017- GDP revenue rate 2017- duties-to- to-Total rate 2017- duties-to- duties-to-Total
ratio ratio 16 ratio ratio 16 ratio ratio 16 GDP ratio revenue ratio 16 GDP ratio revenue ratio
DRC 1,6 % 34,0 % 5,3 % 1,0 % 19,8 % 28,8 % 1,1 % 22,4 % 66,4 % 0,6 % 11,6 % 0,7 % 0,5 % 11,3 %
Rwanda 5,5 % 36,0 % 8,9 % 3,8 % 24,6 % 12,5 % 2,5 % 16,6 % 19,5 % 1,1 % 7,0 % 4,9 % 1,9 % 12,3 %
Senegal 6,0 % 40,9 % 0,4 % 2,4 % 16,5 % -10,5 % 1,5 % 10,4 % 15,7 % 2,1 % 14,3 % 12,3 % 1,4 % 9,3 %
Seychelles 10,9 % 36,1 % 9,0 % 4,7 % 10,3 % -2,6 % 5,5 % 18,2 % 30,0 % 1,4 % 3,2 % -19,7 % 6,4 % 21,4 %
Sierra Leone 2,6 % 25,4 % 7,2 % 2,6 % 25,1 % 2,6 % 0,3 % 3,2 % -31,5 % 1,8 % 17,3 % 27,3 % 1,5 % 15,1 %
Tanzania 3,7 % 28,0 % 11,1 % 2,4 % 18,1 % -3,5 % 1,4 % 10,2 % 5,1 % 1,4 % 10,9 % 14,4 % 2,0 % 14,9 %
Chad 1,2 % 16,4 % -35,5 % 1,6 % 22,2 % 14,1 % 0,7 % 9,2 % 51,6 % 1,2 % 16,8 % 29,8 % 0,3 % 4,0 %
Togo 9,3 % 45,0 % 1,0 % 1,5 % 7,5 % 2,8 % 1,9 % 9,2 % -19,3 % 3,2 % 15,3 % -11,9 % 1,1 % 5,6 %
Zambia 8,3 % 52,6 % 32,5 % 3,5 % 22,3 % 6,3 % 1,8 % 11,5 % 10,2 % 1,2 % 7,5 % 52,6 % 1,3 % 8,1 %
Zimbabwe 7,3 % 37,0 % 11,1 % 2,7 % 13,9 % -33,5 % 4,1 % 20,8 % NC 1,7 % 8,4 % 6,2 % 3,8 % 19,2 %
SACU
6,9 % 39,4 % 3,6 % 6,1 % 28,5 % 13,6 % 4,1 % 21,2 % 6,9 % 0,3 % 1,5 % -14,9 % 1,4 % 3,5 %
Average
SADC
6,4 % 39,2 % 11,4 % 3,9 % 21,1 % 7,7 % 3,2 % 18,5 % 16,0 % 0,9 % 6,7 % 8,2 % 2,1 % 10,0 %
Average
EAC Average 4,5 % 32,1 % 13,1 % 2,8 % 19,5 % 9,8 % 1,7 % 11,9 % 11,3 % 1,1 % 7,1 % 13,2 % 2,1 % 15,3 %
CEMAC
3,4 % 29,0 % -9,4 % 1,6 % 16,9 % 8,9 % 1,4 % 12,1 % 21,1 % 1,5 % 15,2 % 21,6 % 0,9 % 7,9 %
Average
ECOWAS
5,1 % 33,9 % 14,8 % 1,8 % 12,9 % 9,2 % 1,9 % 14,5 % 3,1 % 2,4 % 16,4 % 7,5 % 1,0 % 6,2 %
Average
Integrated
management
structures 5,6 % 34,1 % 11,9 % 3,1 % 19,5 % 9,1 % 2,4 % 15,6 % 8,3 % 1,5 % 10,1 % 9,8 % 1,8 % 10,1 %
average (22
countries)
Separate
management
structures 5,0 % 38,0 % 11,4 % 2,2 % 13,9 % 7,8 % 2,4 % 15,6 % 14,3 % 1,7 % 13,3 % 9,0 % 1,3 % 7,6 %
average (12
countries)
3.7.1. Leveraging technology to improve Digital technology has its limits, of course. It cannot
collection replace the proper implementation of procedures
and activities. Furthermore, institutional and political
Digital transformation is accelerating and with it a
constraints and insufficient human capacity could
general increase in connectivity. Developing countries,
prevent innovation and the adoption of advanced
for their part, are beginning to leverage the enormous
technical solutions. Moreover, digitalization raises
potential of mobile technology. Sub-Saharan Africa
new questions about the broader debate on inequality
alone had 420 million individual mobile subscribers
and redistribution.
in 2016, and this number is expected to increase
to 535 million (almost one in two), according to the
international trade body Global System for Mobile
Communications Association (GSMA). 3.8. Conclusion and Recommendations
Many tax administrations now offer taxpayers self- Tax revenues play a vital role in sustainable
service options through mobile and web applications. development: they provide governments with the
These applications can help taxpayers update their resources needed to invest in development, reduce
personal data, register for tax purposes, download poverty and improve public services. They also
electronic returns and pay their taxes. They therefore strengthen its capacity, accountability and ability to
improve collection by making compliance easier. meet citizens’ expectations (OECD, 2015).
This last remark is particularly relevant for fragile states
where conflict and corruption hamper tax collection
and the payment of benefits. VAT is dominant
VAT’s share in the tax revenues of ATO countries is
Kenya pioneered the adoption of mobile payments
predominant. It contributes 35.3%, while no other
technology. Its MPesa platform, launched in 2007, can
tax exceeds the 20% threshold. The PIT and the CIT,
be used to pay taxes. In general, all ATO countries have
which bring the highest value to national treasuries
taken steps to modernize their tax administrations in
after VAT, represent respectively 17.5% and 15.6%
line with the best practices of the Tax Administration
Diagnostic Assessment Tool (TADAT) and the Public of total tax revenue. Import duties and excise duties
Expenditure and Financial Accountability programme come last, with 11.2% and 9.1% respectively.
(PEFA). Indeed, TADAT and PEFA advocate that 85%
Some countries stand out in terms of their efforts and
of the main tax returns and 100% of large taxpayer
efficiency in tax collection
returns should be made electronically.
The following countries stand out: Lesotho,
ATO countries that allow taxpayers to submit
Mozambique, Rwanda, Seychelles, Zimbabwe,
their returns and pay their taxes electronically are:
Ghana, Madagascar, Malawi, Mali and Nigeria.
Botswana, Cameroon, Kenya, Mauritius, Nigeria,
In general, these countries are performing above
Rwanda, Senegal, Seychelles, South Africa, Eswatini,
Togo, Tanzania, Uganda, Zambia and Zimbabwe. the ATO average in terms of revenue collection and
growth. By the same criteria, the worst performers are
Eight of these countries (Cameroon, Kenya, Mauritius, Uganda, DRC, Chad, The Gambia, Liberia, Niger and
Nigeria, Rwanda, South Africa, Tanzania and Uganda) Togo. Their results are often below average.
also introduced mobile phone tax payments. And four
of them made electronic payment mandatory - Kenya, As far as Regional economic groupings are concerned,
Tanzania, Togo and Uganda. In other ATO countries, the best performing ATO countries are from the EAC.
this obligation is only valid for large taxpayers and for Then come, SADC, SACU, ECOWAS and CEMAC
the payment of major taxes such as the PAYE and VAT. countries, in that order.
92
Tax administrations, on the other hand, tend to be less
effective when they separately manage, individual
structures, domestic and customs taxes. Integrated
management delivers better results in terms of
revenue collection and revenue growth over time.
Tax revenues contribution to GDP remains

modest
Tax revenues represent on average more than a
third of GDP in OECD countries, but half as much
in developing countries. The Tax revenues-to-GDP
ratio in ATO countries is 15% on average, which is
insufficient to finance development. In fact, the United
Nations estimates that developing countries will have
to collect tax revenue equal to at least 20% of their
GDP in order to achieve the Sustainable Development
Goals (SDGs).
Nevertheless, a handful of countries rose above this

development criterion in 2017: Seychelles where the
tax revenue-to-GDP ratio was 45%, South Africa with
26%, Togo 21%, and Cape Verde 20%.
Possible areas of improvement

Despite some of the actions they have already
undertaken, ATO countries need to do more to
increase their revenues. Several possible ways of
doing so by:
• Taxing the informal sector which generates a very

large share of the GDP.
• Fighting against tax evasion from large

multinationals and big fortunes.
• Removing tax incentives with low economic

impact.
• Improving efficiency and transparency in tax

administration, particularly through the use of new
technologies.

4
TAX BUOYANCY,
ELASTICITY AND
STABILITY
4 Tax Buoyancy, Elasticity
and Stability
Average ATO-wide buoyancy of

Personal Income Tax (PIT)
from 2011 to 2017
1.4
INCREASE IN GDP INCREASE IN PIT
If GDP increased 1%, PIT would rise

1.4%, making it the most responsive tax to
changes in national income.
96
PIT’s good showing was due to high
buoyancy in the following outlier countries:
MAURITIUS SIERRA LEONE SOUTH AFRICA
Stability of total tax revenue in the ATO countries:
=
The stability of tax revenue is measured by the variation coefficient.
Lower coefficient Greater stability
Average variation coefficient of total ATO-wide

tax revenue between 2011 - 2017 = 0.10
ATO countries with low variation coefficients (stable tax revenues):
LESOTHO SOUTH AFRICA MAURITIUS
0.03 0.03 0.04
BENIN ZAMBIA CAMEROON KENYA
0.05 0.05 0.05 0.03
97
4. Tax Buoyancy, Elasticity and Stability
Many countries depend chiefly on taxation to What does elasticity measure?

generate the resources they require to finance public
Though closely related to buoyancy, elasticity
expenditure. Economic growth increases the taxable
measures the automatic responsiveness of tax shorn
capacity of a country and enables the government
of discretionary changes. In other words it measures
to harness a larger proportion of the private sector’s
changes in national income keeping all other
resources as taxes for the provision of public goods
parameters (including tax legislation) constant.
and services (Birhanu, 2018).
Tax elasticity is measured as the ratio of a percentage
In a good tax system, tax yield should be highly
change in tax revenue (adjusted for discretionary
responsive to changes in the national income –
changes) to the percentage change in the national
particularly in developing countries where the state
income of a country. Its prime use is to identify which
is assigned a greater, and crucial, role in growing the
taxes are naturally elastic – i.e. those which will yield
economy. It is therefore important to measure the
more revenue as GDP rises, even when tax rates are
responsiveness of tax revenue growth to growth in the
not changed from year to year.
tax base.
Measuring revenue growth in relation to growth in the

tax base takes a two-pronged approach: it considers 4.1.1. The ideal tax system is buoyant or elastic
revenue growth both inclusive (buoyancy) and and stable
exclusive (elasticity) of discretionary measures (see
The ideal tax system is one where revenue grows at
below) (Bilquees, 2014).
the same rate, or faster, than the economy. If it does,
it is described as “buoyant” or “elastic” (depending
on whether discretionary changes are accounted
4.1. What do buoyancy and elasticity for or not). An elastic tax system is highly desirable
measure? as it affords a sustained fiscal resource base for
financing state expenditure. An inelastic system, by
What does buoyancy measure? contrast, forces the government to continuously make
Buoyancy measures the total response of tax revenue discretionary changes in the tax base or tax rates, or
both to changes in national income and to changes in both, to keep up with increasing public expenditure
in fiscal policy (“discretionary changes”) over time. (Glenday, Shukla, & Sugana, 2014).
It is traditionally considered as the percentage
Another crucial component of a good tax system
change in revenue associated with a 1% change in
is revenue stability. It is key to forecasting future
income (Skeete, 2003). Tax buoyancy compares the
tax revenue collection. Stability is desirable from a
actual growth of tax revenue in relation to growth in
government’s perspective since it makes it easier to put
the tax base.
together plausible spending and borrowing plans for
However, the dynamic nature of tax bases can make the year ahead (Jonathan, 1998). Taxes with relatively
them fiendishly complex. So tax buoyancy typically stable receipts are likely to be particularly helpful in
uses GDP as proxy for tax base. Depending on the giving stability to the overall stream of revenue.
tax under consideration, other bases may be used
– e.g. consumption as the base for measuring the
responsiveness of sales tax and VAT, or imports as
the base for customs duties.
98
4.1.2. Why do tax buoyance and elasticity • Tax elasticity is valuable for revenue forecasting
matter? purposes because it disregards changes in tax
policy. When the elasticity of major revenue
The examination of tax buoyancy and elasticity is sources is low (owing to the rigidity of the tax base,
crucial for tax policy formulation and design for three for example, or to tax evasion and/or avoidance),
reasons (Dudine and Jalles, 2017): governments can raise additional resources
through discretionary measures like policy change.
• Tax buoyancy illustrates the role that revenue
In that event, the growth of tax revenue comes
policy plays in ensuring fiscal sustainability in the
through high buoyancy rather than high elasticity.
long run, and in stabilising the economy over the
business cycle in the short run. Revenues which
move with output in the long run support the 4.2. How buoyant is tax revenue in
sustainability of fiscal policy. Those that respond to ATO countries?14
changes in output in the short run ensure that the
tax system functions as a good output stabiliser. 4.2.1. Tax buoyancy of overall tax revenue
• Assessing country-specific tax buoyancy helps
Between 2011 and 2017, the average ATO-wide tax
ascertain whether the government is mobilising buoyancy factor was 1.3 – so a 1% increase in the
tax in line with economic activity. The estimation tax base spelled a 1.3% increase in total tax revenue.
of individual tax buoyancies, for its part, helps Tax revenues were thus buoyant over the period.
identify the strong and weak points in the revenue High buoyancy levels of over 2 were recorded in Cote
system. Both kinds of buoyancies help authorities d’Ivoire (2.5), Eswatini (2.3) and Togo (2), indicating
to ascertain whether they should focus on that their tax revenues responded automatically to
mobilising more revenue or on increasing shares changes in the tax base (using GDP as the proxy tax
of the taxes that best respond to a sustained base). The least responsive tax revenues were those
increase in income. of Burundi and Zimbabwe.
14. Tax elasticity requires data on tax revenue, tax base (GDP) and discretionary changes. Detailed information and data on discretionary changes is
currently not available for ATO countries. Elasticity was not therefore included in this report. It should be considered in future research.
CHA PTER 4: Ta x B u o y a n c y, E l a st i c i t y a n d St a bilit y 99

Figure 4.1. Tax buoyancy of ATO countries’ total tax revenue, 2011 2017 15
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mauritius
Namibia
Niger
Rwanda
Senegal
Seychelles
Sierra Leonne
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (29)
0 0,5 1 1,5 2 2,5 3
Buoyancy (Total Tax Revenue) Benchmark (1)
Tax buoyancy by main type of tax ATO countries recorded very high VAT buoyancy –
in excess of 2. They were Eswatini, Togo and Gambia.
The average ATO-wide buoyancy of personal income
tax (PIT) in 2011 2017 was 1.4. In other words if GDP As for corporate income tax, buoyancy was negative
increased 1%, PIT would rise 1.4%, making it the in three countries – Burundi, Liberia and Zambia,
most responsive tax to changes in national income. which points to negative GDP growth or negative tax
PIT’s good showing was due to high buoyancy in growth. At the other end of the scale, CIT revenue was
Mauritius, Sierra Leone and South Africa, which may very responsive in Lesotho (nearly 3), Niger (over 2.5)
be considered outliers in that respect. and Eswatini, Rwanda, Togo and Madagascar, all with
well over 2.
VAT responded less to changes in national income,
with a buoyancy factor of 1.1. Nonetheless, some
15. Some countries were excluded from the analysis since the results were not statistically significant
100
Figure 4.2. Buoyancy factors of the main tax types, 2011 2017
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mauritius
Namibia
Niger
Rwanda
Senegal
Seychelles
Sierra Leonne
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average (29)
-2,0% -1,5% -1,0 -0,5 0,0 0,5 1,0 1,5 2 2,5 3,0 3,5
CIT Buoyancy PIT Buoyancy VAT Buoyancy Benchmark (1)

Changes in tax rates and possible impact on tax Indeed, there have been many changes in tax policy in
buoyancies ATO countries since 2012. They are likely to have had
an impact on tax buoyancy estimates.
Tax buoyancy estimates are affected by:
Six countries have introduced VAT (Table 4.1).
• changes in the tax base (GDP in most cases),
In addition, three countries have their increased both
• discretionary changes in tax policy, for which the their standard and import VAT rates since 2012 –
revenue series is not adjusted. Botswana by 2% in 2013, Ghana by 5% in 2017, and
Liberia by 3% in 2017.
Table 4.1. ATO countries that have introduced VAT to their tax system since 2012
Country Year Standard VAT rate Import VAT rate VAT Buoyancy
Cape Verde 2016 15 15 Not computed
Cote d’Ivoire 2015 18 18 0.9497
DR. Congo 2012 16 16 Not computed
Eswatini 2012 14 14 2.8752
Gambia 2013 15 15 1.9470
Seychelles 2013 15 15 1.7636
As for PIT, some ATO countries have reported changes in their top and bottom marginal PIT rates since 2012 (Table
4.2). Ten ATO countries have cut their CIT rates, while two increased them (Table 4.3).
Table 4.2. Changes in ATO countries’ PIT marginal tax rates since 2012
Change in bottom Change in top

Country Year PIT buoyancy
marginal rate marginal rate
Angola 2015 +1 1.6558
Benin 2017 +10 0.7117
Burundi 2013 -5 -1.5752
Chad 2017 -9 Not computed
Gambia 2013 -5 -5 0.2166
Lesotho 2015 -2 -5 0.1052
Madagascar 2013 -1 0.6310
Namibia 2014 -9 1.9729
Nigeria 2012 +2 -1 0.5525
Senegal 2013 +2 -10 1.0430
102
Change in bottom Change in top
Country Year PIT buoyancy
marginal rate marginal rate
Seychelles 2012 -4 -3 1.0606
Sierra Leone 2016 +5 2.5839
South Africa 2015 +1 2.2836
2011 -1
Tanzania 1.3006
2017 -5
Togo 2013 +3 -5 2.1583
Zambia 2017 +3 0.7986
2012 +10
Zimbabwe 1.6736
2014 +5
Table 4.3. Changes in ATO countries’ CIT standard tax rates since 2012
Country Year Standard CIT rate CIT Buoyancy

Angola 2014 -5 0.5054
Botswana 2012 +7 0.6718
Burundi 2013 -5 -0.8803
Cameroon 2015 -6 1.1876
Chad 2015 -5 Not computed
Eswatini 2014 -2.5 2.4398
2012 -2
2013 -1
Gambia 0.4669
2014 -1
2015 -1
2012 -1
Madagascar 2.1193
2013 -1
2014 -1
Namibia 1.2184
2016 -1
Niger 2013 -5 2.6028
Senegal 2013 +5 1.0099
2013 +2
Togo 2.2918
2016 -1

4.3. Stability of total tax revenue in the (0.05), Kenya (0.03), Lesotho (0.03), Mauritius (0.04),
South Africa (0.03) and Zambia (0.05).
ATO countries
Generally speaking, the total tax revenues of the
The stability of tax revenue is measured by the
countries that are members of the Economic
variation coefficient (see Annex to this chapter and
Community of West African States (ECOWAS)
Chapter 3, Part B). The lower the coefficient, the
were relatively unstable between 2011 and 2017.
greater the stability. The average variation coefficient The variation coefficient for Burkina Faso was 0.39,
of total ATO-wide tax revenue between 2011 and 2017 Cote d’Ivoire 0.24, Nigeria 0.27, Gambia 0.17, Niger
was estimated at 0.10. Overall, then, tax revenue was 0.16, and Ghana 0.16. The inference is that, even
stable. ATO countries with stable total tax revenues – though these countries’ tax revenues may grow at
i.e. with little variation – were Benin (0.05), Cameroon times, there is no guarantee they will in the future.
Figure 4.3. Stability of total tax revenue, 2011 2017
Angola, 0.13
ATO Average, 0.10 Benin, 0.05
0,30
Zimbabwe, 0.12 Botswana 0.08
Zambia, 0.05 0,25 Burkina Faso, 0.07
Uganda, 0.14 Burundi, 0.10
0,20
Togo, 0.11 Cape Verde, 0.06
0,15
Tanzania, 0.07 Cameroon, 0.05
0,10
South Africa, 0.03 Côte d’Ivoire, 0.24

0,05
Sierra Leone, 0.08 DR. Congo, 0.14
Seychelles, 0.06 Eswatini, 0.10
Senegal, 0.11 Gambia, 0.17
Rwanda, 0.08 Ghana, 0.16
Nigeria, 0.27 Kenya, 0.03
Niger, 0.16 Lesotho, 0.03

Namibia, 0.11 Liberia, 0.09
Mozambique, 0.13 Madagaskar, 0.08
Mauritius, 0.04 Malawi, 0.06
Note: The figures in brackets are the coefficient of variation which measures tax revenue stability. The closer they are to the centre,
the lower the coefficient of variation and the more stable the tax revenue.
104
Revenue stability by type of tax Revenue from other miscellaneous domestic taxes
(“Other Domestic Taxes” in Figure 4.4) shows high
Revenue from VAT is the most stable, followed
instability, as it is generated by different taxes that
by PIT (Figure 4.4). The inference may be that tax
are often country-specific. It is actually a growing
administrations should concentrate on those taxes
revenue stream. Because it is not stable, though, ATO
to generate greater, more stable revenue from
countries should not rely on it.
economic growth.
Figure 4.4. Stability of revenue from main tax types, 2011-2017
0,40
0,35 0,34
0,30
0,25
0,20
0,20 0,18
0,15 0,16
0,15 0,14
0,11
0,10
0,10
0,05
0,00
VAT PIT CIT Import Duty Other DT Excise Customs Total Revenue
4.4. Main findings and ways forward a specific objective. Policy should also ensure that
monitoring the stability of tax types should be part of
Though total ATO-country tax revenue is buoyant, tax strategies to seek out sources of revenue that can be
components in some countries are unresponsive to relied upon to finance the budget.
automatic changes in national income. Tax authorities
need therefore to strengthen their revenue collection It is important that governments understand how and
capacity by promoting positive taxpayer attitudes why revenues react to changes in income during the
towards tax compliance. They should also seek to business cycle if they are to address intertemporal
build transparent, equitable, efficient and effective budget constraints and meet tax-smoothing objectives.
human and institutional capacities for formulating tax
There is a need for further research into the effects
policy and administering collection.
of policy changes on tax revenue in order to refine
Tax policies must draw on domestic resource elasticity measures. It should involve recording
mobilization strategies that are consistent and holistic longer time series data on total tax revenues and
and which have enhanced revenue stabilization as major tax types.

