Mitigating the cost impact of ICT system failures in tax agencies: lessons from Uganda

by | Dec 17, 2020 | AMTJ, AMTJ 2020 I1

Mitigating the cost impact of ICT system failures in tax agencies: lessons from Uganda

Author: Masembe Michael (masembey@gmail.com)

ISSN: 2709-8575
Affiliations: Team leader Tax Education; Uganda Revenue Authority
Source: African Multidisciplinary Tax Journal, 2021 Issue 1, p. 113-132
https://doi.org/10.47348/AMTJ/2021/i1a7

Abstract

Tax administrations that have adopted information and communication technology (ICT) face the challenge of system failures. Exhaustive literature exists on the causes and nature of such downtime or failures. This study investigated the cost of downtime in a tax administration, taking the case of the Uganda Revenue Authority (URA) as a case study, and reviewing and analysing system performance reports and interviews with staff on downtime. The study found that while automation enabled tax compliance, it was vulnerable to system downtime, which affected process efficiencies, reduced revenue yield, lowered staff productivity and raised ICT maintenance costs. Existing systems must therefore be continuously monitored with clear system performance levels in light of any future ICT hiccups. The study concluded by recommending alternative manual processes when ICT processes suffer downtime while prioritising compliance support systems uptime ( for example, payment systems) to other systems during downtime. Overall, the tax administrations must have a business continuity strategy with tested downtime safeguards.

The value-added tax refund problems in developing countries – case of Zimbabwe

by | Dec 17, 2020 | AMTJ, AMTJ 2020 I1

The value-added tax refund problems in developing countries – case of Zimbabwe

Author: Passionate Siwela (siwela.passionate@gmail.com)

ISSN: 2709-8575
Affiliations: Tax Auditor, Zimbabwe Revenue Authority
Source: African Multidisciplinary Tax Journal, 2021 Issue 1, p. 133-148
https://doi.org/10.47348/AMTJ/2021/i1a8

Abstract

Refund abuse is especially problematic when implementing value-added tax (VAT). Nevertheless, refunds must be paid promptly to ensure that VAT does not become a cost to business. There is therefore a need to strike a balance between procedures put in place to limit refund fraud opportunities and not causing refund delays. It is against this background that the study sought to investigate the refund processing system in Zimbabwe to highlight potential challenges faced by taxpayers and tax administrators. Evidence was collected by reviewing domestic legislation and other published literature, analysing the administration processes, including administering taxpayers and tax administrators surveys. The study found weaknesses in tax design and administration processes that created opportunities for refund fraud, fraudsters and tax planners taking advantage of the weak structures, taxpayers who fear pursuing their rights (as that will trigger a comprehensive audit), and a general unwillingness of the tax administration to invoke existing tax laws.

Civic pride and tax compliance in Kenya

by | Dec 17, 2020 | AMTJ, AMTJ 2020 I1

Civic pride and tax compliance in Kenya

Authors: Clement Otindo (Clement.otindo@kra.go.ke), Racheal Mbaire (Racheal.mbaire@kra.go.ke), Jane Kanina (Jane.kanina@kra.go.ke)

ISSN: 2709-8575
Affiliations: Research Economist
Source: African Multidisciplinary Tax Journal, 2021 Issue 1, p. 149-168
https://doi.org/10.47348/AMTJ/2021/i1a9

Abstract

Every government aspires to foster voluntary tax compliance; thus, the need to understand what citizens think about paying taxes other than taxes being a legal requirement. This paper analysed data collected through a nationwide survey on tax compliance. An ordered probit regression model was employed to examine the relationship between civic pride and tax compliance in Kenya. The findings indicated that tax compliance pertains to the relationship between individuals and the state. Individuals who are proud to be Kenyan and have faith in both the Kenya Revenue Authority (KRA) and the government depicted higher levels of compliance than those who were not proud and did not have faith in the institutions. Other factors that were found to significantly influence voluntary tax compliance in Kenya included age, gender, satisfaction with democracy, corruption in government and a fair tax system. Therefore, to improve voluntary tax compliance, the government and tax administration should adopt strategies aimed at increasing taxpayers’ confidence in the system. This include improved service delivery to the citizenry especially health and education, fair and equitable distribution of resources, fair treatment to all, eradication of corruption and having a fair tax system.

