Technology Evolution and Tax Compliance: Evidence From Rwanda

by | May 21, 2023 | AMTJ, AMTJ 2023 I1

Technology Evolution and Tax Compliance: Evidence From Rwanda

Authors: Naphtal Hakizimana and Fabrizio Santoro

ISSN: 2709-8575
Affiliations: Rwanda Revenue Authority; International Centre for Tax and Development
Source: African Multidisciplinary Tax Journal, 2023 Issue 1, p. 125–149
https://doi.org/10.47348/AMTJ/V3/i1a7

Abstract

Technology and digitalisation have great potential to boost taxpayer compliance and revenue collection in Africa. Despite an increasing reliance on IT solutions for taxpayers, evidence of their effectiveness is still limited. In Rwanda, the revenue authority has introduced a more advanced version of an electronic billing machine, EBM version 2 (EBMv2), both to strengthen the tracking of transactions for enforcement purposes and to improve the experience of taxpayers. Based on a wealth of administrative data, this paper evaluates the impact of the adoption of EBMv2 on the filing behaviour of firms. Importantly, we can compare first-time adopters of EBMv2, mostly new taxpayers, with those moving from the old EBM version 1 to EBMv2. Findings reveal a significant increase in turnover, VAT inputs and VAT due, driven by new users. The probability of zero filing is reduced. Furthermore, discrepancies between VAT and income tax returns are greater, due to a much larger increase in turnover from VAT returns, mostly attributable to first-time users. We recommend that policymakers closely examine shifters who do not change their behaviour after adoption. Furthermore, we suggest that tax authorities adopt a more holistic approach to monitoring compliance across different tax categories since the positive impact on VAT does not necessarily translate into income tax.

Tax Policy, Corruption and Poverty in WAEMU

by | May 21, 2023 | AMTJ, AMTJ 2023 I1

Tax Policy, Corruption and Poverty in WAEMU

Authors: Alastaire S. Alinsato and Symphorien Zogbasse

ISSN: 2709-8575
Affiliations: Laboratoire d’Economie Publique, Université d’Abomey-Calavi, Bénin; Laboratoire d’Economie Publique, Université d’Abomey-Calavi, Bénin
Source: African Multidisciplinary Tax Journal, 2023 Issue 1, p. 150–139
https://doi.org/10.47348/AMTJ/V3/i1a8

Abstract

The aim of this paper is to demonstrate that a tax policy designed for taxes for social purposes reduces poverty in the West African Economic and Monetary Union. Poverty reduction requires optimal taxation, reduction of corruption, and improvement of the final consumption level per inhabitant. In order to reach this conclusion, we used panel data from the period 1996 to 2019. We used a method based on ‘panel-corrected standard errors corrected’ (PCSE). The paper suggests that public officials should establish proper tax policies and effective social protection programmes, and ensure good tax governance. Mainly, authorities can establish tax exemption thresholds for the poor, increase tax rates on the highest incomes, and ensure good tax governance.

Application of Autoregressive Distributed LAG Models to Evaluating Malawi’s Tax Revenue Productivity and Tax Administration Reform

by | May 21, 2023 | AMTJ, AMTJ 2023 I1

Application of Autoregressive Distributed LAG Models to Evaluating Malawi’s Tax Revenue Productivity and Tax Administration Reform

Author: Isaac Yamikani Chilima

ISSN: 2709-8575
Affiliations: Assistant Professor of Economics and Business, and Chair of Economics, School of Business and Leadership, Colorado Christian University
Source: African Multidisciplinary Tax Journal, 2023 Issue 1, p. 170–197
https://doi.org/10.47348/AMTJ/V3/i1a9

Abstract

This analysis demonstrates the application of autoregressive distributed lag (ARDL) models to gauge tax revenue performance in both the short term and the long term, as well as how to incorporate dummies to gauge changes following a popular semi-autonomous tax authority reform. To measure performance, we estimated tax buoyancy, defined as the percentage change in tax revenue in response to the percentage change in the tax base. Using data from 1979 to 2017 from annual economic reports and the United Nations University Government Revenue Dataset, the results show that personal income tax is the most productive of the direct taxes, while VAT is the most productive of the indirect taxes. However, underperforming customs duties estimates were evidence of deep-seated problems, calling for urgent intervention to curb tax evasion, fraud and corruption. Overall, estimates also suggest that tax revenue productivity improved following the tax reform, although the study could not fully credit the improvement to the reform itself.