5
STRUCTURE AND
FUNCTIONS OF
TAX AND CUSTOMS
ADMINISTRATIONS
5 Structure and Functions of Tax
and Customs Administrations
Cost of Revenue Collection:

A comparison of the average tax administration costs of SARAs and ministry-based
departments shows that the ratio of the cost of collection to revenue collected for 2017
is respectively 2.8% and 0.58%.
Contribution from large taxpayers:
ATO-wide revenue
6.3% depends heavily on a
handful taxpayers,
77.6% with 6.3% of taxpayers
RECEIPTS generating 77.6% of
receipts.
In 12/13 ATO Countries:

MORE THAN
50%
LESS THAN
10% CONTRIBUTED
2017 TO STATE COFFERS
108
In 4 Countries:
MORE THAN
62%
LESS THAN
1% CONTRIBUTED
2017 TO STATE COFFERS
UGANDA
1/1000 62.4%
taxpayers REVENUE
2/1000 94.7%
ZAMBIA
taxpayers REVENUE
4/1000 91.4%
RWANDA
taxpayers REVENUE
5/1000 87.1%
MADAGASCAR
taxpayers REVENUE
109
5. Structure and Functions of Tax
and Customs Administrations
Tax administration lies at the very heart of the state. Accordingly, this section looks at how ATO countries
The taxes, duties, excise and fees that tax authorities manage their tax bases and the action they take to
collect supply the resources the state needs to ensure broaden them. It also considers their policies for
people’s well-being, education and security. Tax managing the informal sector, the contribution of large
administration taxation in ATO countries falls into two taxpayers, and the notion of effective contributors
organisational categories. (see Annex 5A.1)
In some, tax administration is a finance ministry duty

– the work of a department. In other words, the state
manages tax administration directly with its staff and 5.1. Tax base segmentation
funds, and the tax revenue authority has no legal Taxpayers are not a homogeneous group. Accordingly,
personality. In other countries, separate bodies handle over the past two decades, many revenue departments
tax and customs administration revenue with a certain and authorities have developed operating structures
degree of administrative and financial autonomy. based on taxpayer segments. Segments are, in
Accordingly, they are known as semi-autonomous turn, based chiefly on turnover or the nature of the
revenue authorities (SARAs). economic sector in which the taxpayer operates.
Tax authorities thus generally divide taxpayers into
The efficiency of tax administration depends in part
four main segments (Table 5.1). They are large,
on how taxpayers are managed. Good taxpayer
medium, small and micro taxpayers.
management, or segmentation, makes it possible to:
• develop compliance strategies that incorporate

risk management,
• provide taxpayers with the services that meet their

needs,
• direct enforcement and audit resources to areas of

highest risk.
110
Table 5.1. Taxpayer segmentation and risks associated in the ATO countries - 2017
Segments Degree of risk ATO Countries

Benin, Botswana, Burkina-Faso, Burundi,
• Low risk of under-reporting Cameroon, Côte d’Ivoire, Eswatini, Gambia,
Mauritius, Kenya, Lesotho, Liberia, Malawi,
Large taxpayers • High tax-planning risk
Mali, Mozambique, Nigeria, Rwanda, Senegal,
• Low risk of misclassification Seychelles, Tanzania, Togo, Uganda, Zambia and
Zimbabwe.
Benin, Burkina Faso, Burundi, Cameroon, Côte
Risk of under-reporting and moderate risk
Medium taxpayers d’Ivoire, Kenya, Malawi, Mali, Nigeria, Senegal,
of misclassification
Seychelles, Tanzania, Togo, Uganda and Zambia
• High risk of under-reporting
• Difficult to trace
• Incorrect declarations Benin, Burkina Faso, Burundi, Côte d’Ivoire,
• Constant change in the International Cameroon, Kenya, Mali, Malawi, Nigeria,
Small taxpayers
Standard Industrial Classification (ISIC), Senegal, Seychelles, Tanzania, Togo, Uganda
making it difficult to control and Zambia
• High costs of administering tax

discipline
• Very high risk of under-reporting
• Difficulty in determining income
Micro taxpayers • High costs of administering tax Benin, Cameroon et Nigeria
discipline
• Very difficult to trace
Large taxpayers are so-called because their That being said, mobility and under-reporting point to
turnovers are large, as is the contribution they make considerable room for broadening the tax base.
to tax revenue – over 60% ATO-wide. They are also
characterised by high levels of tax planning. Indeed,
when countries consider making changes to tax 5.1.1 Policies for broadening the tax base
administration and tax policy, they often take large
The low levels of tax revenue in ATO countries are
taxpayers as a pilot group. Medium-sized taxpayers
partly attributable to the narrowness of tax bases,
are the second most important category in terms of
with relatively low shares of economically active
income potential. This group of taxpayers regularly
populations liable to taxation. Two important factors
keep their accounting in order.
account for the narrowness of tax bases – tax evasion
As for small and micro enterprises, their sheer number and the dominance of the informal sector. Accordingly,
leads to numerous challenges for ministry-based tax countries should seek to promote tax reforms to
departments and SARAs. They are widely covered broaden the tax base and bring a larger share of the
by simplified or flat-rate systems that are costly to population into the formal productive fold. Some ATO
administer. Small and micro enterprises are also countries have indeed taken measures to that end.
highly mobile and very prone to under-reporting.
CHA PTER 5: St r u c t u re a n d F u n c t i o n s o f Tax a nd Cust oms Administ r a t ions 111

Devolved revenue collection 5.1.2 Taxing the informal sector
The Gambia, Nigeria and South Africa, for example, In 1993, the 15th International Conference of Labour
have introduced policies to devolve revenue collection Statisticians (ICLS) characterised the informal sector in
to local tax office branches, providing them with these terms:
technical support in the management of accounting
documents. Côte d’Ivoire, too, has put in place local “[It is] a set of units producing goods and services
certified tax administration offices to offer taxpayers mainly with the aim of creating jobs and income for
guidance in filing synthetic tax returns. the people concerned. These units, with a low level of
organization, operate on a small scale and in a specific
way, with little or no division between labour and capital
Plug tax loopholes, strengthen regulations, as production actors. Labour relations, where they
reduce exemptions exist, are mainly based on casual employment, kinship
Botswana and Tanzania, for their part, have sought to relationships or personal and social relationships rather
widen their tax bases by reforming tax legislation to than contractual agreements with formal guarantees.”
plug loopholes, increasing tax rates, and improving
Difficult to quantify by nature, the informal economy
revenue collection. Cameroon, Uganda, Zimbabwe
occupies a central place in all ATO countries. While
and Kenya have focused on strengthening their
it defies any accurate measurement of tax revenue
regulatory frameworks, while monitoring markets
shortfall, its importance is undeniable. According to the
and commercial locations in order to contain informal
African Development Bank (AfDB), it may account for
activity. Several VAT and corporate tax exemptions
up to 55% of sub-Saharan Africa’s cumulative gross
in sectors such as agriculture, health, education,
domestic product (GDP).
financial services and for multinationals have been
reduced or even abolished. The informal sector comprises a wide range of trades –
vendors, skilled and unskilled craftspeople, waste and
scrap metal pickers, mechanics, plumbers, bricklayers,
Information exchange
drivers, etc. Few governments dare tackle it, because
To lower the risks of under-reporting and identify it functions as a social buffer and embodies a vision
unregistered taxpayers, information is key. Tax of how people relate to and interact with each other.
administration entities should regularly exchange Indeed, informal workers often learn their trade on the
data with other branches and tiers of government. job. It becomes their only way to earn a living and many
Rwanda, Eswatini and Liberia, for example, have could not survive without it.
signed memoranda of understanding with local actors.
The sheer scale of the informal sector in ATO countries
costs them very significant amounts of tax revenue. It is
Improve tax education hard to put a figure on revenue shortfalls because:
Promoting tax citizenship has also proved its
• the perimeter of the informal sector is fuzzy,
effectiveness in reducing evasion. Indeed, people who
understand the ins and outs of taxation are generally • the formal and informal sectors often overlap each
more disciplined. A number of ATO countries seek other,
to educate and raise awareness among taxpayers, • it is impossible to estimate the cost of tax collection
running tax clinics, seminars, workshops and even from informal businesses.
talk shows (such as “Tax and You” in Côte d’Ivoire).
However, to limit the extent of any shortfalls, most ATO
Despite the initiatives underway to broaden the tax base, countries have taken action (Table 5.2). Twenty-one out
a persistent challenge is how to tax the informal sector. of 34 currently have schemes in place.
112
Table 5.2. AFP countries with programmes in favour of the informal sector in 2017
Do you have any special Do you have any special

Country programmes or initiatives to Country programmes or initiatives to
deal with the informal sector? deal with the informal sector?
Angola Yes Mali Unavailable
Benin Unavailable Mauritius No
Botswana No Mozambique No
Burkina Faso Yes Namibia No
Burundi Unavailable Niger Yes
Cameroon Yes Nigeria Yes
Cape-Verde Yes Uganda Yes
Chad No RDC Unavailable
Côte d’Ivoire Yes Rwanda Yes
Eswatini No Senegal No
Gambia Yes Seychelles No
Ghana Yes Sierra Leone Yes
Kenya Yes South Africa Yes
Lesotho Unavailable Tanzania Yes
Liberia Yes Togo Yes
Madagascar Yes Zambia Yes
Malawi Yes Zimbabwe Yes
The use of mobile money to tax informal and track mobile money movements. They may also
businesses determine only whether they are informal transactions
The development of new technologies offers real and liable to tax (VAT or corporate income tax [CIT]).
opportunities for taxing the informal sector. Mobile Kenya, Uganda and Ghana have experimented with
money is one such opportunity. The term denotes taxing this informal base directly – either as excise
the use of mobile phones to make payments and to duty levied on the value or volume of transfers, or
transfer, withdraw and deposit funds. And because as specific VAT added to the rate resulting from the
few informal businesses have bank accounts, they common law. However, it is still too soon to say
make wide use of mobile technology. Through mobile whether there has been any effect on the take up of
money platforms revenue authorities may record mobile money and formalisation.

Mobile money to formalise and raise revenue • Uganda, 1 taxpayer in 1 000 (0.1%) – 62.4% of
from agents revenue
Indeed, many informal workers have little ready access • Zambia, 2 taxpayers in 1 000 – 94.7% of revenue
to mobile airtime or digital technology. They rely on
• Rwanda, 4 taxpayers in 1 000 – 91.4% of revenue
agents who, operating from distribution points, collect
cash from informal workers and use mobile money • Madagascar, 5 taxpayers in 1 000 – 87.1% of
to carry out transactions on their behalf. Agents revenue.
themselves are initially informal entrepreneurs. As ATO-wide revenue depends heavily on a handful
distribution has expanded, the use of mobile money taxpayers, with 6.3% of them generating 77.6% of
has allowed more and more agents to formalise. receipts. A balanced ratio is to be found only in Niger,
The effect on tax revenue has been significant, as where 54% of taxpayers contribute almost 80% of the
the number of formal distribution points and volume country’s tax revenue.
of formal business have grown. The formalisation of
distributors also makes it possible to levy VAT and Heavy dependence on a small number of taxpayers
profit tax on their side businesses not related to is a risk to revenue mobilisation and budgets. Indeed,
mobile money – as for large taxpayers. should any of them experience economic difficulties,
the entire budget balance would be jeopardised.
Moreover, large taxpayers generally are or belong to
multinationals that widely practice tax optimisation,
5.1.3 Contribution from large taxpayers
robbing states of substantial income. Multinational
The contribution to tax revenue of large taxpayers companies are, for the most part, the riskiest
outweighs their number in the taxpayer base (Figure taxpayers because of their aggressive tax planning
5.1). In 2017, in 12 of the 13 ATO countries that (OECD, 2010).
reported data, less than 10% of taxpayers contributed
Such risky over-dependence makes it important that tax
more than 50% to state coffers. And less than 1%
authorities find strategies for increasing contributions
accounted for over 62% in four countries:
from other categories of taxpayers. Determining the
share of active taxpayers by type of tax, for example,
can help them identify certain tax niches.
114
Figure 5.1. Contributions of large taxpayers in ATO countries, 2017
6,3%
8,2%
Burundi 87,4%
3,8%
2,5%
Eswatini 91,9%
1,8%
Ghana 50,4%
0,5%
Madagascar 87,1%
Niger 54 ,4%
79,5%
Nigeria 1,7%
75,4%
Rwanda 0,4%
91,4%
Seychelles 1,2%
68,0%
Togo 4,3%
75,0%
Uganda 0,1%
62,4%
Zambia 0,2%
94,7%
2,2%
Zimbabwe 70,1%
0% 20% 40% 60% 80% 100%
Rates/Taxpayers Contribution/Revenues
5.1.4. Active taxpayers Twenty-two ATO countries supplied data on shares

of active VAT, CIT and personal income taxpayers
Active taxpayers are registered taxpayers who in 2017 (Table 5.3). The data should be treated with
effectively pay their taxes. An active VAT taxpayer in caution, however, as they may not square with the
2017, for example, pays VAT at least once in the tax principle of tax fairness, which all ATO countries have
year in question (see Annex). To be precise, an active yet to fully assimilate and apply.
taxpayer is one who has made a payment of any kind
(by cheque, cash, set-off, etc.) in respect of a certain
Shares of active VAT taxpayers
tax over a given period of time. Payment may relate
to a tax due for the current period, or to arrears from ATO-wide, more than three out of four taxpayers
previous periods and can be partial. pay VAT in the ATO countries. However, there is wide
disparity between countries, with shares ranging from
The share of active taxpayers in a country is the 100% to 7%. In Liberia, Ghana, Gambia, Rwanda
percentage of the taxpayers registered for a tax who and Seychelles all taxpayers pay VAT, as do very high
effectively pay it. Ideally, the share should be 100% proportions in Mauritius (98%), Burundi (97%), Chad
and anything short of that requires scrutiny. Indeed, the (94%), Madagascar (94%), Namibia (90%) and Togo
tax authorities should regularly monitor active taxpayer (90%). Eswatini and Botswana had percentages in the
to improve under-exploited revenue potential (e.g. tax high eighties, so 13 countries altogether boasted shares
niches), tax assessment, and tax recovery operations. of active taxpayers in excess of the 76% ATO average.

