PRETORIA – “This is what Africa needs, and I am privileged to witness it…”
These were the words from the African Tax Administration Forum (ATAF)’s chairman, Mr Philippe Tchodie, as he declared the official launch of the Information and Communications Technology (ICT) tax systems and informal sector guidebooks.
The chairman noted, “I’m pleased that Africa is increasingly looking within itself and collaborating through the ATAF umbrella to find sustainable solutions to its tax issues such as the Guidelines offered by ATAF to acquire and maintain efficient ICT tax systems and review the fiscal management of the informal sector in Africa.”
The two guidebooks titled, Efficient Acquisition, Implementation and Maintenance of Integrated Revenue Administration Systems in Africa and The Efficient Taxation of the Informal Sector in Africa, are manuals that can be regularly used by tax experts and policymakers to improve their administrative processes and political, legal, and institutional environments to strengthen both sectors.
Mr Abdoulaye Coulibaly, Director of Governance and Public Financial Management at the African Development Bank, started his address by thanking ATAF for hosting the launch.
“Formalisation of the informal economy is not just a priority for tax collection but has wider developmental benefits. Higher taxes and complicated fiscal process may prevent informal sector operators from formalising their activities,” Mr Coulibaly said. He further observed that the formalization of the informal sector increases access to finance, offers social protection and improves working conditions of the informal sector players.
The launch took place in four highly engaging sessions involving seasoned tax experts and focusing on approaches to strengthening ICT tax systems and various pragmatic ways of implementing the proposed informal sector taxation guidelines in African countries.
SESSION ONE:
The first session’s theme was titled: The proposed ICT tax system model for Africa: A guide to a more efficient acquisition, implementation, and maintenance of integrated ICT tax systems. It unpacked the key considerations that tax administrations should bear in mind in building and maintaining sound ICT Tax systems. The key recommendations in this area included the following:
- Use of local skills to develop ICT systems. Not everything should be imported.
- Use of local knowledge hubs to develop ICTs locally (e.g., partnering with local universities). Direct and indirect costs will be drastically reduced.
- IT infrastructure standardization is important.
- To manage ICT-related changes more efficiently, tax administrations should implement organizational changes.
- Integrating with all relevant stakeholders reduces the costs of compliance and increases revenue collections.
SESSION TWO:
This sitting focused on the possibility of better fiscal management of the informal sector on the continent. The situational analysis of the taxation of the informal sector in Africa was presented and the proposed model for an optimal fiscal management of this sector outline. Given that the informal sector contributes significantly to GDP but not to tax, it cannot be neglected.
The recommendations in this session were summarised as follows:
- Ensuring that there is common and clear understanding between various actors regarding informal sector.
- Need for specific informal sector tax policy apart from the current informal trader’s tax and presumptive taxes.
- Simplify registration process and payment systems for informal sector players.
- Promptly resolve any queries that may arise.
- Tax rates should not be punitive.
- Taxpayer segmentation is crucial to provide customised services to the needs of the informal sector.
- Transparency and accountability help in promoting informal sector compliance.
- Generation of a common unique identifier that can be used to register taxpayers.
SESSION THREE:
Session three offered discussion from panellists on the value that ATAF’s ICT products bring to the field of tax in Africa.
Mr Chibale Chimambo, Director of Innovation and Project Management at Zambia Revenue Authority, spoke about how Zambia used tools to efficiently implement and maintain ICT integrated tax systems with minimum costs.
“Many costs have been reduced because of the introduction of ICT tax systems in Zambia. We have cut our costs by over 50%. In terms of support and maintenance, we've cut costs by 70%,” he added.
Furthermore, Ms Ndèye Aïssatou NDAO, Director of Tax Services in Senegal, praised the ICT guidebook for its ability to provide innovative tools such as the monitoring and assessment tools that enable tax administrations to track progress in implementing the proposed models and benchmark their performance against peers within the region.
“These tools will help us to engage with taxpayers,” she said.
Panellists agreed on the following:
- Unpacking importance of process management - important to always document business processes and changes to process.
- Vendors need to understand how the current processes in tax administration are working.
- Clear project timelines (start and end dates) and people involved.
- Good change management (transition from the old to the new systems) - stakeholders to be always updated on progress.
- Implement projects in phases (starting at low pace and increase subsequently as operations adapt to new systems).
- Assessing the impact of the new systems at the early stages of implementing a new ICT system and what skills are required to operate the new system.
- Tax administrations should keep in mind that in implementing ICT tax systems, the process is key, as technology is just an enabler.
- Need for clear supporting legislation.
- Coordination among various stakeholders involved is important.
- Tax administrations should engage with parent Ministries to ensure ICT projects are incorporated in the national ICT blueprints.
- Adequate funding (ICT projects are expensive)
SESSION FOUR:
Discussion in the last session centered around various practical ways of implementing the proposed informal sector taxation guidelines in African countries.
The panellists addressed issues and questions such as how the proposed guidelines can be successfully implemented at the administration, institutional and legislative levels.
Mr Rameck Masaire, Acting Commissioner General of the Zimbabwe Revenue Authority, spoke about measure to increase voluntary tax compliance in the informal sector and the importance of a good relationship with authorities and taxpayers.
Mr Masaire said, “One of the key issues is ensuring there's common understanding and coherence with authorities with regards to activities of the informal sector. It's important to work together with the informal sector so that it's easier to collect taxes.”
The recommendations were as follows:
- Importance to simplify registration process and payment systems for informal sector players.
- Tax rates should not be punitive.
- Taxpayer segmentation is crucial to provide customised services to the needs of the informal sector.
- Important to improve the culture of paying taxes through educating taxpayers.
- Importance of block management systems – to map sections of towns, cities; to ease the process of identification, registration, and monitoring of taxpayers.
- Finding ways to bringing together scattered informal sector players under various umbrellas.
- Making tax clearance certificate a requirement for business registration.
- Importance of advance income tax on commercial imports (this is not a final tax but a withholding tax).
- Considering the challenges observed, panellists suggest more work to be done on informal sector taxation.
- Develop digital platform to interface with other entities.
- Introduce requirement for tax identification number for all entities planning to open a business as in the case of Malawi
In his closing remarks, ATAF’s Executive Secretary, Mr Logan Wort stressed the importance of tax experts using the guidebooks.
“Tax administrations and policymakers are strongly encouraged to appropriate and implement these guidebooks and their recommendations. I would like to encourage tax administrations to own and implement the tools offered in these guidebooks to benefit from them.”
WATCH the full launch of these guidebooks here:
https://www.youtube.com/watch?v=FSXgk6DI6qs&t=2s
ACCESS the guidebooks in English, French and Portuguese here:
https://www.ataftax.org/library
This has been made possible with the financial support of the African Development Bank and contributions from tax administration ICT and informal sector taxation technical experts from across Africa.