The Impact of Tax Treaties on the Promotion of FDI: the Case of Morocco

by | May 21, 2023 | AMTJ, AMTJ 2023 I1

The Impact of Tax Treaties on the Promotion of FDI: the Case of Morocco

Author: Amine Doghmi

ISSN: 2709-8575
Affiliations: National Institute of Statistics and Applied Economics, Rabat, Morocco
Source: African Multidisciplinary Tax Journal, 2023 Issue 1, p. 198–212
https://doi.org/10.47348/AMTJ/V3/i1a10

Abstract

Foreign direct investments (FDI) play a decisive role in stimulating economic growth and the socio-economic development of developing countries. Foreign investors look for states that offer an environment that is favourable to business and investment. With this in mind Morocco has adopted a policy of attracting foreign investors by reducing administrative obstacles to investment and introducing advantageous tax incentives, including the conclusion of double taxation treaties (DTT). The impact of DTTs on the promotion of FDI has given rise to some debate: the results of studies thereon have diverged, depending on the country. In the Moroccan context, the interpretation of the results of the ARDL model used in this article shows that the impact of DTTs on FDI is statistically insignificant. Consequently, the Moroccan tax authorities should start thinking about a cost-benefit analysis of these tax treaties.

Impact of Implicit Tax on Personal Income Tax Compliance Behaviours

by | May 21, 2023 | AMTJ, AMTJ 2023 I1

Impact of Implicit Tax on Personal Income Tax Compliance Behaviours

Authors: lhasan Usman and Professor Victor Kyari Gimba

ISSN: 2709-8575
Affiliations: Federal Inland Revenue Service (FIRS) Nigeria; Professor and Head of Department, Department of Economics, Kaduna State University (KASU), Nigeria
Source: African Multidisciplinary Tax Journal, 2023 Issue 1, p. 213–236
https://doi.org/10.47348/AMTJ/V3/i1a11

Abstract

The objectives of this study are to examine the impact of implicit tax, income level and the perception of corruption on personal income tax compliance level in Kaduna State, Nigeria. The data were retrieved from primary sources, and 486 questionnaires were screened and analysed. The Breusch-Pagan-Godfrey Heteroskedasticity test was conducted to determine the presence of heteroskedasticity or otherwise, while the weighted least square regression model was used to analyse the study’s data. It was found that implicit tax and perception of corruption have a significant negative impact on personal income tax compliance behaviour, while income level has an insignificant positive impact on personal income tax compliance level. This study concluded that implicit tax and perception of corruption are important determinants of personal income tax compliance behaviour in Kaduna State, Nigeria. Therefore, the study recommended that Kaduna State government and its relevant agencies should do as much as they can to discharge their constitutional responsibilities and provide the necessary public services. The relevant tax authority should double its efforts in ensuring that all taxpayers, no matter their level of income, comply with the provisions of the relevant tax laws and the regulations of the relevant tax jurisdictions.

Impact of the AfCFTA Agreement on Customs Revenue: case of Togo

by | May 21, 2023 | AMTJ, AMTJ 2023 I1

Impact of the AfCFTA Agreement on Customs Revenue: case of Togo

Author: Bayoma Wili Samara

ISSN: 2709-8575
Affiliations: Macroéconomiste-financier, Chef Section budget, Direction des finances, Office Togolais des Recettes, TOGO
Source: African Multidisciplinary Tax Journal, 2023 Issue 1, p. 237–253
https://doi.org/10.47348/AMTJ/V3/i1a12

Abstract

The problem of loss of budgetary revenues with the implementation of the African Continental Free Trade Area (AfCFTA) agreement remains a concern, especially for the least developed countries. The losses resulting from the removal of tariff barriers deserve to be assessed in order to allow public authorities to establish mitigating measures. Drawing from this perspective, this paper aims to quantitatively assess the impact that the AfCFTA agreement has on Togo’s customs revenue. Using the differential method of current and future tariff regimes, the results of the study estimate the total loss in Togolese customs revenue during the first three years of the implementation of the Agreement at 30.9 billion CFA. This loss represents up to 0.25 per cent of the GDP and 22.67 per cent of the customs revenue collected, which could further widen the country’s budget deficit, and consequently compromise the financing of its development needs. Faced with such a situation, the Togolese state should carry out major internal tax reforms and public policy, consisting among others of broadening its national tax base, promoting the facilitation of intracontinental trade, and supporting the private sector through financial mechanisms in order to contribute to their competitiveness in light of the competition from other foreign companies.

Tax Awareness Among Micro-Business Owners in Informal Settings

by | May 21, 2023 | AMTJ, AMTJ 2023 I1

Tax Awareness Among Micro-Business Owners in Informal Settings

Author: Ayodele Ibrahim Shittu

ISSN: 2709-8575
Affiliations: Department of Economics, University of Lagos, Nigeria
Source: African Multidisciplinary Tax Journal, 2023 Issue 1, p. 254–272
https://doi.org/10.47348/AMTJ/V3/i1a13

Abstract

This paper broadly seeks to examine the determinants of tax awareness among micro-entrepreneurs in informal settings in the Bariga Local Council Development Area (LCDA) of Lagos State, Nigeria. Specifically, this paper examines the effects of business size, business records and tax education on tax awareness among microentrepreneurs in informal settings there. Tax awareness in this study is treated as a dichotomous variable to test the statistical significance of each of the predictors. The study uses a multiple logistic regression analysis. The findings show that gender, education, business records and tax education are significant predictors of tax awareness among the micro-entrepreneurs in informal settings. The study makes a significant contribution to an understanding of taxation in informal sector, especially in the African context where the size of informal settings significantly impacts the sustainable development of the economy at large.