Conversely, shares in seven were below the average. Cape Verde (33%), Côte d’Ivoire (32%), Nigeria (7%)
Bottom with 7% was Nigeria, which has considerable and Madagascar (5%).
room for progress, as it was the only country where
As with VAT, taxpayers from SADC countries were
active taxpayers failed to account for 25% of registered
more active than their peers in the regional economic
taxpayers. Cameroon, Sierra Leone, Senegal, Côte
d’Ivoire and Cape Verde recorded rates between 25% groupings. The SADC share was 74%, against 70%
and 50%. in the EAC, 66% in (Economic Community of West
African States) ECOWAS, and only 38% for CEMAC.
As for regional groupings, the Southern African
Development Community (SADC) had the highest
Shares of active PIT taxpayers
average of active taxpayers with 93%. It was followed
by the East African Community (EAC) with 87%, while In 2017, all registered PIT taxpayers in Angola,
the Economic and Monetary Community of Central Rwanda, Gambia, Ghana and Liberia paid their taxes.
Africa (CEMAC) brought up the rear with 62%. In a further 12 countries, more than 50% did. In
Mozambique, Kenya and Cameroon, however, shares
were less than 50%. Indeed, Cameroon’s 34% was
Shares of active CIT taxpayers
the lowest.
In Gambia, Ghana, Liberia and Rwanda all registered
taxpayers paid CIT, and nearly all did in Botswana Regionally, the best performance came from the
and Namibia (99%), and in Eswatini (98%). Seven ATO countries in ECOWAS with 89%, while the
countries had proportions of active taxpayers that lowest share was CEMAC’s, with only 34% of active
were lower than the ATO average of 62%. They were taxpayers. The three remaining groupings all boasted
Mozambique (48%), Kenya (42%), Cameroon (38%), rates in excess of 65%.
116
Table 5.3. Active VAT, CIT and PIT taxpayers in ATO countries, 2017
VAT CIT PIT
Regions Countries Registered Active / Active / Active /

Active Registered Active Registered Active
registered registered registered
Taxpayers Taxpayers Taxpayers Taxpayers Taxpayers Taxpayers
Taxpayers Taxpayers Taxpayers
SADC Angola NC NC NC 146 098 124 909 85% 3 999 569 3 980 267 100%
Botswana 35 703 31 038 87% 81 542 80 468 99% NC NC NC
Madagascar 6 097 5 731 94% 25 928 1 307 5% 263 384 141 078 54%
Mauritius 18 976 18 611 98% 72 488 64 970 90% 226 321 222 155 98%
Mozambique NC NC NC 106 973 51 252 48% NC NC NC
Namibia 48 310 43 647 90% 129 430 128 475 99% 27 496 26 159 95%
Seychelles 1 441 1 441 100% 4 536 3 259 72% 17 559 10 787 61%
Eswatini 4 516 3 982 88% 12 235 11 953 98% 32 573 32 265 99%
Average 19 174 17 408 93% 72 404 58 324 74% 761 150 735 452 84%
EAC Burundi 1 662 1 614 97% 5 357 3 562 66% NC NC NC
Kenya 193 864 122 384 63% 244 223 103 788 42% 5 499 931 2 097 617 38%
Rwanda 23 050 23 050 100% 60 029 60 029 100% 91 688 91 688 100%
Average 72 859 49 016 87% 103 203 55 793 70% 2 795 810 1 094 653 69%
ECOWAS Cape-Verde 8 627 3 281 38% 7 844 2 608 33% NC NC NC
Côte d’Ivoire 38 417 11 062 29% 42 064 13 563 32% 47 555 25 170 53%
Gambia 940 940 100% 6 703 6 700 100% 137 028 137 027 100%
Ghana 37 665 37 665 100% 32 625 32 625 100% 45 391 45 391 100%
Liberia 528 526 100% 5 074 5 057 100% 17 129 17 107 100%
Nigeria 2 164 069 155 948 7% 1 266 517 92 784 7% NC NC NC
Senegal 29 787 13 314 45% NC NC NC NC NC NC
Sierra Leone 2 322 1 106 48% NC NC NC NC NC NC
Togo 7 843 7 088 90% 5 082 4 593 90% 16 039 14 494 90%
Average 254 466 25 659 62% 195 130 22 561 66% 52 628 47 838 89%
CEMAC Chad 947 892 94% NC NC NC NC NC NC
Cameroon 11 402 3 298 29% 13 979 5 266 38% 30 322 10 346 34%
Average 6 175 2 095 62% 13 979 5 266 38% 30 322 10 346 34%
Average ATO 131 808 21 247 76% 224 008 58 026 62% 1 546 916 378 473 69%

In Rwanda, Gambia, Ghana and Liberia, all registered Separate or unified customs and domestic tax
taxpayers pay the three types of tax. The lowest collection
shares of VAT and CIT taxpayers come in Nigeria, while
However, while some ATO tax administration bodies
Cameroon has the smallest proportion of registered
administer customs and domestic tax collection
PIT taxpayers who pay their taxes.
separately through dedicated agencies, others have
In all four regional economic groupings, with the merged their customs and domestic activities (Table
exception of ECOWAS, taxpayers pay more VAT than 5.4). Most are in English-speaking countries, with the
CIT and PIT. exceptions of Togo, Rwanda, Burundi and Angola.
Semi-autonomous tax administration

5.2. Organisational structure of ATO
tax authorities These unified revenue authorities are not bound so
The organisational structures of African revenue closely to their national public administration and
authorities have undergone many changes since first political authorities. Their ties are looser – indeed, semi-
established. autonomous. There are 22 such semi-autonomous
revenue authorities (SARAs) and all practice unified
customs and tax collection.
ATO revenue administration authorities are
function-based SARAs are run by a board of directors. They issue calls
Originally, they were structured by tax category – for nominations to fill key management positions. They
direct taxes, indirect taxes, land registry and domain, assess applicants against well defined performance
stamp duty and registration etc. There were many criteria and even hire them on performance-related
shortcomings, however, ranging from areas like terms. Departments within SARAs are geared to
operating efficiency to taxpayer management. Indeed, business tasks, although some handle single, cross-
the services were compartmentalized by tax category, functional issues like personnel management or tax
so lacked an overview of the taxpayer’s situation. And fraud and corruption. Such an operating structure
the taxpayers, for their part, had to deal with multiple enables more efficient use of human and material
people and procedures, so heightening the risks resources.
of collusion with revenue authority employees and
increasing costs for all. The many drawbacks of such Taxes administered by finance ministry
a fragmented operating structure prompted revenue departments
authorities to opt for integrated administration.
In 13 ATO countries16 (38% of them), tax administration
Tax administration bodies in the ATO countries are authorities are departments in the finance ministry.
no longer structured by type of tax, but by function Apart from Mozambique and Namibia, they are all
– e.g. registration, auditing and collection, resource in French-speaking countries. All, apart from Cape
management, and IT services. Taxpayer information Verde, administer domestic and customs taxes
is centralised in a “single file” that the different separately. As for the Mozambican revenue body,
departments can access. It simplifies formalities for it is the sole finance ministry department to enjoy
the taxpayer and facilitates monitoring and recovery semi-autonomy.
operations. Costs are cut and the quality of tax
services improves.
16. Benin, Burkina Faso, Cameroon, Cape Verde, Chad, Chad, Côte d’Ivoire, Madagascar, Mali, Mozambique, Namibia, Niger, DRC and Senegal.
118
Table 5.4. Structure and configuration of tax administrations of ATO in 2017
Tax administration Collection

Country Department in finance Integrated (domestic
Semi-autonomous
ministry taxes and customs)
Angola × √ √
Benin √ × ×
Botswana × √ √
Burkina Faso √ × ×
Burundi × √ √
Cameroun √ × ×
Cape Verde √ × √
Chad √ × ×
Côte d’Ivoire √ × ×
Gambia × √ √
Ghana × √ √
Kenya × √ √
Lesotho × √ √
Liberia × √ √
Madagascar √ × ×
Malawi × √ √
Mali √ × ×
Maurice × √ √
Mozambique √ √ ×
Namibia √ × ×
Niger √ × ×
Nigeria × √ √
RDC √ × ×
Rwanda × √ √
Senegal √ × ×
Seychelles × √ √
Sierra Leone × √ √
South Africa × √ √
Eswatini × √ √
Tanzania × √ √
Togo × √ √
Uganda × √ √
Zambia × √ √
Zimbabwe × √ √
Note: √ denotes “yes”, × denotes “no”.

5.3. Cost of tax and customs agencies prompted previous editions of the African
Tax Outlook to compare countries’ cost of collection
administration
ratios. Experience has since shown that it is difficult
A country’s legislation usually makes provision for the to draw consistent comparison when countries’
cost of tax administration (Tuerck, 2007), allocating institutional tax administration set-ups vary widely.
funds from the operating and capital cost budget.
The ratio of recurrent operating costs to net revenue On one hand, semi-autonomous agencies perform
collected indicates how well revenue authorities (RAs) all core and support functions. On the other hand,
use the funds. It is a measure of their efficiency, which departments in finance ministries manage core
subsumes institutional set-ups, scope of activity, functions, while the ministry takes care of the support
performance measurement systems, and collection functions.
strategies. A fall in cost, all other things being equal,
However, sticking with the ratio of collection costs
shows improved efficiency while a rise points to
to revenue collected (despite its drawbacks as a
inefficiency.
cost metric), comparison reveals that ministry tax
departments (generally in French-speaking countries)
Collection cost comparisons show ministry tended to have lower cost ratios in 2017 (Figure 5.2).
departments more efficient The highest ratios were those of Lesotho (7.05 %)
However, the indicator should be treated with extreme and Eswatini (6.63%), while Namibia, Cote d’Ivoire,
caution, as cost efficiency is shaped by many factors Senegal had the lowest with 0.18%, 0.25% and
which make comparison difficult. The numerous 0.26% respectively.
similarities between taxes administered by revenue
120
Figure 5.2. Cost of revenue collection, 2017
Lesotho 7,051%
Eswatini 6,627%
Liberia 5,020%
Gambia 4,539%
Angola 4,354%
Burundi 3,862%
Zimbabwe 3,526%
Rwanda 3,141%
Botswana 2,977%
Zambia 2,766%
Ghana 2,613%
Mauritius 2,602%
Dr. Congo 2,495%
Sierra Leone 2,403%
ATO Average 2,277%
Tanzania 2,264%
Uganda 2,103%
Malawi 1,896%
Nigeria 1,726%
Kenya 1,320%
Seychelles 1,248%
South Africa 1,002%
Cape Verde 0,874%
Togo 0,587%
Niger 0,316%
Cameroon 0,307%
Senegal 0,258%
Côte d’Ivoir 0,247%
Namibia 0,177%
Chad 0,014%
Mozambique 0,003%
0,000% 1,000% 2,000% 3,000% 4,000% 5,000% 6,000% 7,000% 8,000%
A comparison of the average tax administration costs Tax administration capital and operating costs
of SARAs and ministry-based departments shows
Tax collection costs were very low in ministry
that the ratio of the cost of collection to revenue
departments (except in DR Congo) because the
collected for 2017 is respectively 2.8% (less efficient)
ministry covers wage bills and capital, operating and
and 0.58% (more efficient).
other costs. However, it can be unduly complicated
to separate operating from capital costs. In Cote
d’Ivoire and Madagascar, for example, operating and
capital expenses make up almost equal shares of tax
administration costs.

Figure 5.3. Cost of collection in semi-autonomous and ministry-based tax administration authorities
Revenue Authorities
Lesotho
Eswatini
Liberia
Gambia
Angola
Burundi
Zimbabwe
Rwanda
Botswana
Zambia
Ghana
Mauritius
Sierra Leone
Tanzania
Uganda
Malawi
Nigeria
Kenya
Seychelles
South Africa
Cape Verde
Togo
Mozambique
Average RA
0% 1% 2% 3% 4% 5% 6% 7% 8%
Departments within Ministy of Finance

Cameroon
Chad
Namibia
Côte d’Ivoire
Senegal
Niger
Average Dpt
DR.Congo
0% 0,5 % 1% 1,5% 2% 2,5% 3%
122
Operating costs, which tax administration departments affairs, and cross-cutting functions like strategic
consider day-to-day costs, encompass core and planning or institutional and compliance risk
support functions (Figures 5.4 and 5.5): management.
• Core functions: enforcement, accounting, assess- Capital expenditure, for its part, relates to the
ment, audit and surveillance, debt collection, tax- acquisition of new assets (Figures 5.4)
payer account management and other cross-cut-
Chad and Lesotho were the only ATO countries not
ting functions directly related to tax administration.
to acquire new assets in 2017, while the purchase
• Support functions are administrative in nature, e.g. of equipment accounted for more than 75% of tax
human resources, finance, IT, public and internal administration costs in Senegal.
Figure 5.4 Tax administration operating and capital costs, 2017
Angola
Botswana
Burundi
Cape Verde
Cameroon
Chad
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
South Africa
Tanzania
Uganda
Zambia
Zimbabwe
0% 20% 40% 60% 80% 100%
Operation/Total Cost Capital/Total Cost

Figure 5.5. The ratio of operating costs to tax revenue collected, 2016 and 2017
Angola
Botswana
Burundi
Cameroon
Côte d’Ivoire
Eswatini
Gambia
Ghana
Kenya
Liberia
Malawi
Mauritius
Mozambique
Namibia
Niger
Nigeria
Senegal
Seychelles
Sierra Leonne
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
Cape verde
DR. Congo
Lesotho
Rwanda
ATO Average
0% 1% 2% 3% 4% 5% 6% 7% 8%
Operating Cost to Tax Revenue 2016 Operating Cost to Tax Revenue 2017
Note: Cape Verde, DR Congo, Lesotho and Rwanda provided data for 2017 only. Chad provided no data for either year.
124
Past editions of the African Tax Outlook have
grappled with the challenge of coming up with a Box 5.1:
consistent methodology that works across all 30 ATO
participating countries. Issues include: Human resources management in Togo
• Comparing the separate administration of customs To ensure employees meet high standards of
and domestic taxes with integrated administration skill and integrity and so contribute to effective
administration, the Togolese revenue authority
• Identifying why costs are high. They may be high in Togo uses a number of human resource
for desirable reasons – e.g. capital investment management tools. They include;
in information technology and automation; or
nascent RAs competing to attract professional • Results-based management (RBM). At the
staff or expand services. Both instances illustrate beginning of the year, officers and their
how initially high costs may spell productivity gains supervisors sign a performance contract with
in the longer term. specific, measurable objectives. A copy of
this contract is sent to the Human Resources
• Understanding that tax policy measures may have
Directorate (HRD).
positive or negative effects on revenue collection.
These effects may wrongly be taken for greater • End-of-the-year evaluation where employees
efficiency or inefficiency. are assessed against their performance targets
using an evaluation grid designed by HRD. An
Singling out issues that impact the revenue effort must
ad hoc HRD-appointed committee decides the
be a priority. Only then will it be possible to design a
final score. Employees’ career advancement
more robust indicator of tax administration efficiency
depends on scores.
suitable for the analysis of wide arrays of data.
• Every two years, employees must disclose their
assets and those of their spouse and children.
The purpose is to ensure that employees do
5.4. Human resources capacity in
not take advantage of their position as public
revenue administration revenue collectors to enrich themselves
Optimal human resources management is key illegally. A free phone number is available
to effective, efficient tax administration. OECD round-the-clock to the public to report any
guidelines to improving tax administration state that actual or attempted bribery
the cost of personnel often exceeds 80% of total
operating costs. The guidelines also say that human
Source: Good practice database 2017 - Togo Tax
capacity management and development are vital to
Authority (OTR)
the accomplishment of organizational goals (USAID/
LAC, 2013). Accordingly, ATO tax administration
authorities need to invest in employees and effective
human resources management (see Box 5.1).

Sheer size a factor in efficient tax administration with 6 596 employees. At the other end of the scale,
workforces those of Cape Verde, Sierra Leone, Eswatini, Lesotho,
Namibia, Gambia, and Burundi have the lowest staff
Naturally, a good, efficient workforce depends on a
levels – (less than 1 000 employees).
range of factors, such as operating structure, types
of revenue administered, the complexity of the
legislation, and level of automation (see Box 5.2 in Core and support workers levels and revenue
Annex 4A.2). But one of the most powerful factors is collected
simply the size of the workforce.
ATO revenue administration authorities generally have
The most revenue is collected by the South African more staff working in core than support functions –
revenue service (SARS) – and it is also the largest of 71% vs. 29% (Figure 5.6). At one end of the spectrum
all the ATO countries. It boasts 13 583 employees. lies Cote d’Ivoire with 95% of its staff in core functions
Then come the revenue administration bodies of and, at the other end, Angola with only 28%.
Ghana with 7 812, Nigeria with 7 543, and DR Congo
126
Figure 5.6. Percentage shares of tax administration staff in core and support functions, 2017
Angola
Botswana
Burkina Faso
Burundi
Cape Verde
Cameroon
Chad
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Sierra Leonne
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average
0% 20% 40% 60% 80% 100% 120%
Share of Staff in the Core Department Share of Support Staff
Note: Namibia supplied data for core functions only

A question that arises from considering shares of revenue collected per employee. It is applied to both
workers in core and support functions is how efficient functions to compare which one yields most revenue
they are at collecting customs and domestic tax per worker.
revenue (Figure 5.7). The indicator used to that end is
Figure 5.7. Tax revenue per tax worker in core and support functions, 2017
Angola
Botswana
Burkina Faso
Burundi
Cape Verde
Cameroon
Chad
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Malawi
Mali
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Sierra Leonne
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average
0 2000000 4000000 6000000 8000000 10000000 120000000 140000000 160000000
Rev/Core Rev/Support
Note: Namibia supplied data for core functions only
128
SARS, as stated above, collects the most revenue in the revenue administration bodies of Mali, Nigeria
thanks chiefly to its core function staff. On average, its and Zambia. Angola is the only country where support
core function workers raised over 90% more revenue function workers outdid those in core functions,
than support staff. They were followed by their peers mainly because they outnumber them.
Figure 5.8. Male and female staff numbers in ATO tax administration bodies, 2017
Angola
Botswana
Burkina Faso
Burundi
Cape Verde
Cameroon
Chad
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Kenya
Lesotho
Liberia
Madagascar
Malawi
Mauritius
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Sierra Leonne
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average
0 2000 4000 6000 8000 10000 12000 14000 16000
Total Number of Male Staff Total Number of Female Staff

Gender balance uneven in executive positions Faso do much better, however, as half of their top
managers are female. The share is only 12.5% in
Gender balance in revenue administration bodies
SARS, even though 62% of its overall workforce is
varies, of course, from country to country. But
female.
imbalance is especially pronounced in senior
management. In Gambia, Ghana and Nigeria, for Clearly, ATO countries have to rethink how to
example, top executives are exclusively male, though accelerate their efforts to build greater gender equality.
the Nigerian and Ghanaian revenue administration Some countries, such as Chad, Liberia, Mozambique,
authorities do report that they have not yet filled all Senegal and Togo, have made very little progress in
executive positions. Lesotho, Eswatini and Burkina this area, far less than many others.
Figure 5.9. The gender balance in executive positions
Botswana
Burkina Faso
Burundi
Cape Verde
Cameroon
Chad
Côte d’Ivoire
DR. Congo
Eswatini
Gambia
Ghana
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritius
Namibia
Niger
Nigeria
Rwanda
Senegal
Sierra Leonne
South Africa
Tanzania
Togo
Uganda
Zambia
Zimbabwe
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Nb Male in Executive Position Nb Female in Executive Position
130
5.5. Risk management and mitigation As for the risk of revenue target shortfalls, it can be
mitigated by monthly target monitoring. In the event of
As tax administration institutions grow and develop shortfalls in certain types of tax revenue, there should
into efficient and effective enterprises, risk, too, will be provision for rapid-response corrective action.
grow and develop. It is inherent in the work of any
institution, so successfully mitigating it enables
revenue authorities to achieve their objectives.
Box 5.3:
In a world driven by innovation and constant economic
Malawi’s revenue authority strengthens
change, the ever-emerging risks must be managed
document security to mitigate risk
quickly to minimise threat and maximise potential.
Eighteen ATO members have introduced enterprise One way in which tax administration authorities
risk management policies and put in place corporate may lose revenue is through the forgery of key
risk registers that identify risks, such as: documents (e.g. tax clearance forms) by would-be
taxpayers or tax officers. Advances in technology
• The misuse or unavailability of automated digital
have made it possible to alter or forge documents
systems and cybercrime, which could be a grave
in ways virtually undetectable to the naked eye.
danger to the whole tax administration system.
• Loss of knowledge as experienced tax officers The Malawi Revenue Authority

retire but are not replaced. The inability to (MRA) has come up with a way to
attract and retain the required talent jeopardises mitigate this risk. It has introduced
understanding, know-how, and targets. document security features for
verifying that documents are
• Poor stakeholder engagement, stakeholder genuine and valid.
inexperience, wrong allocation of resources and
bad strategic investment decisions. Two important security implementations are now
in place.
• Poor taxpayer compliance will lead to shortfall of
revenue collection. • The QR Code. It is a code printed on official
• Changes in tax policy and procurement practices documents that users can scan to check and
may lead to misprocurement of goods and validate them.
services. • Validation Code. A number code printed on
• Worsening cost-to-revenue ratio due to low funding original MRA documents that enables users
prevents the revenue authority from carrying out to check that documents are genuine. They
key operations and projects. can then use the code to retrieve documents
details from the MRA website or using the
• Non-integrity and staff malpractice. Tax officers MRA mobile app.
may commit fraudulent and corrupt acts or leak
confidential information to unauthorized users The MRA has incorporated the codes on
official domestic taxes and customs and excise
• Absence of business continuity or disaster documents to help safeguard the documents and
recovery plan. The revenue authority cannot the associated revenue collection.
therefore respond to critical emergencies and
maintain normal business operations. Source: ATO good practice database - Malawi Revenue
Authority

In practice, numerous factors complicate answering
important questions, such as the diversity of taxpayer
compliance behaviour or the lack of knowledge
of the nature and incidence of non-compliance in
different segments of taxpayers (OECD-CFA, 2004).
Good models of compliance risk management – in
both semi-autonomous and ministry-based revenue
administration bodies – should outline standards and
compliance risks. Such risks include:
• loopholes in the legislation;
• transfer pricing;
• tax avoidance and evasion, especially in the

informal sector;
• tax incentives and exemptions – particularly those

granted in port free zones – and companies who do
not pay their taxes when exemption has expired;
• non-filing and the under- and mis-declaration of

income and/or goods;
• failure to comply with electronic tax register (ETR)

requirements;
• non-compliance with tax and customs laws,

labour laws, procurement laws, data protection
requirements and financial reporting obligations;
• non-compliance with the requirement to file tax

returns;
• failure by high net worth individuals (HNWIs) to

comply with their tax obligations;
• significant book debt accrued as part of VAT refund

fraud.
Against the backdrop of multiple risk and taxpayer

non-compliance, many ATO members are now
benchmarking their tax administration institutions’
risk-management practices and processes against a
standard. Their aim is to strengthen those practices
and processes in pursuit of established goals. Their
data collection processes and analyses will leverage
future research and indicators that the next edition of
the African Tax Outlook will address.
132
6
EFFICIENT
MANAGEMENT
IN REVENUE
ADMINISTRATION

