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This article looks into the problems of poor and corrupt taxation systems throughout Africa and claims that poverty and poor economic performance could be improved by civil-based reforms. Thanks to Human Writer, Elias Mhegera
TANZANIA, EAST AFRICA
Africans Suffer from Poor Tax Regimes
By Elias Mhegera
Many African countries, have consistently failed to broaden their tax bases after falling into the deadly trap of treating taxation as a political weapon, experts say.
They say most governments of African countries have a tendency to treat businesspeople who support political parties – and therefore governments in power - with kid gloves when it comes to paying tax.
This, together with various ruses like tax havens, holidays and exemptions granted to multinationals and other corporate institutions, denies African countries much needed revenue, therefore subjecting their nationals to perpetual aid dependence, the experts say.
These revelations were made at an international training in tax administration event held last week at Kunduchi Beach Hotel in Dar es Salaam, Tanzania, organized by a local non-government organization, Policy Forum, and drawing representatives of civil society organizations from eastern, western and southern African countries.
To curb the dangerous trend in tax shortfalls, participants urged African countries not to leave the issue of tax administration in the hands of the governments alone, and proposed that parallel institutions be formed to monitor tax administration in respective countries.
It was stated that political oligarchies in most African countries use tax collection as a weapon to punish those deemed to be on the side of their political opponents while at the same time giving favours to their supporters through various means.
Participants identified examples from the host country. In Tanzania, some multinational companies – including Five Star hotels and telecommunication companies – have been using long term strategies to evade tax by changing names and ownership structures. Some have done this more than three times in a short space of time.
To this end, civil society and investigative journalists have been challenged to dig deep and expose the motives behind such changes.
In his opening remarks, Policy Forum (PF) Coordinator Semkae Kilonzo said tax administration had caused a lot of problems in African countries.
He argued that a lot of revenues are left untapped and deny people adequate services.
“If taxes are not collected properly it means some of the Government’s revenues are left outside and hence denying the people income through services which are essential,” he commented.
He added that it was the duty of the civil society to ensure that reports are published and there is transparency on who should pay what.
“The tax regime is poor in Tanzania and many other African countries because the whole issue has been left to civil servants as a result of which, corruption and capital flight out of Africa have become common phenomenon,” he added.
Jack Ranguma a tax expert from Kenya said that his research finds that proper collection of taxes can be effective if various community groups are involved in the monitoring programmes.
Ranguma who is former Commissioner of Kenya Revenue Authority is currently working as a consultant with the Kenyan Tax Research Institute.
He believed such groups as parliamentary groups, villagers, and distribution functionaries should be entrusted with ensuring that there is justice in tax administration and that there is enough capacity building in order to create awareness.
“If people are reluctant to pay tax then it means that they do not see the direct benefit of paying taxes to their government and this is a reflection that either tax rates are too high, or the tax authorities are weak,” he commented.
Ranguma said that the main problem with developing countries in Africa is the fact that they give priority to the expenditure side rather than to the income generation side.
He argued this trend eventually deprives funding for important areas like hospitals, schools and other infrastructure and hence helps generate the vicious cycle of poverty.
He further explained that once there is proper collection of taxes a country's economic stability is enhanced. He , warned that without this stability the rich tend to manipulate the economy to their advantage.
“I am convinced that African countries, and other poor countries need to discuss (these issues) with the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) more seriously and constructively,” he commented.
Vituz Azeem who presented a paper on the link between tax justice and development said that tax is meant to support development, and if there is poor collection of the same this will be reflected in the national budget.
He warned that many African countries fall prey to corrupt officials in customs and excise units to the extent that big amounts are pocketed and/or shovelled into to their personal accounts, rather than onto governments.
“Tax administration needs a lot of ethics, if you are working with the tax authority you need to declare your property, also these workers need to report their properties periodically,” he cautioned.
On the issue of tax leakages, Savior Mwambwa who presented a paper on the role of multinationals in tax exemptions, competition policy, and capital flight said exemptions are always issued in the pretext of attracting more foreign direct investments, reducing poverty and job creation, as well as to facilitate economic growth.
But in many cases these exemptions are poorly conceived.
Such exemptions do more harm than good to African economies, he concluded.
“In many cases tax exemptions is just a creation of a space for corruption to flourish. There is a need to create independent bodies for scrutiny and for independent prosecutors who can handle the matters in court,” he said.
Presenting a paper on how to mobilize domestic resources in order to avoid dependency, Dereje Alemayehu counseled that citizens must be induced to respect that payment of taxes.
“If citizens realize that there is a value for their money they will just be attracted to pay without any kind of harassment or intimidation,” he commented.
Mr. Alemayehu mentioned that there are four measures to make people pay tax willingly: to make state income transparent; to ensure equity in the provision of services; and to minimize the externalization of costs.
The fourth measure is to give voice to the citizenry in regard to public expenditures, and on how incomes are generated and spent.
On his side was Michael Otieno from the Kenya’s National Taxpayers Association (NTA). He said that there is a need for the civil society to institutionalize mechanisms of verifying how tax is collected and spent in a country.
He counselled that through civil society advocacy, people must understand that paying tax is a moral obligation and a duty which has benefit to their lives.
Elias is a features editor at The Express (Tanzania), a secondary school teacher, a communications student at St. Augustine University in Tanzania and a public affairs consultant at the Tanzanian Human Rights Defenders Coalition. He blogs at: http://mhegeraelias.blogspot.com
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