Effect of Tax Rates on Industrial Profits on Industrial Production in Sub-Saharan Africa

Effect of Tax Rates on Industrial Profits on Industrial Production in Sub-Saharan Africa

by | Jul 3, 2024 | AMTJ, AMTJ 2024 I1

Effect of Tax Rates on Industrial Profits on Industrial Production in Sub-Saharan Africa

Authors: Mingnimon Ghislain Gnidehou & Alastaire Sèna Alinsato

ISSN: 2709-8575
Affiliations: Laboratoire d’Economie Publique (LEP), Faculté des Sciences Economiques et de Gestion, Université d’Abomey-Calavi, Benin; Laboratoire d’Economie Publique (LEP), Faculté des Sciences Economiques et de Gestion, Université d’Abomey-Calavi, Benin
Source: African Multidisciplinary Tax Journal, Volume 4, Issue 1 (2024), p. 18–36
https://doi.org/10.47348/AMTJ/V4/i1a2

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Gnidehou, M G & Alinsato, A S
Effect of Tax Rates on Industrial Profits on Industrial Production in Sub-Saharan Africa
African Multidisciplinary Tax Journal Volume 4, Issue 1 (2024) p. 18–36 https://doi.org/10.47348/AMTJ/V4/i1a2

Abstract

This paper analyses the effect of the tax rate on industrial profits on industrial production in sub-Saharan Africa. A Seo and Shin dynamic threshold panel model was specified and estimated for this purpose. Using data from the World Bank (WDI) over the period 2005–2021, the results from the estimation of the dynamic threshold model show that there is a threshold from which the effect of the tax rate on profits of industries becomes negative on industrial value added. This is a threshold of 20,47% of the tax rate on industrial profits. Beyond this threshold, the effect of the rate of this type of tax becomes negative on industrial production in Sub-Saharan Africa, precisely in the 25 countries taken into account in this study. The study therefore recommends the implementation of policies favourable to broadening the tax base and moderate tax rates.

Taxation of E-Commerce Activities and Revenue Potential in Ghana

by | Jul 3, 2024 | AMTJ, AMTJ 2024 I1

Taxation of E-Commerce Activities and Revenue Potential in Ghana

Authors: Ammishaddai Owusu-Amoah, Charles Addae, Alex Moyem Kombat*, Douglas Moffatt-Haizel, Felix Ghartey, Israel Elorm Dzokoto, Delali Aku Sunu, Lydia Obeng-Agyei, Stephen Nabareseh, Michael Gyasi, Byrne Joseph Abeiku Yorke, Docia Obiri Asare, Ali-
Kukubor Kobla Jnr, Abdul-Razak Awafo, Christian Nii Welbeck, Julia Ama Senaya†

ISSN: 2709-8575
Affiliations: * Corresponding author. Assistant Commissioner of Tax Research and Policy, Ghana Revenue Authority, † All the authors are affiliated with the Ghana Revenue Authority
Source: African Multidisciplinary Tax Journal, Volume 4, Issue 1 (2024), p. 37–57
https://doi.org/10.47348/AMTJ/V4/i1a3

Abstract

Electronic commerce (e-commerce) businesses have become a common mode of transaction in Ghana. However, Ghana Revenue Authority (GRA) has struggled to assess and maximise its revenue potential due to technical challenges and the complex nature of the market. The main objective of this research was therefore to identify the entities, goods and services involved in online transactions and estimate the total monetary value and revenue potential of online transactions in Ghana. To achieve this, both qualitative and quantitative research methodologies were adopted. The study found that resident and non-resident entities constitute 19 per cent and 81 per cent, respectively of those entities engaged in e-commerce activities in Ghana. Further, it was found that about 20 per cent of students, 45 per cent of people in formal employment, 30 per cent of the self-employed and five per cent of the unemployed are engaged in e-commerce. In addition, it appears that groceries constitute 47.5 per cent of all goods traded online with the rest of the goods constituting 52.5 per cent. Again, as many as 31 per cent of the e-commerce businesses identified in this study had not registered with GRA. Of those registered with GRA, 45 per cent had not filed their corporate income tax (CIT) or personal income tax (PIT). Thirty-eight per cent had not filed their value added tax (VAT), 28 per cent had not filed or paid their pay-as- you-earn (PAYE) and 72.4 per cent of the businesses did not withhold taxes. The paper recommends creating a database for all e-commerce businesses, including those with resident and non-resident status. The estimated revenue potential for e-commerce transactions by resident persons across all types of tax is over GHȻ 1.39 billion.

Dynamics of Taxation and Economic Governance : What Design for the Uemoa Zone?

by | Jul 3, 2024 | AMTJ, AMTJ 2024 I1

Dynamics of Taxation and Economic Governance : What Design for the UEMOA Zone?