6 Efficient management in
revenue administration
Taxpayer Education:
Countries who run school programmes:
CÔTE D’IVOIRE KENYA NIGERIA
SOUTH AFRICA UGANDA
Programmes designed
for high school pupils
and students in higher
education. Action
includes debates on tax
issues and tax
advocacy programmes.
134
Share of ATO countries where taxpayers
filed their returns electronically
57% 74%
2012 2017
75% of customers used electronic payment while filing

their returns electronically between 2012 - 2017
Customs Clearance:
2016 15% INCREASE 2017
11 769 004 13 562 299

IMPORTED GOODS IMPORTED GOODS
Percentage of import declarations in ATO countries:
SOUTH AFRICA ZAMBIA ZIMBABWE BOTSWANA ESWATINI
48% 8% 7% 4% 4%
135
6. Efficient management in revenue administration
Taxpayer service delivery is crucial to effective, There have been considerable developments in
efficient administration of tax legislation. A user- taxpayer telephone services. Revenue administration
friendly service provision, i.e. accessible to and authorities in many countries have put in place large
understandable by all, helps sustain and strengthen call centre arrangements that draw on sophisticated
individual and overall taxpayer willingness to comply telephone technology to facilitate taxpayer access to
(Forum on Tax Administration, 2007). If taxpayers information and assistance.
and their representatives receive high-standard tax
Between 2011 and 2017 the number of countries
administration services to help them determine and
using call centres and monitoring website enquiries
meet their legal obligations, they will respond with high
increased from 10 to 17 or more (Figure 6.1). Data on
standards of voluntary compliance.
both counts should be treated with caution, however,
as some countries that had provided data in previous
years did not do so in 2017.
6.1. Taxpayer service and
communication • Eighteen ATO countries had call centres that track
response times in 2017: Angola, Botswana, Burundi,
Revenue administration bodies deliver services through Cameroon, Eswatini, Gambia, Ghana, Kenya,
a variety of channels. They include: Liberia, Mauritius, Rwanda, Senegal, Sierra Leone,
• local tax offices which afford taxpayers face-to- South Africa, Tanzania, Togo, Uganda, Zambia.
face contact with tax officers, • Seventeen ATO countries have websites that
• written correspondence by post, monitor taxpayers’ queries: Angola, Botswana,
Burkina Faso, Cape Verde, Cameroon, Eswatini,
• online services like the internet and email, Ghana, Kenya, Liberia, Madagascar, Malawi,
• and telephone inquiry services (see below). Rwanda, Senegal, Sierra Leone, Tanzania, Uganda,
Zambia.
136
Figure 6.1. ATO countries with call centres that track response time and websites that monitor
taxpayer queries
20
18
18
17 17 17
16
14
12 12 12 12
12
10 10 10 10 10 10
10
9
8
8
0
2010 2011 2012 2013 2014 2015 2016 2017
Call Centres that track response time Websites that monitor taxpayer queries
Note: Data for previous years in the 2019 edition may not necessarily compare to data in earlier publications as new and old ATO
countries continuously update data even for past years with each new edition.
Taxpayer service channels have inherent strengths 6.2 Taxpayer education

and weaknesses and, of course, are shaped by cost
Taxpayer education seeks to help people understand
considerations. Some revenue bodies, for example,
the whole process of taxation and why they should pay
have large office networks where taxpayers can deal
taxes (Aksnes, 2011). Its purpose is to assist taxpayers
with tax officers. Such service may meet the needs
in meeting their tax obligations so that revenue
of taxpayers who desire the reassuring nature of
administration bodies may transition from high-cost
personal contact, but it is likely to entail significant
enforcement measures against non-compliance to
overhead costs and can typically be provided only in
lower-cost, non-enforcement solutions (Misra, 2004).
normal business hours. Online services, by contrast,
In fact, the objective of taxpayer education is three-
are available round the clock and seven days a week.
fold (ibid):
However, not all taxpayers have access to internet
services and some may be reluctant to use them. 1. impart knowledge about tax laws and compliance,
2. change taxpayer’s attitude and behaviour towards

taxation,
3. increase tax collection through voluntary

compliance.
CHA PTER 6: Eff i c i e n t ma n a g e m e n t i n re v e nue a dminist r a t ion 137

There is a positive relationship between taxpayer addressed the role of taxpayer education in tax
education and voluntary tax compliance (Kassipillai, compliance (Table 6.1). Of the 29 that provided data on
Aripin, and Amran, 2003). Education transmits taxpayer education, 25 had taxpayer education units.
understanding of taxation and changes perceptions of And of those, 18 had also earmarked budgets. Clearly,
tax compliance into more positive attitudes.
tax education is attracting increasing attention amongst
If taxpayer education is to be effective, revenue ATO revenue administration bodies. They are adopting
administration bodies need to have dedicated education more modern approaches to tax administration that
units and budgets. Accordingly, ATO countries have focus on customer orientation and voluntary compliance.
Table 6.1. The provision of taxpayer education and budgets in ATO countries, 2017
Taxpayer Taxpayer
Taxpayer Taxpayer
Country education Country education
education unit education unit
budget budget
Angola Yes No Malawi Yes Yes
Benin / / Mali / /
Botswana Yes Yes Mauritius Yes No
Burkina Faso No No Mozambique / /
Burundi Yes Yes Namibia Yes Yes
Cabo Verde Yes No Niger Yes /
Cameroon Yes No Nigeria Yes Yes
Chad No No Rwanda Yes Yes
Côte d’Ivoire Yes Yes Senegal No No
DRC / / Seychelles Yes No
Eswatini Yes Yes Sierra Leone Yes Yes
Gambia Yes Yes South Africa Yes Yes
Ghana Yes Yes Tanzania Yes Yes
Kenya Yes Yes Togo Yes Yes
Lesotho / / Uganda Yes Yes
Liberia Yes Yes Zambia Yes Yes
Madagascar Yes No Zimbabwe No No
138
Television, radio and the print media, together concerns about the use of social media and fear the
with workshops and awareness campaigns, are possibility of misleading information (Araki, 2013) in tax
the most widely used channels of tax education in administration (see Box 6.1). As for events like taxpayer
ATO countries. Neither social media nor taxpayer appreciation and national tax days, they are hindered
recognition days are much used, by contrast. Research by insufficient funding.
shows that tax administration officials harbour security
Table 6.2. Main channels of taxpayer education in the ATO, 2017
Channel Countries using this channel How the channel is used
Media - Radio and Cameroon, Cote d’Ivoire, Gambia, Talk shows on tax matters that create awareness
Television Ghana, Liberia, Madagascar, Malawi, among taxpayers and the public at large.
Namibia, Nigeria, Senegal, Eswatini,
Tanzania, Zambia. Zimbabwe,
Media – Print Cameroon, Cote d’Ivoire, Gambia, Newspapers, magazines, annual reports, etc.
Ghana, Malawi, Namibia, Nigeria,
Senegal, Tanzania, Togo, Zimbabwe
Media - social Liberia, Eswatini Use of social media platforms such as Facebook,
Twitter, and YouTube to reach taxpayers, particularly
younger ones.
Adverts and Burundi, Eswatini, Niger, Zambia, Billboards, newspapers, pamphlets, brochures, etc. to
marketing materials keep taxpayers mindful of their tax obligations, remind
them of deadlines, etc.
School programmes Cote d’Ivoire, Kenya, Nigeria, South Programmes designed for high school pupils and
Africa, Uganda students in higher education. Action includes debates
on tax issues and tax advocacy programmes. The aim
is to foster tax awareness among future taxpayers and
set solid foundations for a better taxpaying culture.
Taxpayer education Angola, Botswana, Burundi, Cote These are workshops, seminars, tax clinics, trainings,
workshops d’Ivoire, Ghana, Kenya, Liberia, business support programmes targeted at taxpayers
Namibia, Nigeria, South Africa, and other key stakeholders. Targeted taxpayer
Eswatini, Tanzania, Togo, Uganda, education workshops address specific groups of
Zambia, Zimbabwe taxpayers.
Campaigns Angola, Botswana, Burundi, Gambia, Road shows, exhibitions, outreach programmes, open
Kenya, Malawi, Namibia, Senegal, days to raise public awareness of taxes. Further efforts
South Africa, Eswatini, Tanzania, must be made to explain how taxpayers and society
Togo, Zambia, Zimbabwe benefit from taxes.
Taxpayer Rwanda, Togo, Uganda Taxpayer awards, taxpayer appreciation days, national
recognition tax days to promote compliance.
Web-based Cameroon, Gambia, Namibia, Provision of taxpayer information on websites,

taxpayer Zimbabwe, responses to queries, and help desks.
information

6.2.1. Challenges of taxpayer education • Low quality of educational services. The poor
quality of the education provision is related to
Though taxpayer education has gained popularity poor take-up. Flawed services can fuel negative
amongst revenue authorities in the ATO countries, perceptions, which in turn reduce attendance at
challenges still exist. They relate mainly to roll-out and taxpayer education events. Since one of the key
evaluation. They include: objectives of tax education is to improve taxpayer
• Little impact and unchanged taxpayer behaviour. perceptions, it is particularly important that revenue
Although no direct evidence is available, recent authorities ensure that the service is delivered to
studies have shown that education can have the highest professional standard.
a positive or negative effect on tax morale,
depending on a person’s circumstances and the
6.2.2. Improving taxpayer education in the ATO
institutional environment (Rodriguez-Justicia and
Theilen, 2018). Although education may improve Taxpayer education thus faces daunting challenges in
knowledge of attitudes to compliance, it does the ATO countries. The following considerations may
not necessarily translate into improved taxpayer point to ways of improving the current state of taxpayer
behaviour. The literature has shown that attitudes education in ATO countries.
and actual behaviour do not always match (Onu,
2016). • Evaluation of taxpayer education programmes.
There is lack of rigorous evaluation of taxpayer
• Low uptake and limited reach. Taxpayer education education action. Revenue authorities should focus
programmes seldom reach people who do not on drawing up effective evaluation programmes
want to be reached. Their attitudes may be fuelled to determine which taxpayer education initiatives
by a general aversion to taxpaying, often related to work and which do not. They should then channel
widespread perceptions of corruption and lack of resources towards the programmes that are most
clarity as to the use of public money (Isbell, 2017). effective in improving compliance, attitudes and,
Such sentiment is of greater concern in countries ultimately, tax revenue. Taxpayer education units
with large informal sectors, where many potential will then be able to use evidence to argue for
taxpayers are yet to be convinced that taxes play greater funding.
an important role in a country’s development. To
correct that misapprehension, tax education needs • Transparency and accountability. Taxpayer
to reach people outside the tax net. education should not overly focus on technical
issues like tax registration and filing. It should
• Limited budgets and weak link to revenue include action to foster a meaningful, sustainable
generation. Despite the growing interest in tax taxpaying culture (Mascagni and Santoro, 2018).
education in recent years, taxpayer education Working together with the relevant government
units are still widely under-funded compared to agencies such as the finance ministry, tax
traditional enforcement functions such as audit or educators should place greater emphasis on
risk management. As a result, taxpayer education budget transparency and accountability. Indeed,
teams are understaffed and have neither the time many taxpayers not only grapple with the technical
nor the financial resources to manage programmes. difficulties of taxation. They also struggle to see
Since revenue authorities operate under tight what taxes are for (Kira, 2017). Tax education
financial constraints, they choose to allocate their should be part of an effort to build citizens’ trust
scarce resources to programmes and activities in government institutions in general, and in tax
with more immediate revenue returns. administration in particular.
140
Box 6.1:
Good Practices
Targeted taxpayer education in the Seychelles
Seychelles runs a taxpayer education programme that caters for the particular needs of taxpayers operating in
different sectors of the economy. The programme does, of course, target such traditional segments as “large
taxpayers” and “small and medium taxpayers”. However, it also addresses the issues faced by particular
sectors and arranges workshops on sector -specific challenges.
Interventions are set up in such a way as to:
• serve as refresher courses for businesses,
• identify areas where taxpayers face special difficulties,
• clarify uncertainties.
Expectations are that taxpayers:
• show a clearer understanding of tax laws and their obligations,
• make fewer mistakes when filing returns,
• improve their compliance levels.
Eswatini Revenue Authority leverages social media
As tax bases grow, tax administration bodies seek new ways to reach out to taxpayers and inform them of
their service offerings. Social media affords them a unique, cost-effective opportunity for widening outreach.
The Eswatini Revenue Authority has incorporated Facebook and Twitter as channels for their taxpayer
engagement programme. It uses these social media channels to launch and promote compliance campaigns
and receive taxpayer feedback. The result is increased coverage at lower costs. According to its 2017 annual
report, the Eswatini Revenue Authority reached 4 146 taxpayers through organic or non-paid campaigns in tax
year 2016 2017.
As for taxpayer engagements, they increased to tens of thousands per campaign in response to advertisements
that cost less than the traditional channels of communication.

6.3. Modernising tax administration • lower-cost enforcement,
for cost-effectiveness • lower-cost human resources,
Drawing on information and communication technology • cost-effective voluntary taxpayer compliance.

(ICT), tax administration bodies have modernised. Their
The number of ATO countries seeking to modernise
information management systems can now process,
their tax administration processes is steadily growing.
store and analyse huge amounts of data related to
Those which practice ICT-based tax collection
taxpayer accounts, so streamlining operations and
increased yearly between 2012 and 2017 from 18 to
making them more effective (Araki, 2013). There are
24 (Figure 6.2), while the revenue authorities that allow
multiple benefits to the use of ICT in tax administration.
or require electronic payment have been in a constant
They include (ibid.):
majority over the period. They are, however, still at
more efficient information sharing and cross-checking different stages of modernisation, with some having
between internal tax administration departments, introduced procedures and others not.
Figure 6.2. Extent of online tax filing, collection and payment in ATO countries, 2012 2017
Penetration of online formalities, percentage
Have you modernized your

tax collection process?
Do your taxpayers file their

returns electronically?
Do your taxpayers pay

their taxes electronically?
Is it compulsory for all

taxpayers to pay their
taxes electronically?
Do you have a mobile

payment system?
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2017 2016 2015 2014 2013 2012
Note: The data are sometimes indicative only, as some ATO countries who provided data in previous years did not do so for 2017.
142
Electronic tax filing systems are arguably the most Mobile payment systems enable taxpayers without
visible of the tax modernization processes worldwide. bank accounts to pay their taxes through their mobile
The system enables taxpayers to submit tax returns phones to the revenue authority. Mobile payment
electronically, which benefits taxpayers as well as could be a way of increasing compliance among small
tax administration authorities. ATO countries have and medium enterprises in the ATO countries with
increasingly been moving towards electronic filing since their large informal sectors. However, it remained a
2012 (Figure 6.2). The share of ATO countries where relatively limited practice, restricted to less than 40%
taxpayers file their returns electronically grew from 57% of the countries that provided the data until 2016. In
to 74% between 2012 and 2017, while over 75% used 2017, though, there was a significant rise to almost
electronic payment throughout the period. However, for 60% (see Figure 6.2).
reasons of flexibility and limited ICT infrastructure, only
a few tax authorities have made it compulsory to pay
taxes electronically.
Box 6.2.
Good Practices in Madagascar and Cabo Verde
Madagascar’s Hetraphone addresses the needs of SMEs
In 2017, the Madagascar tax administration authority launched “Hetraphone”, a pilot project platform for
declaring and paying synthetic tax via mobile telephone. The project is part of the Madagascar Financial
Inclusion Project funded through the World Bank. It seeks to provide a service tailored to the needs of small
taxpayers and to include them in the non-traditional financial system.
The objectives of Hetraphone project are to:
• continue Madagascar’s tax administration modernisation strategy,
• increase the mobilization of domestic resources,
• promote voluntary compliance among small and very small taxpayers,
• improve tax service delivery to taxpayers,
• reduce face-to-face dealing between taxpayers and tax officers,
• promote a tax administration service that is much closer to taxpayers.
Since 2017, Hetraphone has functioned through two operators, Mvola and Orange Money, in two tax centres.
Deployment to the capital city’s seven tax centres is scheduled for 2019 in line with the General Tax Directorate’s
vision of ensuring constant improvement of taxpayer services. And from 2020, the plan is to extend the service
nationally.
However, the commission fees that the money transmitters charge taxpayers has been an obstacle to use of
the Hetraphone service. Cash payment, for which there is no charge, has come to seem more advantageous
in the eyes of very small taxpayers.

Proposed solutions include negotiation with donors to cover commission costs (with the state bearing part
of the commission costs in the medium term) and negotiations with the money transmitters to cut their
commission fees.
Mobile banking is very widespread in Madagascar, particularly among low- and middle-income households
and Hetraphone is now operating with all money transmitters. As the project is still in the pilot phase, no
significant impact is yet tangible at the revenue level. However, the tax administration authority has hopes of
improved tax compliance.
Cabo Verde implements electronic notification
Cabo Verde rolled out its electronic notification system in March 2019. The system works through a website
dubbed the “citizen’s portal”. All small and medium sized enterprises (SMEs) that have signed up to accounting
regimes have an email inbox that they must activate and maintain. It is to these boxes that the various services
of the National Directorate of State Revenues (DNRE) sends notifications, summons and information relating to
tax matters, notifying them it has done so.
The notification system is part of the electronic document management system and electronic authentication
that the DNRE has put in place. The aim is to phase out paper and fully automate tax administration procedures,
so improving the quality of its taxpayer service provision, while reducing non-compliance and its associated
costs.
The DNRE’s strategy is to become an electronic tax administrator that is closer to the taxpayer and at the service
of the country. Guided by its concern for tax justice, it seeks to promote competitiveness, fair competition, and
the well-being of citizens.
144
6.4 Customs clearance 71%, Burundi 66%, Cote d’Ivoire 63%, Gambia
61%, Cameroon 57% and Togo 55%.
Customs clearance is documented permission that a
national customs authority grants to imported goods
so that they can enter a country and to exported • Yellow lane. For medium-risk importers and
goods so that they can leave. It is proof that all imports.
applicable customs duties have been paid and a Full documentary checks performed. On average,
shipment approved. ATO countries cleared 23% of imports through the
yellow lane in 2017 (against 24% in 2016). Cabo
The customs clearance procedure involves:
Verde cleared 79%, Mauritius 55%, Madagascar
• checking goods declaration forms and supporting 53%, Malawi 45% and Liberia 43%.
documentation
• inspecting goods,
• Green lane. For low-risk cargo intended for
• assessing and collecting import duties and taxes, immediate release.
• releasing (or impounding) goods. No documentary checks or physical inspections
The total number of imported goods declared in ATO performed. On average, ATO countries cleared
countries was 13 562 299 in 2017, an increase of 27% of imports through the green lane in 2017
15% over the 11 769 004 recorded in 2016. The rise (against 24% in 2016). Countries which cleared
is attributable to a larger number of ATO countries over 50% of imports through the green lane:
submitting the required data than in 2016. About half Botswana 97%, Eswatini 61%, Zimbabwe 60%,
(48%) of the import declarations were made by South Zambia 55%, Senegal 52%.
Africa, followed by Zambia (8%), Zimbabwe (7%),
Botswana (4%) and Eswatini (4%).
• Blue lane. For accredited freight companies
The flow of goods and traffic at border crossing that enjoy preferential treatment (e.g. those that
is determined by level of risk. Commodities and ship goods for diplomats) and for big companies
shipments go through colour-coded lanes according to considered low-risk. Goods are immediately
their risk level. released but subject to post-clearance audits. On
average, ATO countries cleared only 6% of imports
through the blue lane in 2017 (against 12% in
• Red lane. For high risk importers and imports. 2016). Rwanda cleared 30% of imports, Malawi
Goods are physically inspected so that duty 23%, Senegal (22%).
can be assessed. Importers with a history of • Some ATO countries use an extra lane, through
non-compliance are audited. On average, ATO which 9% of goods were cleared in 2017,
countries cleared 36% of imports through red lane compared to 5% in 2016. Only five ATO countries
in 2017 (against 35% in 2016). Countries which made use of this “other” lane in 2017: South Africa
cleared over 50% of imports through the red lane: (100%), Angola (98%), Uganda (26%), Senegal
Nigeria 87%, Sierra Leone 79%, Mozambique (8%) and Togo (2%).