The determinants of the vat potential in Benin: an econometric analysis

by | Dec 17, 2020 | AMTJ, AMTJ 2020 I1

The determinants of the vat potential in Benin: an econometric analysis

Author: Tidjani Ousmaïla Awe Obinti (ismaelobinti@gmail.com)

ISSN: 2709-8575
Affiliations: Economètre-Chercheur à la Direction Générale des Impôts du Bénin
Source: African Multidisciplinary Tax Journal, 2021 Issue 1, p. 169-188
https://doi.org/10.47348/AMTJ/2021/i1a10

Abstract

This paper aimed to analyse the determinants of VAT potential in Benin over the period 1991 to 2017. The results of the estimation, conducted using Engle Granger’s cointegration model, showed that the latter is, on the whole, lower than the actual level of VAT collection over the period of analysis. This means that the VAT potential is relatively well developed, insofar as the tax capacity of the Beninese economy remains insufficient to mobilise more VAT revenue. However, this observation must be put into perspective as the capacity to mobilise VAT lost momentum from 2013 after a remarkable performance for over 23 years. This result calls for an improvement in tax reforms implemented in order to optimise the capacity of the tax administration in VAT mobilisation. Furthermore, the estimate showed that structural factors such as the degree of openness of the economy and the real gross domestic product per capita have had a positive and significant impact on VAT revenue mobilisation.

Taxable capacity and effort of value-added tax in Kenya

by | Dec 17, 2020 | AMTJ, AMTJ 2020 I1

Taxable capacity and effort of value-added tax in Kenya

Authors: Jane Muguchu (janemuguchu@gmail.com), Nelson H.Wawire, Anthony Wambugu

ISSN: 2709-8575
Affiliations: Ph.D. Student, School of Economics, University of Nairobi, Kenya; Associate Professor of Economics, School of Economics, Kenyatta University, Nairobi, Kenya; Professor of Economics, School of Economics, University of Nairobi, Kenya
Source: African Multidisciplinary Tax Journal, 2021 Issue 1, p. 189-210
https://doi.org/10.47348/AMTJ/2021/i1a11

Abstract

Domestic tax revenue mobilisation has received great focus among developing countries in order to achieve the development objectives with less reliance on foreign aid. The effort to mobilise revenue in developing countries has been undermined by some challenges such as high levels of non-compliance, low taxable capacity and effort averaging 10 to 20 per cent compared to Organisation for Economic Cooperation and Development (OECD) countries, which collect 30 to 40 per cent of their gross domestic product (GDP). To achieve Kenya’s Vision 2030 development objectives, the tax administration is expected to collect over 20.7 per cent of GDP and ensure revenue growth of 10 per cent per annum (Republic of Kenya, 2007). This called for establishing how far the country is from reaching its maximum tax potential and the effect of various factors that determine the taxable capacity of the country. Emphasis was placed on value-added tax (VAT) due to its high revenueraising potential. Using the Ordinary Least Squares (OLS) estimation technique and maximum likelihood for stochastic frontier approach, the study estimated the taxable capacity and effort of value-added tax (VAT). The results indicated that capital investment, manufacturing and private credit as a per cent of GDP impacted positively on taxable capacity while inflation, exports and agriculture negatively affected taxable capacity. The tax effort estimation results indicated that the average tax effort between 2011 and 2015 was 0.5, thus classifying the country under low collection, high effort category. Therefore, broadening the tax base through increased investments, manufacturing and improving on the efficiency of tax administration is fundamental in enhancing revenue mobilisation.

Carbon tax to lower emissions: the likely impact of carbon emissions tax on households in South Africa

by | Dec 17, 2020 | AMTJ, AMTJ 2020 I1

Carbon tax to lower emissions: the likely impact of carbon emissions tax on households in South Africa

Author: Nkhensani Siweya (nsiweya@sars.gov.za)

ISSN: 2709-8575
Affiliations: Functional Analyst: Economist, South African Revenue Service (SARS)
Source: African Multidisciplinary Tax Journal, 2021 Issue 1, p. 211-227
https://doi.org/10.47348/AMTJ/2021/i1a12

Abstract

The South African government, along with other countries, has signed the Paris Agreement to commit to lowering carbon dioxide emissions. This has led to the introduction of carbon tax in different countries to combat global warming. The Mexican government was the first to introduce carbon tax amongst the emerging economies back in 2014, while the Argentine government implemented carbon tax in January 2018. The South African government followed suite and introduced carbon tax effective 5 June 2019. Households are expected, however, to be weighed down by the levy as the carbon fuel levy will be implemented at 9 and 10 cents per litre on petrol and diesel respectively. The impact on strained households’ income is expected to emanate from the already high fuel prices, which have been on a rising trajectory since the beginning of 2019.