Author: Fidel Saliga

ISSN: 2709-8575
Affiliations: Faculté des Sciences Economiques et de Gestion, Université d’Abomey-Calavi
Source: African Multidisciplinary Tax Journal, Volume 4, Issue 1 (2024), p. 58–77
https://doi.org/10.47348/AMTJ/V4/i1a4

Abstract

Financing development is an imperative for any system of governance. Failure in the resource mobilisation process undermines economic growth. The objective of this paper is to analyse the effect of economic governance on public contributions in UEMOA countries. The econometric estimation carried out using the generalised least squares method over the period from 2009 to 2020 shows that governance has a positive and significant effect on total tax revenue. The governments of these WAEMU countries must put in place more effective mechanisms to accelerate the collection of tax revenues while protecting vulnerable taxpayers.

An Appraisal of Carbon Taxes for Alignment to Socio-Economic Realities of Africa

by | Jul 3, 2024 | AMTJ, AMTJ 2024 I1

An Appraisal of Carbon Taxes for Alignment to Socio-Economic Realities of Africa

Author: Khan Teyim Pila

ISSN: 2709-8575
Affiliations:Policy Analyst, Legislation and International Tax Relations Division, Directorate General of Taxation, Cameroon
Source: African Multidisciplinary Tax Journal, Volume 4, Issue 1 (2024), p. 78–101
https://doi.org/10.47348/AMTJ/V4/i1a5

Abstract

Weather fluctuations are negatively impacting global growth; hence, continued calls for global carbon mitigation are being made. Research, especially in the European Union (EU), reveals that carbon pricing and emission trading systems are innovative and flexible enough to address market failures caused by externalities linked to carbon emissions. However, these countries lack proxies in Africa, and there is a research gap on how such taxes could be designed to align with Africa’s socio-economic realities. Through a literature review of open-source, but recent, studies on the subject, this paper seeks to fill this research gap, while creating a foundation for next-generation research in this area. The paper argues that, despite Africa’s low carbon footprint, economic realities and prospects, the implementation of the Carbon Border Adjustment Mechanism (CBAM) by the EU (one of Africa’s major trading partners) has rendered such taxes inevitable in Africa; hence, implementable policy alternatives aligned with the region’s socio-economic realities are needed.

Do Reforms in Automation Reduce Tax Compliance Costs in Africa? A Staggered Double-Difference Approach

by | Jul 3, 2024 | AMTJ, AMTJ 2024 I1

Do Reforms in Automation Reduce Tax Compliance Costs in Africa? A Staggered Double-Difference Approach

Authors: Nassibou Bassongui; Albert N’lédji Honlonkou

ISSN: 2709-8575
Affiliations: Ecole Nationale d’Economie Appliquée et de Management, Université d’Abomey-Calavi, Bénin
Source: African Multidisciplinary Tax Journal, Volume 4, Issue 1 (2024), p. 102–122
https://doi.org/10.47348/AMTJ/V4/i1a6

Abstract

This study evaluates the effect of e-taxation on the costs of tax compliance using a large sample of 53 African countries over the period 2004-2020. The econometric approach based on the staggered difference in difference estimator has allowed highlighting the causal effect. By controlling for heterogeneity and taking into account the dynamics of the effect of e-taxation, the results of the study show that e-taxation reduces the costs of tax compliance. Specifically, the e-taxation reform reduces the average number of tax payments per year in the long term. However, its effectiveness in reducing the time required to prepare and pay taxes is effective in the short and medium run. These results suggest the need to establish a rigorous system for monitoring e-taxation reforms in Africa. Innovations should accompany the reform in order to limit corrupt behaviour and bad governance.

The Need for a Responsive African Business Community in International Tax Cooperation

by | Jul 3, 2024 | AMTJ, AMTJ 2024 I1

The Need for a Responsive African Business Community in International Tax Cooperation

Author: Opeyemi Bello

ISSN: 2709-8575
Affiliations: PhD Candidate, Schulich School of Law, Dalhousie University, Halifax, Canada
Source: African Multidisciplinary Tax Journal, Volume 4, Issue 1 (2024), p. 123–148
https://doi.org/10.47348/AMTJ/V4/i1a7

Abstract

The paper examines how the African business community can complement the efforts of the African states in international tax reforms. It argues that international tax cooperation is not exclusive to state actors; non-state actors, particularly businesses, have significant roles to play, considering their expertise in the global business environment. The noticeable absence of African businesses in public engagement with the Organization for Economic Cooperation and Development’s (OECD’s) work on the tax consequences of a digitalised economy justifies the need to undertake this study to demonstrate how African businesses can support their home governments in demanding international tax reforms. It seeks to demonstrate to African business actors the significant role played by shadow treaty negotiators played and other business actors in negotiating tax treaties that may significantly impact the African market. The paper presents three reasons why African business actors should be proactive in international tax cooperation. It also provides a practical framework for how they can engage with international tax initiatives. As a case study, the paper adopts a descriptive and analytical-qualitative approach to examine the OECD BEPS Inclusive Framework’s Two-Pillar proposal to address the tax consequences of the digitalised economy.