Figure 6.3. Imported goods by lane colour in the ATO, 2017
Botswana
Burundi
Cape Verde
Cameroon
Côte d’Ivoire
Eswatini
Gambia
Ghana
Liberia
Madagascar
Malawi
Mauritius
Mozambique
Niger
Nigeria
Rwanda
Senegal
Sierra Leone
Tanzania
Togo
Uganda
Zambia
Zimbabwe
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Red Lane Yellow Lane Green Lane Blue Lane Other Lane
As for imports into regional economic groupings, as did SACU member states, where the green lane
data show that the regions where the highest share of accounted for an even higher 53%.17 The little use that
declared imports transited through the red lane in 2017 SADC and SACU countries make of the red lane points
were ECCAS, ECOWAS and EAC. to the benefits of regional integration as well as the low-
risk profiles of importers and imports in these regions.
SADC countries, for their part, cleared most goods
through the green lane – 33% of declared imports –
17. The proportions for SADC and SACU are influenced by the dominance of the other lane in Angola and South Africa.
146
Figure 6.4. Customs clearance by lane colour and regional groupings, 2017
ATO Average
ECCAS
ECOWAS
EAC
SACU
SADC
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Red Lane Yellow Lane Green Lane Blue Lane Other Lane
Box 6.3.
Good Practices
Zimbabwe’s authorised economic operator (AEO) programme
In 2017, the Zimbabwe Revenue Authority (ZIMRA) implemented an authorized economic operator programme
in the wake of a successful pilot run by its Customs and Excise Trade Facilitation Department. Its aim was to:
• reward compliant importers and their representatives,
• reduce congestion by expediting flows of low-risk traffic.
ZIMRA was also keen to meet the requirements of the SAFE Framework of Standards.
Before programme roll-out, ZIMRA granted no recognition or preferential treatment to highly compliant
importers. As a result, there were unnecessary delays and growing costs for customs checks that yielded
nothing.
Selected AEOs and their agents benefit from minimum customs formalities and faster clearance in line with the
recommendations of the SAFE Framework. The selection and accreditation procedure is transparent but strict,
and only importers who meet the required standard are granted AEO status. They may appeal if not accredited,
while any deviation from standards may mean withdrawal of the privilege.
The programme was smoothly implemented and has proved successful: traffic flows more easily at border
crossings, there is less congestion, and compliance has improved. Faster customs clearance also means that
revenue flows faster into state coffers.

6.5. Conclusion and ways forward Maintain ICT-based modernisation
The complexity of tax laws coupled with the large ATO countries should harness the power of ICT as they
numbers of taxpayers that they have to serve compel continue to modernise with the dual purpose of:
all revenue administration bodies to rely heavily • increasing the cost-effectiveness of tax
on voluntary taxpayer compliance. To achieve that administration operations
voluntary compliance, it is essential that they provide
high-quality taxpayer services. Since 2013, ATO • to making it easier for taxpayers to comply.
countries have seen significant improvements in their In 2012, 82% of ATO countries had modernized their
tax administration service provision – e.g. call centres tax collection procedures. In 2017, that share stood at
that track response times and websites that monitor 89%, with taxpayers able to file returns and pay their
taxpayers’ queries. taxes electronically. As for mobile payment platforms,
they are in place in only 59% of ATO countries – in other
Taxpayer education words, relatively little used. Yet mobile systems would
greatly facilitate taxpayers’ access to tax administration
Taxpayers with knowledge of tax regulations better
services. More countries should introduce or enhance
understand their rights and duties and the importance
their provision of electronic tax and mobile money
of paying taxes to the state. Educating taxpayers has
services. And to reap the full benefit of such services,
thus become a key aspect of improving tax compliance
governments should combine them with good policies
and attitudes. ATO countries have used a number of
to increase taxpayers’ use of them.
channels to educate taxpayers, though shortcomings
persist. There is, for example, a lack of evaluation tools
for assessing whether taxpayer education improves Customs clearance
compliance. Budget constraints are an additional ATO countries’ customs authorities use four main
factor. Nevertheless, more must be done to improve lanes to clear imported and exported goods.
taxpayer education in ATO countries. Social media The lanes are denoted by colour – red, yellow, green
platforms have potential as effective communication and blue – in descending order of risk level. The most
tools, although tax administration authorities have as frequently used lane in the ATO countries in 2017
yet little experience of using them. was the red lane, particularly in ECCAS, ECOWAS
and EAC member states, which points to inefficient
for customs management. Goods imported into the
SADC and SACU economic grouping were cleared
chiefly through the green lane. ATO countries need to
simplify customs clearance procedures between each
other and with other trading blocs outside those in the
ATO to facilitate trade.
148
7 AUDIT AND
COMPLIANCE

7 Audit and compliance
Countries with high taxpayer to auditor ratios
NIGERIA GAMBIA GHANA
TANZANIA NAMIBIA x3 Higher

Average
Countries with low taxpayer to auditor ratios
TOGO MALAWI CÔTE D’IVOIRE
89 205 556
taxpayers taxpayers taxpayers
per auditor per auditor per auditor
150
Countries with two Countries with
separate administrations integrated revenues
873 2482
TAXPAYERS TAXPAYERS
TO PAY TO PAY
Stock of arrears as percentage of net tax revenues:
2016 2017
14 COUNTRIES 17 COUNTRIES
WITH ARREARS WITH ARREARS
STOCK ABOVE 10% STOCK ABOVE 10%
Countries with highest arrears stock:
CAPE VERDE ZIMBABWE The average for the

ATO countries is 27.3%,
122% 110%
compared to 24.5% in
2016 and 17% in 2015
Countries with lowest arrears stock:
GHANA MALAWI TANZANIA TOGO CÔTE D’IVOIRE
1% 2% 2% 3% 4%
151
7. Audit and compliance
The good functioning of public services in ATO 7.1.1. Audit capacity and coverage
countries and the implementation of their development
projects depend more and more on the mobilization Human resources
of resources from economic actors operating in their Two indicators are used to assess whether the staff
national jurisdictions. This mission is devolved to the assigned to auditing functions is in sufficient numbers
tax administrations which acts according to the rules (ATAF, 2018):
defined each year by the budget law. Tax policy remains
however faced with two major obstacles: the tax • The ratio of auditors to total tax administration staff.
evasion strategies orchestrated by certain companies In modern tax administrations, with taxpayers
and the lack of spontaneity from taxpayers in honouring increasingly paying their taxes online, a growing
their tax obligations. These are two manifestations of number of staff is called to focus on auditing
non-compliance. functions (Figure 7.1).
The notion of non-compliance (whose positive • The number of auditors per total number of
counterpart is tax compliance) covers all taxpayer registered taxpayers.
perceptions and behaviours that result in fraud or non-
payment of taxes. Tax non-compliance leads to revenue Monitoring auditors’ caseloads is critical. Should an
losses and therefore to the loss of the resources needed auditor have a high caseload, the quality of his/her
to finance the economy. It is up to tax administrations audit will suffer. Similarly, taxpayers will be less likely
to promote tax compliance through the various means to be audited and therefore, more likely to default their
at their disposal. tax obligations.
More specifically, they can explore the possibilities of

The ratio of auditors to total tax administration
new communication technologies and analytic data
staff.
management and / or use behavioural science to
encourage taxpayers to become more tax compliant. In 2017, auditors accounted for 11,6% of the total tax
Or, to enforce tax compliance, they can opt for coercive administration staffs in the 25 ATO countries which
measures such as tax audits and customs interventions. had submitted data, which represents just over a
This chapter reviews the actions undertaken by ATO third of the 30% international benchmark (Gallagher,
countries in view of improving tax compliance. 2004). This figure still represented an increase over
the 7% recorded in 2016, which means either that in
2017 there were more auditors than in 2016 in some
ATO countries, or that the countries had accounted
7.1. Auditing for compliance for them better.
The tax systems of most ATO countries are declarative:
As in 2016, only the tax administration of Togo
taxpayers submit their own declarations to the best of
(37.9%) has tax auditors’ rate above the 30%
their knowledge. It is up to the tax administration to
international benchmark. Indeed, Togo includes its
check the regularity and accuracy of such declarations.
customs officers who carry out verifications at points
In this respect, tax audit is a critically important tool:
of entry in its count of auditing staff (ATO, 2018). Three
it constitutes a means of monitoring and ensuring
countries have ratios above 20% - Chad (28.1%),
equality for all in terms of taxes and fighting tax evasion.
Sierra Leone (24.9%) and Uganda (20.5%). Followed
Moreover, tax audit is expected to play an increasingly
by six countries with lower ratios but still above the
important role revenue mobilization.
ATO average. Mauritius (18.9%), Cameroon (17.8%),
From this perspective, human resources are one of the Madagascar (14.8%), Cape Verde (13.9%), Namibia
determining factors. (13.8%) and Nigeria (12.5%).
152
In the majority of ATO countries (15) the ratio of auditors by the Economic Community of West African States
is below the ATO average, notably in South Africa (ECOWAS) (12.0%) and the East African Community
(1.9%), Senegal (3.0%) and The Gambia (3.2%). Of (EAC) (11.7%). Ratios below 10% were recorded in
these three countries, South Africa and Senegal are 2017 in the Southern African Development Community
down from 2016. (SADC) (8.2%) and the Southern African Customs
Union SACU (6.4%).
At the regional groupings level in 2017, ATO countries
that are members of the Central African Economic Whether tax and customs administrations are integrated
and Monetary Community (CEMAC) recorded the or separate, the ratio of auditors in the total workforce
largest number of auditors in their tax administrations is the same, 11.6% (ATO average).
staff, with an average ratio of 22.9%. It is followed
Figure 7.1. The ratio of auditors to total tax administration staff.
South Africa, 1,9%

ATO Average 25, 11,6% Botswana, 3,5%
Zimbabwe, 9,9% Cameroon, 17,8%
Zambia, 7,5% Cape Verde, 13,9%
Togo, 37,9% Côte d’Ivoire, 5,3%
Chad, 28,1% Eswatini, 6,5%
Tanzania, 7,4% Gambia, 3,2%
Sierra Leone, 24,9% Ghana, 7,3%
Senegal, 3% Liberia, 7,8%
Rwanda, 7,1% Madagascar, 14,8%
Uganda, 20,5% Malawi, 6,3%
Nigeria, 12,5% Mauritius, 18,9%
Niger, 4% Mozambique, 6%
Namibia, 13,8%
The lack of auditors is therefore evident, which goes according to an OECD survey. Conducted in twelve
against the principle of equal treatment of all in tax administrations, the survey reveals that OECD
terms of tax. Indeed, tax audit focuses on the most countries allocate over 40% of their human resources
profitable cases, known as “high return cases”, which to audit, investigations and other auditing functions
are handled from A to Z. As a result, taxpayers are no (ATAX, 2010), compared to 11, 6% for ATO countries.
longer treated equally.
The more auditors there are, the better, of course. It is
The efforts required from ATO countries in order also important to ensure that they are used effectively
to increase their auditing staff are even greater by monitoring their caseload.
CHA PTER 7: Au d i t a n d c o mp l i a n c e 153

Auditors’ workload average of 2,479 taxpayers per auditor in 2017 (Figure
7.2). This average is almost six times higher than the
The performance of an auditor is in part a function of
number of taxpayers per auditor identified in a 2009
the number of taxpayers in his charge: the fewer they
ATAX case study of the Malaysian Customs. Even then,
are, the more effective the audit will be. In this regard,
ATAX judged this number very high (ATAX, 2009).
17 ATO countries provided data that resulted in an
Figure 7.2. Number of taxpayers per auditor, 2017
Tanzania 7465
Namibia 7290
Gambia 6139
Nigeria 3630
Ghana 3429
ATO Average, 17 2479
Zambia 2361
Mauritius 2187
Uganda 2112
Rwanda 1801
Seychelles 1170
Senegal 1127
Eswatini 1038
Cameroon 904
Liberia 640
Côte d’Ivoire 556
Malawi 205
Togo 89
0 1000 2000 3000 4000 5000 6000 7000 8000
Tanzania, Namibia, The Gambia, Nigeria and Ghana countries, the taxpayer register includes each public
recorded a number of taxpayers per auditor above and private worker whose tax is deducted from the
the ATO average in 2017 - three times higher for wage (or “withholding tax”). In most French-speaking
Tanzania and Namibia. These figures illustrate the countries, on the other hand, the taxpayer’s register
very heavy workload of auditors in these countries only records the entity or the company that transfers
and the unlikelihood for taxpayers to be controlled. As the deductions made on wages.
for the Togolese, Malawian and Ivorian auditors, their
The case of Nigeria is rather special. The number of
workload is much less heavy: each one is responsible
taxpayers per auditor soared in 2016 2017, from 1,000
for 89, 205 and 556 taxpayers respectively.
to more than 3,500. The reason for this was the 36.6
In countries where tax and customs are integrated in per cent increase in the taxpayer register, inflated
the same directorate, an auditor has on average, 2,482 by the voluntary declaration of assets and income
taxpayers in his charge, much more than the 873 in programme (VAIDS) introduced in 2016 by the Nigerian
countries with two separate administrations. Federal Inland Revenue Service (FIRS) (Box 7.1).
However, the number of taxpayers per auditor is not
However, the different definitions of “taxpayer” from sufficient in itself to assess the workload of auditors
one country to another call for caution in comparisons. in ATO countries. The number of audits performed by
In fact, in some countries, especially English-speaking them gives a clearer idea.
154
Box 7.1.
Good practice from Nigeria
Voluntary Asset and Income declaration programme
The voluntary asset and income declaration scheme (VAIDS) was formally launched on 29 June 2017 by the
Nigerian Federal Inland Revenue Service (FIRS) in collaboration with the 36 regional tax administrations. It was
an initiative designed to give defaulting taxpayers the opportunity to voluntarily rectify their situation. A similar
exercise was undertaken in 2016, which offered debtor taxpayers a 45-day amnesty period to learn about their
tax obligations and pay their outstanding debts.
Building on the success of this first initiative and faced with low levels of tax compliance, FIRS launched the
VAIDS programme. Indeed, many taxpayers
• under-reported their taxable income or taxable assets,
• Or had paid too little or no tax at all.
The programme gave these bad taxpayers a grace period of nine months, with an additional three-month
extension, to voluntarily repay to National treasury what they owed. In return for a full declaration of assets and
income for the six fiscal years from 2011 to 2016, taxpayers were given discounts on penalties and surcharges
and were assured that they would not be subject to criminal prosecution nor tax investigations.
The VAIDS aimed at recovering all types of taxes from all taxpayers (individuals, companies, institutions, financial
institutions ...), including those who placed funds in tax havens to avoid paying taxes. The FIRS also expected
the scheme to help broaden Nigeria’s tax base and, as a result, increase the low tax revenue-to-GDP ratio from
6% to 10% to 15%.
Despite its ambitious scope, the voluntary nature of the programme limited collection costs for the FIRS. For
voluntary taxpayers, the VAIDS also had benefits, including the ability to repatriate assets held by designated
persons in their own names. And in the case of defaulting taxpayers who choose not to join the programme, they
have come under the act of authorizing forced collection.
VAIDS encountered implementation challenges due to competing priorities within the administration, data
availability and integrity, limited funding, and programme monitoring and evaluation. Nevertheless, it received
5,122 applications for membership and achieved voluntary declarations worth more than 92 billion NGN, of
which more than 30 billion were actually paid to the public treasury in early June 2018, shortly before the end of
VAIDS.
Source: The ATO’s Good Practices online Database - FIRS (2019)

Number and types of audits per auditor Next come Zambia (81) and Mauritius (60). Nevertheless,
the number of audits conducted in Zambia has
The number of audits in ATO countries ranges from
been declining since 2015, from 118 to 106 in 2016.
just one to a hundredfold - from more than 100 in
In 2017, they focused exclusively on issue audits and
Namibia to one in Nigeria (Figure 7.3). But it must
comprehensive audits that take longer, while in 2016
be pointed out that the type of audit determines its
the desk audits (48%) were predominant. In Mauritius,
number. For example, less tedious, desk audits run
the number of audits climbed from 21 in 2015 to 73 in
more easily and faster than on-site audits (Figure 7.4).
2016, before dropping in 2017.
Of the 102 audits conducted in 2017 by Namibia, the
highest number in all 24 ATO countries considered At the other extreme, with one audit per auditor, is
here, all were desk audits. Nigeria. However, as noted in the 2018 African Tax
Outlook, only comprehensive audits are conducted in
Nigeria, which require more time and are more difficult
to achieve than others.
Figure 7.3. Number of audit cases per auditor, 2017
Namibia 102
Zambia 81
Mauritius 60
Rwanda 44
South Africa 40
ATO Average, 24 20
Cape Verde 18
Zimbabwe 16
Tanzania 12
Eswatini 11
Botswana 11
Côte d’Ivoire 11
Senegal 10
Niger 9
Mozambique 8
Malawi 7
Seychelles 7
Chad 7
Ghana 4
Togo 3
Liberia 2
Gambia 2
Cameroon 2
Uganda 2
Nigeria 1
0 20 40 60 80 100 120
156
More generally, 19 of the 24 countries recorded a which requires several months of work is considered in
number of audits per auditor lower than the ATO collective or individual performance assessments, as
average of 20. A big gap separates these countries important as an audit on the due date VAT, which takes
from the five that are above average. It should therefore a day’s work.
be noted that the total number of audits carried out
Tax audits (TAs) are generally grouped into four
does not necessarily depend on the number of auditors
categories (Figure 7.4):
in the tax administration. Togo, Chad, Uganda and
Cameroon, with high auditor-to-total workforce ratios, - Desk audits. The auditor stays in the office to
recorded very few audits in 2017. analyse the taxpayer’s file from the items in his
possession.
It should be noted however that, for the tax authorities,
this does not mean increasing the number of staff to - Issue audits. The auditor travels to the taxpayer’s
increase audit numbers, nor does it mean reverting to premises to conduct an on-site audit. This type
budgetary or coercive objectives. They should rather of audits covers a limited number of tax types,
incite more agents to deal with difficult audit cases. including VAT credits, for example.
Indeed, the programmes are often set according to
- Comprehensive Audit or Accounting Audit.
the number of audits that an auditor should do per
The agent goes to the taxpayer to make sure the
year. And the statistics count only this number without
accounting records are correct and audits all the
taking into account the level of difficulty or how
taxes.
administratively red taped the operations are. It is not
normal, for example, that a transfer pricing audit case - Other types of audits.