An Analysis of Gender Equality and Tax Policies in Zimbabwe

by | May 21, 2023 | AMTJ, AMTJ 2023 I1

An Analysis of Gender Equality and Tax Policies in Zimbabwe

Author: Learnmore Nyamu Zanga

ISSN: 2709-8575
Affiliations: Committee on Fiscal Studies (CFS)
Source: African Multidisciplinary Tax Journal, 2023 Issue 1, p. 273–302
https://doi.org/10.47348/AMTJ/V3/i1a14

Abstract

This paper analyses the relationship between gender equality and tax policies in Zimbabwe. It focuses on direct and indirect taxes, and explicit and implicit gender biases in the current tax system. The study under review used desktop research and a gender-disaggregated tax-incidence analysis to find that Zimbabwe’s tax laws do not have any explicit bias against women. However, indirect taxes like value-added tax, informal taxes and trade taxes, which make up 60 per cent of all tax revenue, have implicit biases against women that are hard to see. Tax data needs to be genderdisaggregated to ensure that the total revenue mix is fair to women and supports gender-transformative tax policies, both in terms of how revenue is raised and how it is spent. To increase revenue and reduce implicit bias against women, the government must close loopholes for illicit financial f lows, increase progressive taxes, evaluate incentives, and eliminate harmful incentives.

Assessment of Impact of the COMESA-EAC-SADC Tripartite Free Trade Area on Tax Revenue in Malawi

by | May 21, 2023 | AMTJ, AMTJ 2023 I1

Assessment of Impact of the COMESA-EAC-SADC Tripartite Free Trade Area on Tax Revenue in Malawi

Author: Miriam Banda Mhango

ISSN: 2709-8575
Affiliations: Senior Tax Policy Analyst – Policy Planning and Research Division, Malawi Revenue Authority
Source: African Multidisciplinary Tax Journal, 2023 Issue 1, p. 303–330
https://doi.org/10.47348/AMTJ/V3/i1a15

Abstract

This study assessed the impact of Malawi’s joining the upcoming COMESA-EACSADC Tripartite Free Trade Area (TFTA) on Malawi’s tax revenue. The TFTA countries have agreed to liberalise 60 to 85 per cent of tariff lines once the Agreement comes into force, while the remaining 15 to 40 per cent will be negotiated in due course. Three simulations were conducted using the Tariff Reform Impact Simulation Tool: full liberalisation, 85 per cent liberalisation, and 60 per cent liberalisation. The findings reveal that the TFTA will have a negative impact on Malawi’s tax revenue. The findings also indicate which are Malawi’s revenue-sensitive goods under the TFTA, and how the list will change depending on how much the country liberalises its trade. The study also establishes that Malawi’s manufacturing sector will be the most affected sector under the TFTA. In conclusion, it is recommended that since Malawi is joining the TFTA, it should consider improving and reforming tariff revenue collection to protect itself from the expected revenue loss.

Impact of Tax Compliance Enforcement Initiatives in Uganda: case Study of the Value-Added Tax Fraud Campaign

by | May 21, 2023 | AMTJ, AMTJ 2023 I1

Impact of Tax Compliance Enforcement Initiatives in Uganda: case Study of the Value-Added Tax Fraud Campaign

Author: Micah Samuel Gaalya

ISSN: 2709-8575
Affiliations: Uganda Revenue Authority
Source: African Multidisciplinary Tax Journal, 2023 Issue 1, p. 331–347
https://doi.org/10.47348/AMTJ/V3/i1a16

Abstract

By utilising the economic deterrence theory of tax compliance the study establishes the impact of a VAT fraud campaign on taxpayer behaviour in Uganda. The study employed grouped matching difference-in-differences in regressions. We used monthly time-series data for 563 taxpayers for the period 2017–2018. The data was acquired from the Uganda Revenue Administration (URA) database. The results show that there was a small improvement in compliance behaviour over a timeframe of one year after the implementation of the VAT fraud campaign. Return filing increased by 35 per cent, timeous or on-time filing increased by 5 per cent and non-filing decreased by 3 percent. The policy implications are that the URA should put more effort into improving return filing since this should lead to important behavioural change. In addition, the URA should design specific risk treatment strategies targeting late and non-filing. Lastly, future compliance risk mitigation strategies should be focused on specific sectors where lessons learnt can easily be replicated in respect of different taxpayers within a given sector.