Analysis of Mining Rent Sharing : Case of the Kamoa-Kakula Project

by | Jul 3, 2024 | AMTJ, AMTJ 2024 I1

Analysis of Mining Rent Sharing : Case of the Kamoa-Kakula Project

Author: Mukoko Akabuele P

ISSN: 2709-8575
Affiliations: Economiste, Inspecteur des Finances à l’Inspection Générale des Finances RDC
Source: African Multidisciplinary Tax Journal, Volume 4, Issue 1 (2024), p. 149–166
https://doi.org/10.47348/AMTJ/V4/i1a8

Abstract

This article aims at analyzing the rent sharing within the framework of the Kamoa-Kakula project which consists of the exploitation of a copper mine, located in the DRC. Based on data from the Integrated Development Plan of this project, published in October 2020, we used the FARI model approach to analyze the tax regime of the 2018 mining code and estimate the share falling to the State and the investors. Analysis of the results of our estimates shows, on the one hand, that the tax burden is close to observed international trends. Expected state revenues are USD 7.3 billion, according to the base scenario, while the Average effective tax rate (AETR) would be between 40.6 and 53.1%. On the other hand, although the innovations introduced increase the AETR, the latter tends to increase with the profitability of the project. Which allows us to conclude that this tax regime remains progressive, despite the increase in tax rates. Although theoretically, this new code seems advantageous for the State, its implementation should be accompanied by measures aimed at strengthening tax administration and control techniques, with the aim of confronting tax optimization practices.

Assessing Tanzanians’ Response to the Implementation of a Mobile Money Transaction Levy

by | Jul 3, 2024 | AMTJ, AMTJ 2024 I1

Assessing Tanzanians’ Response to the Implementation of a Mobile Money Transaction Levy

Author: Francis Nyonzo

ISSN: 2709-8575
Affiliations: Programs Officer and economist at Jamii Forums with expertise in digital economy and social justice.
Source: African Multidisciplinary Tax Journal, Volume 4, Issue 1 (2024), p. 167–186
https://doi.org/10.47348/AMTJ/V4/i1a9

Abstract

This paper analyses the effects of the mobile money transaction levy in Tanzania. The data used in the study was obtained from the Bank of Tanzania and the Tanzania Communications Regulatory Authority. The study employs interrupted time series analysis to determine the impact of the government levy on mobile money transactions. The results show a significant decrease in the total amount transacted and the average amount per subscriber after the introduction of the levy. The results indicate that the intervention had a significant impact on the average money transacted by subscribers. The study suggests that policymakers should consider alternative revenue sources other than those which affect the government revenue negatively. Further, the government should encourage people to use mobile money to pay for goods and services to increase government revenue.

Does the Quality of ICT have an Effect on Tax Revenue Collection in Africa?

by | Jul 3, 2024 | AMTJ, AMTJ 2024 I1

Does the Quality of ICT have an Effect on Tax Revenue Collection in Africa?

Author: Katamantou Woenagnon

ISSN: 2709-8575
Affiliations: Gestionnaire des déclarations fiscales à l’Office Togolais des Recettes (OTR)
Source: African Multidisciplinary Tax Journal, Volume 4, Issue 1 (2024), p. 187–207
https://doi.org/10.47348/AMTJ/V4/i1a10

Abstract

This article examines the effect of the quality of information and communication technologies (ICT) on tax revenue collection in Africa. Starting with a sample of 48 countries, observed over the period 1986 – 2017, we use a cointegration model in panel data using fully modified ordinary least squares (FMOLS) technique for the basic analysis. To check robustness, we use dynamic ordinary least squares (DOLS) and canonical cointegration regression (CCR). The results show that the quality of ICT measured in terms of its bandwidth in kilobits per second, contributes positively and significantly to the collection of tax revenues. The findings suggest that development policies should be geared towards fostering both more and better ICTs. In this sense, African states should invest massively in high-speed fiber optic networks, serving the entire extent of their countries to allow tax administrations use of more advanced technologies.

The Effects of Exchange Rate Dynamics on Tax Revenues Collection: Evidence from Malawi Between 1990 and 2022

by | Jul 3, 2024 | AMTJ, AMTJ 2024 I1

The Effects of Exchange Rate Dynamics on Tax Revenues Collection: Evidence from Malawi Between 1990 and 2022

Author: Khumbolane George Chavula

ISSN: 2709-8575
Affiliations: Malawi Revenue Authority, Policy Planning and Research, P/Bag 247, Msonkho House
Source: African Multidisciplinary Tax Journal, Volume 4, Issue 1 (2024), p. 208–226
https://doi.org/10.47348/AMTJ/V4/i1a11

Abstract

Exchange rate dynamics play a critical role in the determination of tax revenue collection yet remain underexplored in the literature for both Malawi and other sub-Saharan countries. This study addresses this gap by examining the impact of exchange rate dynamics, including devaluation policies and changes in exchange rate regimes on tax revenue collection in Malawi. Using time series secondary data from 1990 to 2022 and employing vector autoregressive (VAR) estimation techniques, the study finds that changes in factors such as exchange rates and the exchange rate regime Granger cause variations in Malawi’s tax revenues. The findings suggest that aligning tax reforms with the recognition of foreign exchange gains or losses could enhance domestic revenue mobilisation efforts, particularly through effectively taxing external currency-denominated assets and broadening the tax base.