Figure 7.4. Number of audits per type of audit, selected ATO countries, 2017
South Africa
Botswana
Cameroon
Cape Verde
Côte d’Ivoire
Eswatini
Gambia
Ghana
Kenya
Liberia
Madagascar
Malawi
Mauritius
Mozambique
Namibia
Niger
Nigeria
Uganda
Rwanda
Senegal
Seychelles
Tanzania
Chad
Togo
Zambia
Zimbabwe
ATO Average (26)
0% 20% 40% 60% 80% 100%
Comprehensive Audits Issues Audits Desk Audits Other Audits
Note: TA means “Tax audits”
Different countries favour different types of audits. Countries with integrated internal tax and customs
The main users of: management conduct mainly comprehensive audits
(36%), while those with separate management mainly
• Comprehensive audits: Nigeria and Mozambique
perform desk audits (43%).
100%, Liberia 92.5%, Tanzania 67.2%, Ghana
65.9% for an ATO average of 36.1%
Audit efficiency
• Desk audits: Namibia 100%, Eswatini 79.6%,
Senegal 78.4%, Chad 67.8% for an average of The recovery rate is the most common indicator for
25.2% evaluating the efficiency of an audit (Figure 7.5) (ATAF,
2017). It is defined as the total amount recovered by
• Issue audits: Uganda 85.8%, Seychelles 79.5%, an audit as a percentage of the amount due. This total
Botswana 65.7% for an average of 11.6%. amount includes the initial and additional revenues
recovered during audits during a given tax period.
158
Figure 7.5. Audit recovery rates, selected ATO countries, 2017
Uganda 93,9%
Togo 59,0%
South Africa 55,7%
Cameroon 53,5%
Liberia 53,0%
Namibia 48,6%
Tanzania 45,1%
Zimbabwe 18,4%
Ghana 17,2%
Zambia 4,6%
Niger 4,1%
Mozambique 3,4%
Nigeria 2,3%
0% 20% 40% 60% 80% 100%
The audit recovery rates of ATO countries was on average. The contrast is clear with Nigeria (2.3%),
average 35.3%, up from 2016 where it is below 30%. Mozambique (3.4%), Niger (4.1%) and Zambia (4.6%),
The most successful country was Uganda, which was which have the lowest recovery rates. It is clear that
able to recover almost all the amounts owed. Such a these countries have not been able to meet their
performance reflects the quality of audits and a high recovery targets.
level of tax compliance.
Audit efficiency is also analysed through the share of tax
Behind Uganda, Cameroon, Liberia, South Africa and revenue from audits in the total tax revenues. Only 14
Togo all have a recovery rate above 50%. Next are countries submitted the required data to calculate this
Namibia and Tanzania, which are also above the ATO indicator.

Figure 7.6. S
hare of revenues recovered from audits in the total tax revenues, selected ATO
countries, 2017
Tanzania 5,80%
Zambia 5,43%
Malawi 4,97%
Uganda 3,91%
Togo 2,42%
Cameroon 1,72%
Zimbabwe 1,49%
Liberia 1,11%
Botswana 1,02%
Nigeria 0,79%
Niger 0,74%
South Africa 0,56%
Namibia 0,13%
Ghana 0,02%
0% 1% 2% 3% 4% 5% 6%
In the 14 AFP countries that provided data, revenues 7.1.2. Modern tax fraud detection
from audits represented an average of 2.01% of total
techniques
tax revenue in 2017. They represent less than 2% in
nine of these countries, and more than 2% in five of The tax administrations of ATO countries are not very
them. This share is minimal with less than 1% in Ghana efficient in conducting audit operations. They are faced
(0.02%), Namibia (0.13%), South Africa (0.56%), Niger with a series of constraints:
(0.74%) and Nigeria (0, 79%). It is in Tanzania that the
• the inadequacy of human and financial resources
contribution of recovered amounts to total revenues is
allocated to audits;
the highest at 5.8%.
• structural changes in the economy;
In general, the share of revenues from audits in the
total tax revenues of ATO countries is small, or even • new ways of managing businesses based on
insufficient, in a declarative system struggling with increased digitalisation.
poorly developed tax compliance. Tax administrations To overcome these challenges, they must seek to
in ATO countries need to give tax audit a greater role in exploit the possibilities of new information processing
resource mobilization. To do this, they need to adopt methods.
modern audit management techniques.
Indeed, tax authorities have a wealth of taxpayer
information. Taxpayer returns are now online in many
countries. Most companies have computerized
160
accounts with digital balance sheets filed online. An important added value of data mining is the
Also, in their daily activities, all interactions between departitioning of information, which allows tax
taxpayers and tax administrations are traceable. It is administrations to easily exchange information with
therefore a question of knowing how to organize and neighbouring countries, as well as with other internal
process all this data in order to leverage it. agencies at municipal, regional and national levels.
A stumbling block in the fight against tax fraud is precisely Some ATO countries have understood the value of data
the mass of raw data from various administrations that mining tools for their way of running audit functions.
do not communicate with each other. Now, thanks This is the case in Zambia (Box 7.2) and South Africa
to analytic data mining tools, it is possible to explore (Box 7.3). (See also Annex for Uganda’s use of science
these terabytes of shapeless data and draw knowledge and technology.)
from it - this is called data mining. For example, tax
In most ATO countries, however, and despite
administrations can search huge amounts of tax data,
international recommendations, tax administrations do
sort them according to their needs, find correlations
not establish their tax audit programmes on the basis
and intersections, and derive forecasting analyses.
of an automated risk analysis system. However, it is
Data mining tools make it possible to detect false clear that the selection of companies to audit must be
invoice systems between companies and suspicious entrusted to a risk analysis unit. Yet, the success of
statements, for example. It is also possible to spot such an approach would depend on the level of buy-in
abnormal peaks of income distributions over a year by vis-a-vis this technology. Tax authorities must therefore
making comparisons between companies in the same recruit new profiles, including mathematicians,
sector. And the automated nature of this detection statisticians, and data management and analysis
capability helps tax administrations schedule tax professionals.
audits, with more efficient targeting by prioritising on
high-return cases and targeting new forms of fraud.

Box 7.2.
Good practice from Zambia
Data Matching
In September 2018, the Zambia Revenue Authority (ZRA) launched a data matching programme with support
from the IMF’s AFRITAC South Mission. The aim was to put in place data matching processes to compare
and cross-check customs declarations with national tax declarations for the years 2015, 2016 and 2017. ZRA
hopes to recover unpaid debts and encourage taxpayers to comply with their tax obligations.
The programme is led by an ad hoc team, assisted by AFRITAC South advisors and composed of customs
officers, tax officers, researchers and policy makers. The team’s task is to extract data from the customs
information management platform, ASYCUDAWorld, and from the TaxOnline domestic tax management
system, to then link them and identify the risks of revenue loss and breaches of tax obligations.
A three-step methodology was adopted. Apart from the recovery of customs declarations, for the moment it
only focuses for 2016, while waiting for the 2015 and 2017 data to be analysed.
Step 1 - ASYCUDA World Customs Data Extraction

• Data for all import and export declarations and related information for calendar years 2015, 2016 and
2017 are downloaded.
• Then, for all types of taxes, there are overlaps with information on import/Export companies contained
in the tax system, TaxOnline - for example, company names, identification numbers, tax situations VAT.
Data is also extracted from 26 sources of manual data.
Step 2 - Data Segmentation by CAF and CIF Value
• Customs data are segmented and stratified according to their cost-insurance-freight (CIF) value.
• The country’s 163 largest importers (75% of imports), as well as the 24 major exporters (90% of CIF
exports) are identified.
Step 3 - Identification of gaps, anomalies and discrepancies
• Gaps, anomalies and discrepancies that exceed a certain tolerance threshold are identified in more than
100 sectors.
• Data is also collected on other known risk elements - for example, VAT non-filers, tax arrears, sales-to-
imports ratios.
• The identified risk factors are then mapped or worked out on a spreadsheet for each importing and
exporting entity for comparison purposes.
• The main risk factors are identified and classified.
• A second spreadsheet calculation is performed, listing all the risks for each of the 163 largest importers
and 24 exporters (identified in Step 2).
• They are then assigned a general score, which allows for the ranking of risks ratings in order of priority.
162
Main findings
12 identified systemic risks and recommendations to correct them.
Proposed action plan split between the medium term (12 months) and the long term (more than 12 months)
Since then, the ZRA has implemented the Deputy Minister’s recommendations for a 12-month project.
An in-depth analysis has been conducted and extended until 2015 and 2017.
It is hoped that the Deputy Minister will be able to generate additional revenue for the ZRA as well as improve
the sampling and orientation of audits performed by the domestic tax and customs divisions.
Source: The ATO’s online Database of Good Practices from Zambia (2019)
Box 7.3.
Good practice from South Africa
Compliance Evaluation and Monitoring Information System (CEMIS)

South Africa Revenue Service (SARS) has recognized the need to manage and maintain tax compliance
throughout the taxpayer value chain - from registration to de-registration, to the filing of declaration and the
payment of the taxes.
Recording Deposit Declaration Payment Deregistration
Conversely, failure to follow a step in this chain - be it non-registration, or non or under-reporting, or non-
payment - results in revenue losses SARS has therefore set up a system for assessing and monitoring tax
compliance (CEMIS).
SARS is one of the few tax administrations to have the ability to objectively measure the taxpayer’s compliance.
The measuring is based on 169 indicators that, for all types of taxes, cover the taxpayer’s four obligations:
registering with the tax department, reporting income, file a tax return, and pay taxes. These indicators form
the basis of the CEMIS system.
The CEMIS allows SARS to:

- obtain at any time an overview of tax revenues and levels of compliance with the four main obligations at
national, regional and local levels;
- obtain, as a result of interventions or the absence of interventions, information on changes in trends in
respect of the four tax obligations;
- identify high levels of non-compliance (registration, declaration, filing, or payment);
- assess the effectiveness of the case selection strategies for non-compliance purposes and the appropriate
response by monitoring and reporting on overall changes in compliance;
- develop and plan such strategies.
CEMIS also contributes to the development of the SARS Compliance Strategy, the SARS Annual Productivity
Plan and Compliance Programme, the Tax Compliance monitoring Index for Business Activity reporting and
Contributions to SARS Compliance Annual Report.
Source: The ATO’s online Database of Good Practices from South Africa (2019)

7.2. Arrears Management accumulation of tax arrears and outstanding recoveries
is an important factor in the depletion of State resources
While the development of the audit function is essential and favours non-compliance. There is therefore a need
to improve tax compliance and revenue levels, better for ATO countries to put in place strategies to reduce
management of arrears also helps raise the level of their stocks of arrears.
recoveries.
Countries that integrate their tax and customs
Arrears are unfulfilled tax liabilities that result in taxes, administrations in the same directorate have, on
fees or duties remaining unpaid after the due date (ATAF, average, a level of arrears of 28.2%. Those with two
2017). Their management and recovery are a complex separate administrations are doing better with 25.4%.
activity that mobilizes tax officials. Any improvement in
the ability to recover the arrears efficiently and within Recovered arrears as a percentage of total arrears and
a reasonable period of time could result in additional distribution
revenues for tax administrations each year.
The amount of arrears received in relation to the total
There are three major types of arrears: potentially amount of arrears indicates, as a percentage, the extent
recoverable, hard to recover, and irrecoverable. of the revenues recovered at the end of the tax period.
In general, newer arrears, recognized by taxpayers, are This indicator depends on:
the easiest to recover. It is therefore recommended to
• The recovery strategies implemented by tax
collect them first (Baer and Silvani, 1997). As for the
authorities,
difficult to recover, the different missions of technical
assistance recommend dealing with them through • Taxpayers compliance culture,
scheduled action plans. Tax authorities are also • (especially) the quality of the arrears portfolio.
encouraged to write off irrecoverable debts or, at least,
to classify them outside the recoverable cases (ibid.). A high percentage is a good sign and reflects the
effectiveness of recovery efforts by tax administrations.
ATO countries should ensure, however, that old debts
7.2.1. Arrears levels and recovery (over 12 months) do not exceed 25% of the total stock
of arrears (TADAT, 2015). The focus should therefore
Stock of arrears as a percentage of net tax revenues
be on the largest amounts (Baer and Silvani, 1997).
The total arrears as a percentage of net tax revenue
At 26%, the average level of arrears recovered in
is simply the amount of arrears divided by net tax
22 ATO countries was slightly above the 25% mark
revenue. Best practice requires the stock of tax arrears
(Figure 7.8). It was down slightly - by one point - from
to total revenue to be less than 10% (TADAT, 2015).
2016, but almost twice as low as in 2015 (48%).
Of the 26 ATO countries that provided the data, Twelve countries are below average and 10 above.
17 posted a level of arrears above 10% in 2017 (Figure The proportion of arrears is lowest in Mozambique
7.7), compared to14 in 2016. Cape Verde and Zimbabwe, (1%) and Niger (2%). In contrast, it is 75% in Côte
with 122% and 110% respectively, have the largest d’Ivoire, which tops the list.
stocks of arrears. The lowest ratios were observed in
Indeed, in 2012, Côte d’Ivoire set up main collection
Ghana (1%), Malawi (2%), Tanzania (2%), Togo (3%) and
points (MCP). Their mission was to assist in the
Côte d’Ivoire (4%). The ATO average stands at 27.3%,
establishment of revenue service accounting as
against 24.5% in 2016 and 17% in 2015.
well as to guide and support these services for the
This increase since 2015 is not a good sign and must recovery of tax arrears. Quantified objectives for the
be a wake-up call for tax authorities. Indeed, the reduction of arrears are set for each MCP, which is
164
Figure 7.7. Stock of arrears as a percentage of total tax revenues
South Africa, 7%
ATO Average 26, 27,3% Botswana, 11%
Zimbabwe, 110% Burundi, 35%
Zambia, 86% Cameroon, 38%
Togo, 3% Cape Verde, 122%
Chad, 47% Côte d’Ivoire, 4%
Tanzania, 2% Eswatini, 34%
Seychelles, 14% Gambia, 7%
Senegal, 22% Ghana, 1%
Rwanda, 13% Liberia, 11%
Uganda, 15% Madagascar, 24%
Nigeria, 27% Malawi, 2%
Niger, 41% Mauritius, 8%

Namibia, 18% Mozambique, 9%
then required to submit an action plan to achieve In some countries, the stock of arrears comprises only
them and whose monitoring is entrusted to a deputy private sector arrears, with one or two exceptions.
director-general. Côte d’Ivoire is now ahead of South This is the case of South Africa, Zambia and Namibia.
Africa (64%), which led in 2015. The Gambia (60%) The private sector also accounts, to a very large
and Chad (51%) complete the list of countries whose extent, for arrears in Ghana (95%), Liberia (95%) and
recovered arrears represent more than 50% of arrears. Uganda (93%).
The low rate of government arrears can be explained by

Private and public sector shares of arrears the realization of operations of compensation between
the tax administration and some public structures
Among the 15 ATO countries for which data is available,
which have a tax debt. State is indebted to some of
the trend observed in 2017 is the same as that of the
them for public works done, while others have of budget
previous years (Figure 7.8): The private sector, with
credits resulting from state subsidies. An exchange of
77%, represents the most important share of the
securities against debts is therefore realized between
stock of arrears of tax administrations. Moreover,
these structures and the tax administration.
it accounts for less than 75% in only four countries
- Senegal and Madagascar, with, respectively, 70% In order to reduce private sector arrears, ATO countries
and 57%, as well as Cameroon (22%) and the Gambia should put in place effective procedures to recover the
(15%), the only countries where the government is the unpaid taxes and systematically enforce the applicable
principal debtor (Figure 7.9). sanctions (ATAF, 2017).

Figure 7.8. Share of recovered arrears in the total Figure 7.9. D
istribution of outstanding arrears
stock of arrears, 2017 between private and public sectors, 2017
Côte d’Ivoire 75% Côte d’Ivoire 75%

South Africa 64% South Africa 64%
Gambia 60% Gambia 60%
Chad 51% Chad 51%
Tanzania 47% Tanzania 47%
Mauritius 39% Mauritius 39%
Cameroon 31% Cameroon 31%
Liberia 27% Liberia 27%
Madagascar 27% Madagascar 27%
Rwanda 27% Rwanda 27%
ATO Average, 22 26% ATO Average, 22 26%
Seychelles 21% Seychelles 21%
Senegal 18% Senegal 18%
Uganda 16% Uganda 16%
Zambia 12% Zambia 12%
Botswana 11% Botswana 11%
Burundi 10% Burundi 10%
Zimbabwe 9% Zimbabwe 9%
Ghana 8% Ghana 8%
Nigeria 6% Nigeria 6%
Namibia 5% Namibia 5%
Niger 2% Niger 2%
Mozambique 1% Mozambique 1%
0% 20% 40% 60% 80% 0% 20% 40% 60% 80%
7.3. Customs interventions borders and their crossing. Customs’ border control
operations are therefore aimed at discouraging illegal
All customs administrations around the world have trade and at identifying, arresting and prosecuting the
three essential missions: entities engaging in it.
• Revenue mobilisation, 7.3.1. Number of seizures from customs

• the application of tariff policies to ensure interventions
competition,
In order to combat fraud and illegal trafficking, customs
• the fight against smuggling for the protection of officers control goods, means of transportation and
businesses and consumers. persons and, where needed, seize merchandises
(Figure 7.10). A low rate of customs seizures may
These missions are carried out at the countries’
indicate the effectiveness of the tax administration in
gateways. The powers of the customs administration
dealing with customs offences or, conversely, their on-
are therefore intimately linked to the question of
going status (ATO, 2018).
166
Figure 7.10. Number of seizures from customs, selected ATO countries, 2017
Uganda 6785
Cameroon 6426
Rwanda 5472
Nigeria 4725
Burundi 3008
Zimbabwe 2898
Cape Verde 2688
Madagascar 2403
Average ATO, 20 2206
South Africa 1987
Côte d’Ivoire 1934
Angola 1204
Niger 1089
Togo 662
Mozambique 642
Malawi 618
Botswana 579
Ghana 341
Tanzania 249
Mauritius 218
Zambia 183
0 2000 4000 6000 8000
In 2017, the average number of customs seizures sophisticated than those with integrated management
in the 20 ATO countries which submitted data was - an average of 2,499 versus 2,108.
2,206, compared to 2,680 in 2016 and 1,608 in 2015.
As in 2016, Uganda (6,785) and Cameroon (6,426)
Motives of the seizures
were amongst the top three countries with the highest
number of seizures in 2017. Rwanda completed the Seizures are motivated by four main categories of
podium with 5,472. Nigeria (4,725), Burundi (3,008), offences (Figure 7.11):
Zimbabwe (2,898), Cape Verde (2,688) and Madagascar
- smuggling;
(2,403) are the other countries that made more seizures
than the ATO average. - under-declarations;
- misclassifications of imports;
It should be noted that while Cameroon and Nigeria
are frequently challenged for their high levels of - other types of seizures.
smuggling and corruption, Rwanda is cited as an The most common reason for seizure in ATO countries
example of integrity. Among the countries claiming in 2017 is smuggling - 46.1% of cases versus only 3.5%
the most seizures, some are considered more virtuous for misclassification of imports. Under-declaration
than others. comes second with 27.5% of seizures. Followed by
Of the 12 countries that reported seizures below the ATO other types of seizures with 22.8%, the most common
average were Zambia (183), Mauritius (218) and lastly type of seizure in 2016 with 47%. Smuggling (23%)
Tanzania (249). Countries with separate management was in second place, followed by under-declaration
structures for domestic taxes and customs are more (18%), and misclassification (12%).

