Royalty Tax Rate and the Under-reporting Dilemma in Tanzania’s Mining Sector

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

Royalty Tax Rate and the Under-reporting Dilemma in Tanzania’s Mining Sector

Author: Amos James Ibrahim

ISSN: 2709-8575
Affiliations: Lecturer of Economics at the Institute of Tax Administration
Source: African Multidisciplinary Tax Journal, 2023 Issue 1, p. 90–102
https://doi.org/10.47348/AMTJ/V3/i1a5

Abstract

The paper investigates whether an increase in royalty tax rates reduces or eliminates under-reporting by firms in Tanzania’s mining sector. It uses a theoretical approach to dynamic optimisation techniques. The findings suggest that an increase in the royalty tax rate does not necessarily lower the possibility of under-reporting. Our approach is to look at the royalty tax that is levied based on the gross value. Its impact on the firm’s extraction behaviour depends mostly on the prices of minerals. More importantly, the price movements counteract the impact of a given royalty tax. We also suggest that when a country wishes to reduce or eliminate under-reporting practices, it should strengthen the regulatory body that oversees the operations of firms in the sector.

Proposition for an AFCFTA-based Tax Dispute Court for the Timely Resolution of Commercial Tax Disputes

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

Proposition for an AFCFTA-based Tax Dispute Court for the Timely Resolution of Commercial Tax Disputes

Author: Marie-Louise Fehun Aren

ISSN: 2709-8575
Affiliations: Doctoral Candidate of International Tax Law, University of Pretoria
Source: African Multidisciplinary Tax Journal, 2023 Issue 1, p. 103–124
https://doi.org/10.47348/AMTJ/V3/i1a6

Abstract

The African Continental Free Trade Area (AfCFTA) Agreement is promoted as a developmental game-changer set to foster an impressive growth in intra-African trade. Already, economic forecasts project that the successful implementation of the AfCFTA could boost intra-Africa trade and investments from the current 16 per cent to about 35 to 40 per cent by 2040. However, the success of the AfCFTA implementation is largely dependent on the willingness of its member states to carry out large-scale trade and investment reforms to reap the benefits of the free trade area. One area in dire need of reform is the tax dispute settlement mechanisms (TDSM) found in tax, trade and investment agreements. These mechanisms often act as technical barriers to the realisation of the AfCFTA objectives. This paper seeks to review the TDSM provisions contained in the tax, trade and investment agreements, including the newly drafted AfCFTA investment protocol. It also seeks to provide a comprehensive analysis of the challenges inherent in these instruments with the aim of offering solutions through a progressively binding AfCFTA tax court. The court will enhance the timely and equitable resolution of tax disputes in the AfCFTA and promote a more conducive environment for investment, trade and growth.

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.