Figure 7.11. Distribution of seizures from customs across selected ATO countries, 2017
Angola
Cameroon
Cape Verde
Côte d’ Ivoire
Eswatini
Ghana
Liberia
Madagascar
Malawi
Mauritius
Mozambique
Niger
Nigeria
Uganda
Rwanda
Tanzania
Togo
Zambia
Zimbabwe
ATO Average, 19
0% 20% 40% 60% 80% 100%
Smuggling Under Declaration Import Mis-classifications Other seizures
In Nigeria, Liberia and Mauritius, 100% of customs Recoveries from customs interventions
seizures were from smuggling. The only country not
Goods seized at customs are destroyed if, for example,
to report this motive in 2017 was Cape Verde, where they are counterfeit goods, substandard goods or
seizures are 95.5% related to under-declaration, as in narcotics. Legal merchandise used to conceal trafficking
Côte d’Ivoire to 95.4%. is put on sale.
Regarding the misclassification of imports, only 10 Twelve (12) countries reported figures for customs
countries have argued this reason, which accounts for seizure recoveries in 2017 (Figure 7.12). With recovery
up to 24% and 23.8% of seizures in Angola and Ghana, revenues of US $ 67.6 million, Côte d’Ivoire is well ahead
respectively. Eswatini, on the other hand, has gone its of the other 11 countries. Madagascar followed with
own way by exclusively making other types of seizures. 23.2 million USD, followed by Mozambique (18.2 million)
and Angola (13.2 million).
Four countries cited one reason, one country two,
seven countries three, and four reported seizures for The remaining countries are all below the US
the four major reasons. $ 11.8 million ATO average. Customs interventions
in Liberia (0.2 million), Burundi (1.1 million), Rwanda
(1.3 million) and Togo (1.4 million) have the least number
of recoveries.
168
Figure 7.12. Recoveries from customs interventions (in millions of USD), selected ATO countries, 2017

Madagascar 23,2%
Mozambique 18,2%
Angola 13,2%
Niger 8,3%
Malawi 5,2%
Eswatini 4,5%
Zimbabwe 4,2%
Togo 1,4%
Rwanda 1,3%
Burundi 1,1%
Liberia 0,2%
0 10 20 30 40 50 60 70
7.4. Conclusions and way forward Insufficient manpower

Tax administration strives to make up for this non-
The reduction in official development aid and the volatility
compliance culture through better auditing, efficient
of commodity prices are forcing African countries
management of arrears and proper enforcement of
to make efforts to mobilize domestic resources.
The focus is therefore on tax. Thus, tax authorities, customs rules. One of the major challenges of the tax
in order to manage and improve compliance, must authorities is to succeed in their mission while facing a
adopt a taxpayer approach that promotes voluntary shortage of auditing staff. In 2017, the share of auditors
compliance in a regulatory environment that is focused in tax administrations workforce was 11.6% while the
on cooperation and participation. international standard is 30%. This shortage of staff is
accentuated by the very high number of taxpayers per
auditor in ATO countries - 2,479.
Taxpayer Education for improved tax
compliance
An important element of this approach is therefore Insufficient revenue recovered
taxpayer education: it is about training taxpayers in the Moreover, the revenue collected from controls
need for taxation and the need to pay it. In fact, an represents a tiny fraction of the total tax revenue, with
“educated” taxpayer is more likely to readily comply only 2%. Tax authorities of ATO countries could increase
with tax obligations. From this perspective, tax this share by improving their recovery rate. On average,
administrations in most African countries have, for the it corresponds in 2017 to 35% of the amounts due.
most part, created independent education services Low recoveries feed the stock of arrears. This stock,
with sufficient budgets to achieve their mission. based on total revenues, continues to grow, from 17%
Nevertheless, tax non-compliance culture remains
in 2015 to 24.5% in 2016 and to 27.3% in 2017.
very high in ATO countries, depriving governments of
resources to carry out development actions.

Customs seizures in 2017 amounted to an average Tax injustice
of 2,206 seizures for ATO countries, mainly due to
Finally, it should be emphasized that tax evasion,
smuggling by 46.1% and under-declarations at 27.5%.
beyond the budgetary aspects, must be analysed
based on several other dimensions. It must be
Leveraging data for more effective controls regarded as a form of fiscal injustice in that it induces
imbalances in the distribution of the tax burden among
In the context of the fight against fraud and the increased
taxpayers. It also deprives the state of resources that
search for corporate financial and tax transparency,
would be useful to finance its public policies in the
governments and tax authorities are nowadays
economic or social fields. Strengthening the fight
equipped with tools for the analytical exploitation of
against tax fraud could also improve revenue and
large volumes of raw data. Thanks to these tools, it is
thus lower the tax burden on taxpayers who regularly
possible to collect data according to the needs and
perform their tax duties.
to compare them with others from different sources.
This way, tax administrations in ATO countries could
perform forecasting analyses, which should enable
audit units to better prepare and target tax audits and
better reconcile tax and financial information.
170
8
DATA AND TAX
AND POLICY
RECOMMENDATIONS
8 Data and Tax and Policy
Recommendations
Revenue
Performance
Sector-specific
tax policies
Changes in tax rates
and their impact on tax
buoyancy
Domestic tax
revenue and tax
arrears performance
Tax compliance
management
Policies to widen the tax base:

・ Regulatory approach
・ The informal sector
The contribution
of large taxpayers
Modernisation in
tax administration
8: Data and Tax and Policy Recommendations
Most of the African countries are at various stages of The potential and challenges of tax
economic and social development which depend on administrative data
the ideal revenue collection in order to meet the public
To conduct a very good and experimental analysis,
expenditure obligations and budget responsibilities.
it is required to collect data. However, having many
It has been suggested over the years through the
countries in the process should not be accompanied
sustainable development goals that most of the ATO
with a low trend of data response rates which will
members countries if not all can meet their public
question the value and accuracy of our analysis.
spending obligations only if they boost their currently
On the other end, due to the ease of collecting data
low tax-revenue-to-GDP ratios. Again, to this end we
based on the current technology development, there is
stress out that they must take policy action which
increasing need to use tax administrative microdata for
includes measures to increase tax rates, broaden
the assessment and analysis of tax policy measures in
the tax base and improve the efficiency of revenue
most countries. The ATO series are using a combined
administration (ATAF, 2016).
data sets based on tax administrative microdata and
A necessary condition for such developments is the national accounts data which have the advantage
indicated in how the information on the current to address tax policy challenges.
condition of the tax system is up to date. Hence,
revenue administrations are required to create nexus Data collection challenges for the ATO countries
between tax statistics and their revenue collection
In the 2019 African Tax Outlook, the following areas
mandate – in other words, they must develop
emerged as particular challenges to ATO countries:
processes, skills and systems to collect and extract
data on critical indicators. This chapter looks at • Collecting the income data of private-sector
recommendations – first for improved data collection employees
and then for more efficient tax systems.
Some countries do not consider employees from
private companies as taxpayers and these companies
pay the personal income tax on behalf of the
8.1. Overview of missing data and employees are registered and considered as taxpayer
indicators employees. Regarding the corporate income tax,
these companies are again registered as taxpayer
The resolution of developing indicators and collecting employers.
data in the ATO participating countries is still the need
to evaluate, compare, and ultimately improve the Due to such issues, it is difficult for some ATO countries
revenue administrations and policy formulation and to be able to calculate their effective tax rates.
implementation. However, some indicators could not
• Lack of computerised, automated processes
be calculated because few countries could provide
and systems (ICT)
the necessary data. Some of the main reasons are that
fragmented data are not available and there are little Some ATO countries have not yet developed
resources and procedures to collect them. However, processes and systems for capturing, collecting and
since inception of the ATO publication, every year we extracting data. They have modernised procedures
have seen improvement in data collection, and we like registration, filing and payment but not for
hope to see expansion in the editions to come. The collecting such information. The limitation we observe
ATO database is relatively new and it is building trust here is that ICT systems need to establish a storage
in its dataset and publications. We hope to extend its of historical data such as cost of collection, arrears
use as a data source and a referencing tool for a very collection, enforcement data, customs clearance,
bigger audience. number of audits and tax assessed per tax types etc.
174
• No integrated systems between tax and 8.2. Tax policy
customs offices
8.2.1. Digging deeper: revenue performance
Some ATO countries do not have unified tax
administration systems – in other words, customs and ATO analysts and policymakers use the tax-to-GDP
domestic taxation are administered separately. Stand- ratio to measure tax receipts and compare them from
alone systems make it hard to access information and year to year and country to country. Tax revenues
data. As a result, data on customs clearance lanes, account for over one-sixth of economic output in the
customs enforcement cost of collection and many ATO countries, a ratio that has remained relatively
other indicators could not be combined consistent over the years. As GDP grows, tax revenue
should, in fact, grow faster. However, tax-to-GDP
• Unreliable data
ratios vary from year to year for a number of reasons.
Although some ATO countries were able to provide It would take a more in-depth analysis that is beyond
data on critical indicators, there were quality issues the scope of this chapter to explain the causes of such
related to problems in the data collection process variations in ratios in some ATO countries. Suffice it
itself. to say that the main reasons – all of which affect tax
revenue and levels of GDP – are:
• Statistics not linked
• changes in economic activity, which affect levels
Some ATO countries struggled because there were
of employment and sales of goods and services,
no linkages, within tax authorities, between data-
etc.;
producing divisions like research, audit, arrears and
enforcement. Audit, arrears and enforcement divisions • changes in tax policy, which affect tax rates, the
in particular took no action to collect information. As tax base, thresholds, exemptions, etc.
a result, only few countries – Ghana, Liberia, Malawi,
• changes in tax administration.
Zambia and Zimbabwe – could supply data on audit
yields, amount assessed, government arrears and
Greater revenue in a well-designed tax system would
number of investigations done. A system of collecting
help many developing countries to finance their
data on audit assessments and yields would enable
national budgets and national development plans.
revenue authorities to evaluate audits and examine
Increasing the tax burden might seem like an odd
the different types of audit, which would then help
proposition to policy makers as many claims they will
to improve the productivity and effectiveness of tax
boost revenues while keeping taxes low. However,
administration.
just as an excessively heavy tax burden may stifle
• Time issue around data collection activity, excessively low taxes starve an economy of
the oxygen it needs to advance.
Most countries focus their efforts on collecting
revenue and meeting their revenue targets. As a result, Nominal revenue in 17 ATO countries in 2017 grew at a
they have neither the time nor the technical means faster rate than nominal GDP – the automatic response
to collect, monitor, and evaluate data. Personnel – of tax revenue to growth in GDP (the proxy tax base)
particularly in-house statisticians – in the revenue and a sign of revenue buoyancy. Country-by-country
authorities of a number ATO countries struggle to analysis shows that the tertiary sector was the largest
extract data and process data from their ICT-based contributor to total tax revenue in most ATO countries,
tax systems. while agriculture was unproductive as revenue
generator. There is a clear need for policies that raise
more revenue from the sector in ATO countries.
CHA PTER 8: Da t a a n d Ta x a n d P o l i c y Re c omme nda t ions 175

8.2.2. Domestic tax revenue and tax arrears “buoyant” (or “elastic”), and the more buoyant it is,
performance the more tax revenue is available to the government.
To support buoyancy, however, ATO countries need
Tax revenues are essential to sustainable development to simplify their tax system. To that end, they should
because they provide governments with the resources consider the following:
they need to invest in development, poverty reduction
and the provision of public services, as well as to Some tax components do not respond automatically
strengthen their own capacity, accountability and to changes in national income. So, tax authorities need
responsiveness to citizens’ expectations (OECD, 2015). to strengthen their revenue-collection capacities by
fostering positive attitudes to tax among taxpayers
In the ATO countries, VAT dominates tax revenues.
and building a transparent, efficient and effective tax
It contributes 35% of all revenue to state coffers, while
system.
no other type of tax accounts for more than 20%.
PIT and CIT, which yield the next largest revenues, Tax-related policies intended to boost revenue should
make up 18% and 15% respectively. As for import be carefully designed and supported by thoughtful
duties, with 11%, and excise with 9%, they were the follow-up and evaluation. Once a tax policy has been
smallest revenue-producing taxes. The good overall introduced, its net effect should be assessed to gauge
performance of domestic taxes in many ATO countries how and whether it has helped yield stable revenue.
was attributable to growth in the amount of VAT
collected and successful debt and arrears recovery It is important to track and measure not only the
during the period under review. stability of total tax revenue streams, but also whether
individual tax components are stable revenue sources.
To shift to faster, inclusive growth, countries should Accordingly, as part of the effort to fund public
address and seek to overcome a set of interlinked expenditure, tax administration bodies should carefully
economic policy challenges. To that end, and although watch every single component to ensure the stability of
many have already taken action, they should step up the tax revenue it generates.
their efforts to increase revenue levels. Accordingly,
they could explore the following avenues of If governments follow these four areas of
improvement: recommendations, tax elasticity and buoyancy should
gradually improve. As part of that effort, understanding
• tax the informal sector, which generates very large how and why revenues react to changes in income
shares of ATO countries’ GDP; during the business cycle is also important from the
• fight tax evasion by large corporations and large point of view of a government’s intertemporal budget
fortunes; constraints and tax-smoothing objectives.
• remove tax incentives with little economic impact;
• improve the efficiency and transparency of tax
administration, particularly by drawing on new 8.2.4. Sector-specific tax policies
communication and information technologies.
The 2019 edition of the African Tax Outlook finds that
tax regimes in the natural resources sector, which
8.2.3. Changes in tax rates and their impact on vary from country to country, show many flaws. As for
the ICT sector, it grapples with a multitude of specific
tax buoyancy
taxes that slow down its expansion. Consequences for
The basic goal of a tax system is that revenues both state and taxpayer may be undesirable, spelling
should grow at the same pace, or faster, than the a heavier tax burden, uneven redistributive effects,
economy. Revenue that does grow faster is said to be more inefficiencies and more costly tax collection.
176
To prevent such consequences, it is important to The cost of taxing informal economic activities is
respect certain principles of tax policy design regularly high. However, as part of the effort to stem the loss
formulated by international organizations such as the of revenue, several countries have taken measures
IMF, OECD, United Nations and World Bank: to address the informal sector. They are drawing on
the power of new technologies which now offer a real
• the tax base should be as broad as possible,
opportunity for taxing the informal sector.
• specific taxes should be limited in number
and introduced in clear response to negative
The contribution of large taxpayers
externalities,
ATO-wide, only 6% of taxpayers generate 76.2% of
• the tax system should be fair, revenue. Such heavy dependence on a handful of
• taxation should not discourage investment, taxpayers for the bulk of revenue is a danger to resource
mobilization and government budgets. Indeed, if a
• the tax system should be simple,
large taxpayer experiences economic difficulty, the
• taxes should be easy to collect. entire budget balance could come under threat.
Moreover, large taxpayers generally belong to

8.3. Tax administration multinational corporations that widely practice tax
optimisation, so depriving countries of substantial
8.3.1. Policies to widen the tax base shares of financial resources. Multinational companies
are, for the most part, very high-risk taxpayers.
Regulatory approach It is important, therefore, that tax authorities devise
Broadening the tax base requires filling gaps in strategies for raising higher shares of tax from other
legislation, increasing tax rates in some regions, and categories of taxpayers.
improving revenue collection. Some ATO countries
have introduced strong regulatory frameworks,
Modernisation in tax administration
while monitoring markets and commercial locations
to contain informal activities. Countries have also ATO countries should harness the power of ICT as
reduced, and even scrapped, a number of exemptions they continue to modernise with the dual purpose of:
related to VAT and taxes for multinationals and for
• increasing the cost-effectiveness of tax
companies in sectors such as agriculture, health,
administration operations
education, and financial services.
• to making it easier for taxpayers to comply
The informal sector Key developments in this respect have been that
many taxpayers may file their tax returns and pay
The size of the informal sector in ATO countries
their taxes electronically. Although a slight majority of
generates a very significant loss of tax revenue.
ATO countries also have mobile payment platforms
Estimating the shortfall is difficult:
in place, penetration is still relatively low. Yet mobile
• The very nature of the informal sector makes it systems would greatly facilitate taxpayers’ access to
hard to quantify. tax administration services. More countries should
introduce or enhance their provision of electronic
• Informal and formal often overlap and businesses
tax and mobile money services. And to reap the full
switch from one to the other.
benefit of such services, they should combine them
with good policies to increase taxpayers’ use of them.

Tax compliance management
Taxpayers with awareness and understanding of
taxation comply with their obligations more readily.
Accordingly, most ATO tax administration bodies have
put in place amply funded units to educate taxpayers
and, thereby, increase compliance. Nevertheless,
non-compliance remains very widespread, depriving
governments of the resources they need to build
sustainable development. However, as part of the
fight against tax fraud and the growing focus on the
requirement for businesses to show financial and
tax transparency, tax authorities are now equipping
themselves with powerful data analysis systems
and tools that enable targeted audits and the cross-
checking of financial and tax information.
178
Annexures
3 A.1. TAX-to-GDP Ratios in ATO Countries, Per Tax

The figure below provides an overview of the weight of revenues from each major tax in the national wealth of all
ATO countries.
Figure 3A.1. Contribution of revenues from each major tax in GDP, per country, 2017
VAT/GDP PIT/GDP CIT/GDP

12% Seychelles 10,5% 6,5%
South Africa
South Africa 10,0%
Togo Botswana
6,0%
11% Mauritius 9,5%
Zambia Mozambique
9,0% Namibia
5,5% Seychelles
10% Cape Verde
8,5%
Zimbabwe Lesotho South Africa
Burkina Faso 8,0% 5,0%
9% Namibia
Seychelles
Mozambique 7,5%
Zimbabwe
Lesotho Eswatini 4,5% Niger
8% Mali 7,0% Kenya
Madagascar Malawi
6,5% 4,0% Lesotho
Senegal Rwanda Mali
7% Benin 6,0% Mauritius
Mozambique
Cameroon 3,5% Eswatini
5,5% Botswana
Eswatini Ghana
6% Zambia Rwanda
Rwanda 5,0% Liberia Cape Verde
Average ATO Average ATO 3,0% Burkina Faso
Malawi 4,5% Zimbabwe Kenya
5% Botswana Sierra Leone Average ATO
Kenya 4,0% Senegal 2,5% Cameroon
Tanzania Togo
Uganda Uganda
4% 3,5% Nigeria
Burundi
Ghana 2,0% Malawi
Niger
3,0% Mauritius Zambia
Liberia Burkina Faso Senegal
3% Côte d'Ivoire Côte d'Ivoire Burundi
2,5% 1,5%
Ghana Mali Madagascar
Tanzania Chad Liberia
2,0% Cameroon
2% Gambia Togo Côte d'Ivoire
1,0%
Sierra Leone 1,5% Cape Verde Tanzania
Dr. Congo Madagascar DR. Congo
1,0% Benin Gambia
1% Angola Angola 0,5% Benin
Chad 0,5% Burundi Uganda
Niger
Nigeria Gambia Chad
0% 0,0% 0,0% Angola
Dr. Congo
Nigeria Sierra Leone
Excise Duties/GDP Import Duties/GDP Presumptive Taxes/Total Revenues

7,0% 5,0% 2,4%
Sierra Leone, 15%
Liberia Tanzania
6,5% Seychelles 2,2% Mali
4,5%
6,0% Cape Verde
2,0%
Namibia 4,0%
5,5%
Mauritius 1,8%
Togo
5,0% Ghana
3,5%
Gambia
Zimbabwe Benin 1,6%
4,5% Burkina Faso
Burundi Côte d'Ivoire
Côte d'Ivoire 3,0%
Ghana 1,4%
4,0% Kenya Mali
Tanzania Senegal
Rwanda Cameroon
3,5% Mozambique 2,5% 1,2%
Sierra Leone
Cameroon
Average ATO Zimbabwe
2,5% Sierra Leone Average ATO
Malawi 1,0%
Malawi 2,0%
Senegal Mozambique
3,0% Cape Verde Seychelles Liberia
Zambia Tanzania 0,8% Uganda
South Africa Madagascar Benin
1,5%
2,5% Uganda Zambia
Togo Niger Chad
Madagascar 0,6%
Chad Côte d'Ivoire
2,0% Gambia Kenya
Burkina Faso 1,0% Uganda Burundi
Liberia Rwanda Seychelles
DR. Congo Burundi 0,4% Average ATO
1,5% Mali South Africa Niger
Niger Angola
Lesotho 0,5% Zimbabwe
Eswatini DR. Congo 0,2% Togo
1,0%
Benin Nigeria
Chad Mauritius Kenya
0,0% Botswana 0,0% Eswatini 0,0% South Africa
Ghana
Nigeria Botswana Malawi
180
3A.2. Personal Income Tax and Corporate Income Tax Rates in ATO Countries
In absolute terms, revenues from the PIT were on the rise in all ATO countries between 2011 and 2017. The countries in
the table below are broken down by regional economic grouping. It is therefore possible to compare the lower and upper
marginal rates of the ATO countries among themselves and according to the regional grouping to which they belong.
Table 3A.2.1. Personal Income Tax rates, 2017
Personal Income Tax

Region Country
Lower marginal rate Upper marginal rate
SADC Angola 7% 17 %
Botswana 5% 25 %
Lesotho 20 % 30 %
Madagascar NC 20 %
Malawi 15 % 30 %
Mauritius 15 % 15 %
Mozambique 10 % 32 %
Namibia 18 % 37 %
DRC NC 40 %
Seychelles NC NC
South Africa 18 % 41 %
Eswatini 20 % 33 %
Tanzania 9% 30 %
Zambia 25 % 37,5 %
Zimbabwe 20 % 50 %
SADC Average 15,2 % 31 %
EAC Burundi 20 % 30 %
Kenya 10 % 30 %
Rwanda 20 % 30 %
Uganda 10 % 30 %
EAC Average 15,0 % 30 %
ECOWAS Benin 10 % 45 %
Burkina Faso NC NC
Cape Verde 4% 27,5 %
Côte d’Ivoire NC NC
The Gambia 5% 30 %
Ghana 5% 25 %
Liberia 5% 25 %
Mali NC NC
Niger 1% 35 %
Nigeria 7% 24 %
Senegal 20 % 40 %
Sierra Leone 15 % 35 %
Togo 7% 35 %
ECOWAS Average 7,9 % 32 %
CEMAC Cameroon 10 % 35 %
Chad 10,5 % 60 %
CEMAC Average 10,3 % 48 %
ATO Average 12,1 % 35,2 %

Table 3A.2.2. Corporate Income Tax rates per ATO country and per Regional Grouping
Region Country Standard rate Minimum rate Maximum rate

SADC Angola 30,0 % 30,0 % 30,0 %
Botswana 22,0 % 5,0 % 22,0 %
Lesotho 25,0 % 25,0 % 25,0 %
Madagascar 20,0 % 20,0 % 40,0 %
Malawi 30,0 % 15,0 % 35,0 %
Maurice 15,0 % 15,0 % 15,0 %
Mozambique 32,0 % 10,0 % 35,0 %
Namibia 32,0 % 32,0 % 55,0 %
RDC 35,0 % 30,0 % 35,0 %
Seychelles 25,0 % 25,0 % 30,0 %
Afrique du Sud 28,0 % 28,0 % 28,0 %
Eswatini 27,5 % 27,5 % 27,5 %
Tanzania 30,0 % 30,0 % 30,0 %
Zambia 35,0 % 10,0 % 40,0 %
Zimbabwe 25,0 % 25,0 % 25,0 %
Moyenne SADC 27,4 % 21,8 % 31,5 %
CAE Burundi 30,0 % 30,0 % 30,0 %
Kenya 30,0 % 30,0 % 37,5 %
Rwanda 30,0 % 15,0 % 30,0 %
Uganda 30,0 % 30,0 % 45,0 %
Moyenne CAE 30,0 % 26,3 % 35,6 %
CEDEAO Benin 30,0 % 25,0 % 45,0 %
Burkina Faso 27,5 % 27,5 % 27,5 %
Cap-Vert 25,0 % 4,0 % 25,0 %
Côte d’Ivoire 25,0 % 20,0 % 30,0 %
Gambia 30,0 % 30,0 % 30,0 %
Ghana 25,0 % 25,0 % 35,0 %
Liberia 25,0 % 25,0 % 30,0 %
Mali NC NC NC
Niger 30,0 % 30,0 % 30,0 %
Nigeria 30,0 % 30,0 % 30,0 %
Senegal 30,0 % 30,0 % 30,0 %
Sierra Leone 30,0 % 30,0 % 30,0 %
Togo 28,0 % 28,0 % 28,0 %
Moyenne CEDEAO 28,0 % 25,4 % 30,9 %
CEMAC Cameroun 33,0 % 33,0 % 33,0 %
Chad 35,0 % 35,0 % 35,0 %
Moyenne CEMAC 34,0 % 34,0 % 34,0 %
Moyenne PFA 29,8 % 26,9 % 33,0 %
182
3A.3. Environmental Taxes
Environmental taxation contributes marginally to the National treasuries of ATO countries because it is still in its
infancy. Indeed, its share in the GDP does not exceed 1% in any of these countries.
Only 12 out of the 34 ATO countries submitted statistics on environmental taxes. Ghana recorded the highest
environmental tax-to – GDP ratio with 0.65%, followed by South Africa (0.25%), Mauritius (0.2%), Uganda (0.18%)
and Zimbabwe (0.17%). The lowest ratios were recorded in Niger (0.001%), Côte d’Ivoire (0.007%) and Kenya
(0.003%).
While environmental taxes accounted for 1.6% of GDP in the OECD and 1.1% of GDP in LAC countries in 2017,
the average of ATO countries providing data is 0.14% in 2017. Thus, environmental taxes remain low in Africa as
green taxation is still in its infancy.
Figure 3A.3.1 Environmental tax revenue-to-GDP ratios, 2017
Niger 0,001%
Kenya 0,007%
Zambia 0,013%
Seychelles 0,027%
Burundi 0,049%
Gambia 0,092%
Togo 0,120%
Zimbabwe 0,170%
Uganda 0,180%
Mauritius 0,196%
South Africa 0,250%
Ghana 0,653%
0,0% 0,1% 0,2% 0,3% 0,4% 0,5% 0,6% 0,7%

4.A.1. Methodology for estimating tax The mathematical form of the regression used in the
study is of double log linear form:
buoyancy, elasticity and stability
Revenue buoyancy and elasticity are traditionally Ln T= Ln α +β*Ln Y+u
estimated by means of a regression of the natural
where, T = tax revenue, Y = GDP (tax base), and β =
logarithm of tax revenue (or subcomponent) on the
tax buoyancy.
natural logarithm of GDP – plus additionally controlling
for tax rates and other parameters of the system when The model uses GDP as a base for measuring tax
estimating elasticity. buoyancy. Tax buoyancy is estimated for total tax
revenue and major tax heads – i.e. CIT, PIT and VAT –
over the period 2011 2017.
Tax buoyancy methodology
Tax buoyancy is estimated from observed data with no
Tax elasticity methodology
adjustment to the revenue series and tax base. Since
measures of tax buoyancy tend to vary widely from Contrary to tax buoyancy, estimates of tax elasticity
year to year, it is more useful to measure buoyancy over require some adjustment to the revenue series to
a longer period – perhaps five or ten years at a time. control for the impact of discretionary changes. Tax
elasticities are difficult to construct because they
The Ordinary Least Square (OLS) method is used to require a counterfactual to be calculated. Elasticity
estimate tax buoyancy as a summary statistic over a is not usually calculated for total tax revenue but can
period by regressing the log of tax revenue on the log be constructed for individual taxes with some degree
of the base (GDP). The coefficient on the log of the of success.
base measures the tax buoyancy. The advantage of
using this technique is that it gives sensible results The procedure is first to generate a revenue series
since it employs econometric techniques (Glenday, assuming no change in tax policy or administration from
Shukla and Sugana). If the estimate of tax buoyancy year to year. Three methodologies are commonly used
is more than unity (1) then the tax system is said to for constructing an adjusted revenue series to estimate
be buoyant since the growth rate of tax revenue is the tax elasticity (Glenday, Shukla, & Sugana, 2014):
relatively higher than the growth rate of GDP. • The constant rate structure method. It applies the
A non-buoyant tax system is denoted by a tax current year’s rates structure to the previous year’s
buoyancy coefficient of less than unity, indicating that tax bases and constructs the adjusted revenue
the growth rate of tax revenue is relatively lower than series that would have been obtained had the
same tax structure been applied consistently over
the growth rate of GDP. A tax buoyancy coefficient of
time
unity (1) implies that the growth rate of tax revenue is
equal to the growth rate of GDP. • The proportional adjustment method. It adjusts
the revenue series to allow for the impact on
Tax buoyancy is estimated econometrically by
revenue of discretionary changes. It requires basic
regressing actual or unadjusted tax receipts on the
information about revenue collections and the
tax base. Tax buoyancy for a given time period may
estimated ex post revenue impact of discretionary
be estimated by applying the regression equation
changes.
of tax revenue to GDP using the OLS method. This
methodology uses the traditional model, and the tax • The dummy variable method. It relies on
buoyancy is defined mathematically as follows: econometric techniques to control for the revenue
impact of discretionary changes when estimating
T= αYβ eu tax elasticity.
184
4.A.2. Tax buoyancy, elasticity and On the other hand, chronic creditors, or taxpayers
who regularly filed returns without payment in 2017,
stability defined in simple
are not considered to be effective contributors for VAT
equations
purposes.
Tax buoyancy considers the actual growth of tax
revenue as a ratio of growth in the tax base. It may be The maximum rate of effective contributors for each
defined as: type of tax is 100%. Deviations from this maximum
rate should be explained. Contributors’ rates may be
Tax buoyancy = %∆Revenue ÷ %∆Tax base (GDP) less than 100% due to some of the following factors:
Tax elasticity is the percentage change in tax revenue • Failure to declare.

adjusted for discretionary changes and considered
• Taxes declared but not paid.
as a ratio of the percentage change in the national
income of the country. The concept of a tax revenue • Nil declarations.
series adjusted for change is a hypothetical construct, • Taxpayers are in positions of credit.
though, as the adjusted revenue series shows what
• Dormant taxpayer files.
the revenue would be if there were no changes in tax
policy. Tax elasticity is defined as: • Legal or contract-related exemptions
Tax elasticity = %∆Adjusted Revenue ÷ %∆Tax base • Liable taxpayers are not liable for the period in
(GDP) question. Such is often the case for taxpayers
who start their activities at the end of the period
A simple measure of the stability of tax revenue is (the fourth quarter) and for whom industrial and
the variation coefficient. It is defined as the standard commercial profit tax in year n+1 is not payable.
deviation of tax revenue (usually as a proportion of
GDP) divided by its mean:
5.A.1. Good human resource
Variation Coefficient = Standard Deviation/Mean
management practice in Kenya
Maintaining and sharing knowledge and skills is
essential part of human resource management. Formal
4.A.3. Effective VAT contributors training programmes often do not address knowledge
and know-how drawn from experience.
Effective VAT contributors for 2017 are all taxpayers
who paid VAT at least once between the start and Accordingly, the Kenya revenue authority has put in
end of tax year 2017, regardless of how the tax place a strategy for knowledge sharing and growing.
was paid (e.g. cash, cheques, tax credit charges,
compensation).

Box 5A.2.1.
Kenya rolls out its knowledge management programme to strengthen its human
resource capacity
The Kenya Revenue Authority (KRA) developed its knowledge management (KM) strategy to strengthen the
sharing and application of tax administration skills and knowledge drawn from experience.
KRA ran a baseline survey on knowledge management in December 2016, which revealed that its culture
of knowledge sharing was weak. In response, KRA rolled out its KM strategy that includes some critical
initiatives:
• The introduction of subject matter experts (SMEs). SMEs are highly skilled tax officials with extensive
industry knowledge and in-depth understanding of different tax regimes. They are encouraged to share
and transfer their knowledge, not only to new employees but also to the less experienced colleagues,
known as “nex’perts” – the next experts.
• Establishment of communities of practice. A “community of practice” is a group of people who work

in the same profession and share a concern, a set of problems, or passion. They seek to deepen their
knowledge and expertise in this area on an ongoing basis through face-to-face and online interactions or
mixes thereof. By putting in place communities of practice, KRA aims to institute structured knowledge
sharing and collaboration within and across departments, business processes and functions. Seven
communities of practice came into being in financial year 2016 17 in three departments. The focus
for 2017 18 is to strengthen the communities of practice through capacity building for the appointed
community leaders.
• The rollout of the Expert Locator functionality designed to help find knowledge experts in KRA.
• The appointment of knowledge management champions to help widen employee participation in the
Knowledge Management Programme.
Source: ATO Good practices Database - Kenya Revenue Authority
186
7A.1. Uganda uses a science and acceptable basis for tax calculations and guarantees
results that are not largely underestimated. Income
technology approach to tax
from audits conducted using this method is greater
administration
than 90%, compared to 30% for traditional financial
Recognizing the growing shortcomings of traditional document analysis.
methods of auditing financial statements, the Uganda
Revenue Authority (URA) has implemented scientific
Scientific analysis in the laboratory
concepts, particularly in the area of tax compliance
management and fraud control. Some examples of Customs duties are paid on imports based on
the scientific approach of the URA: their use, composition, value, and so on. Import
classifications are done under the self-assessment
regime, which gives rise to a risk of loss of revenue
Input-output analysis
due to misclassification of the goods.
For URA, the gaps in reporting on the construction and
manufacturing sectors were a major concern. The use To meet this challenge, Uganda Revenue Authority
of the input-output coefficient could have attenuated has set up a scientific laboratory for the facilitation
them. It is a matter of determining the volume of a of international trade by applying scientific methods
material in the production process related to its and tools to classify goods into the appropriate tariff
volume in the finished product. Of course, a careful category.
study of the production process concerned is first The laboratory helps prevent attempts to avoid or
carried out. Thus, it is possible to validate or invalidate lower customs duties by making false claims. These
alleged production losses, for example, or to detect can be very sophisticated, dealing with the design
hidden production volumes. The method has been and composition of a commodity that only scientific
successfully applied in the following sectors: ferrous analysis can uncover. The detection of banned and
metals, alcoholic and non-alcoholic beverages, easily concealable substances and goods is also done
buildings, public works and civil engineering, cement, through scientific laboratory analysis. The increase
and mills. in import duties attributable to laboratory analysis
The scientific approach of input-output analysis averages between 30% and 40%.
provides reliable retrospective projections and
forward-looking extrapolations that provide an

8.A.1. Issues around data
Enhanced
Revenue
Collection
Fact-based tax administrative Invest in ICT systems, skills &

reforms, policy formulation, strategic processes critical for continuous
& fiscal planning and targeted collection of relevant, accurate and
technical assistance reliable tax statistics
Tax Statistics and their analysis promote a

fact-based discourse on taxation, promote
transparency, reveal trends and shifts crucial in
the policy context
188
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2019 ATO publication focal points (as of December 2018)
The following heads of research and planning, tax policy units, tax statistics and revenue forecasting as well as
their data collectors of the 34 revenue administrations participating in the 2019 ATO publication are at the heart of
the African Tax Outlook and they have contributed to the success of this publication by providing valuable inputs
during all processes.
Angola Benin Benin Botswana

Dr Hamilton Xavier Nihefe Mr Damas Hounsounon Mr Dominique Atindokpo Mr Gaitsiwe M. Motsewabagale
Botswana Burkina-Faso Burkina-Faso Burundi

Mr Gosalamang Mane Mr Bamboo Saidou Mr Jonas Bago Mrs Martine Nibasumba
Burundi Cameroon Chad DRC

Mr Therence Mpabwanayo Mrs Dorothy Nkogko Agbor Mr Gabnon DAWI Mr Mumpalala Gerard
DRC Ghana Ghana The Gambia

Mr William Malengo Mr Charles Addae Mr Alex Kombat Mr Yahya Manneh
192
The Gambia Kenya Kenya Lesotho
Mrs Mary Mendy Mr Joseline Ogai Mr Alex Mwangi Mr Katiso Ramalebo
Lesotho Liberia Liberia Madagascar

Mrs Nozaba Sopeng Mr Nyane Wratto Mr Samual W. Toe Mrs Iary Rakotonindrainy
Madagascar Mauritius Mauritius Malawi

Mr Donah Donahy Mr Yamraj Rampersand Mr Sameer Dulmeer Mrs Mercy S. Njolomole
Mozambique Mozambique Niger Niger

Mr Aurélio da Barca Mr Felipe Uamba Mr Mahamadou Djibrilla Mr Khane Moussa

Nigeria Nigeria Rwanda Senegal
Dr Asheikh Maidugu Mr Sunusi S. Gwaram Mrs Gaudence Uwimana Mr Lamine DIALLO
Senegal Seychelles Seychelles Swaziland

Mr Mamadou Wone Mr Daniel Dugasse Mrs Yvette Campanella Mr Edward Groening
Swaziland South Africa South Africa South Africa

Ms Nomalungelo Dlamini Ms Mamiky Leolo Ms Winile Ngobeni Ms Eva Muwanga
194
South Africa Tanzania Tanzania Togo
Ms Dinah Sekhuthe Mr Emmanuel Hezron Mr Laban Musunga Mr Pelei Sossadema
Togo Uganda Uganda Zambia

Mr Aouro Adoi Mrs Milly I. Nalukwago Mr Mayega Jova Mr Ezekiel Phiri
Zambia Zimbabwe Zimbabwe

Mr Samuel Mukuka Mulenga Mrs Theresa Mutungwazi Mrs Mary Mwaangireni

Development Partners
This publication has been made possible with the cooperation of the following ATAF partners:
EMBASSY OF FINLAND
PRETORIA
196
197
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ATAF Secretariat
Research Directorate
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Private Bag 15, Menlo Park
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South Africa
Telephone: +27 12 451 8800

E-Mail: info@ataftax.org
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I wish to extend my sincere thanks and congratulations

The impact of the African Tax Outlook has extended

We are excited to be publishing the 2019 edition of

Tax administrators and policy makers require

We continue to hone our indicators and statistics in the

Angola Benin Botswana

Burundi Burkina-Faso Cameroon

Cote d’Ivoire Chad Cape Verde

DRC Ghana Gambia

Madagascar Malawi Mali

Mauritius Mozambique Namibia

Niger Nigeria Rwanda

Senegal Seychelles Sierra-Leone

South Africa Eswatini Tanzania

Togo Uganda Zambia

Heads of tax administrations 6

2019 ATO participating countries and their currencies 18

2. TOTAL TAX REVENUE 29

3. TAX REVENUES AND NON-TAX REVENUES 59

4. TAX BUOYANCY, ELASTICITY AND STABILITY 95

4.3 Stability of total tax revenue in the ATO countries 104

6. EFFICIENT MANAGEMENT IN REVENUE ADMINISTRATION 133

6.1 Taxpayer service and communication 136

6.2 Taxpayer education 137

6.3 Modernising tax administration for cost-effectiveness 142

6.4 Customs clearance 145

6.5 Conclusion 148

7. AUDIT AND COMPLIANCE 149

7.1 Auditing for compliance 152

7.2 Arrears Management 164

7.3 Customs interventions 166

7.4 Conclusions 169

8. DATA AND TAX AND POLICY RECOMMENDATIONS 171

8.1 Overview of missing data and indicators 174

8.2 Tax policy 175

8.3 Tax administration 177

Table 3.1. VAT thresholds and rates in ATO countries 2017 64

Table 3.3. PIT revenues and GDP per capita, 2017 85

Table 3.4. Tax revenue indicators by tax type 90

Table 3A.2.1. Personal Income Tax rates, 2017 181

Figure 2.2. ATO country sizes by population 34

Figure 2.5. ATO tax-to-GDP ratios, 2017 and 2016 39

Figure 2.6. Growth in tax-to-GDP ratios, percentage points, 2016-2017 40

Figure 2.9. International organisations’ comparisons of tax-to-GDP ratios, 2014-2017 43

Figure 2.10. Tax-to-GDP variations in ATO countries, 2011-2017 46

Figure 2.16. Contribution to total tax revenue, by sector, 2017 52

Figure 2.17. Shares of domestic tax and customs revenue, 2017 54

Figure 2.18. Average ATO tax-to-GDP ratios by region, 2012 2017 55

Figure 3.1. VAT growth rate, 2016 2017 66

Figure 3.2. VAT Revenue/per capita GDP growth ratios, 2017 67

Figure 3.5. VAT revenues as a percentage of the GDP, 2017 70

Figure 3.6. VAT revenues Growth rates, 2017 2016 70

Figure 3.8. VAT refunds to VAT revenue ratios, 2011 2017 72

Figure 3.9. C-efficiency ratios in ATO countries, 2017 75

Figure 3.11. Excise revenue growth, 2011 2017 77

Figure 3.12. Share of excise revenue in total tax income, 2017 78