Working Paper 111

What is Wrong with African Tax

Administration?
Mick Moore
September 2020
ICTD Working Paper 111

What is Wrong with African Tax

Administration?1

Mick Moore

September 2020

1
This paper is based in part on the ideas and information I received in conversation with a wide range of tax administrators and
other tax specialists over the decade 2010-20 when I was CEO of the International Centre for Tax and Development (ICTD). I
am equally indebted to my excellent ICTD colleagues with whom I worked over this period. I owe a special thanks to Giulia
Mascagni and Fabrizio Santoro, whose research on the arcane topic of ‘nil-filing’ (Sections 9 and 10) has revealed a great deal
about how taxes are administered in practice.
What is Wrong with African Tax Administration?
Mick Moore
ICTD Working Paper 111
First published by the Institute of Development Studies in September 2020
© Institute of Development Studies 2020
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2
What is Wrong with African Tax Administration?

Mick Moore

Summary

National tax administrations in sub-Saharan Africa have undergone considerable reform in

recent decades. In a number of respects, they are, on average, more reformed and more
efficient than tax administrations in other low income regions of the world. They have
responded effectively to a number of major challenges. However, we now have evidence from
benchmarking evaluations organised by the International Monetary Fund (IMF) that overall tax
administration performance in the region is unimpressive. This paper assembles a wide range
of evidence from recent research on two inter-connected policy issues in African tax
administration: the use (under-use, misuse) of digital technologies and a set of questions of
who should be taxing small scale business, how, and how much. The first conclusion is that
digital technologies are generally under-used and mis-used relative to their potential. They
tend to be deployed in a rather fragmented way and for ‘taxpayer facing’ activities, rather than
for internal control purposes. They have much under-exploited potential to support additional
revenue collection, to make the collection process less unpleasant and fairer and to address
the problem of weak oversight and accountability of tax administrations. The second
conclusion is that there is a high potential for improving the organisational arrangements for
taxing small business in sub-Saharan Africa. The current practice reflects a confluence of
several factors. For a number of reasons, tax administration is relatively centralised; nearly all
revenues are collected by central government tax agencies, leaving very little for sub-national
revenue collectors. In consequence, central government tax agencies have to organise
themselves internally to undertake very different types of tasks: to collect revenue both from
small numbers of big companies, that typically provide nearly all revenues, and from very large
numbers of very small scale businesses. The latter collectively provide a small proportion of
total revenue. Further, many if not most national tax administrations have on their books large
proportions of inactive taxpayers – people and companies who are registered with the tax
administration, but who do not actually pay tax. Taxpayer registers are often inaccurate. A
major reason for both the large numbers of inactive taxpayers and the inaccuracy of the
registers is that considerable efforts are continually made to register new taxpayers, even
though experience indicates that few will actually end up paying tax. I label this the registration
obsession. It is closely associated with the idea that the major source of uncollected revenues
in sub-Saharan Africa is the so-called informal sector – implicitly, small scale businesses and
relatively poor people. This narrative is diversionary. The major sources of uncollected
revenues lie elsewhere, including the incomes and assets of the wealthy and the unjustified
tax exemptions granted to companies. The informal sector narrative serves the purpose of
distracting attention from these real sources of uncollected revenues.

Keywords: Tax administration, Africa, informal sector, digital technology, information

technology, taxpayer registration, tax reform

Mick Moore is a political economist. His broad research interests are in the domestic and
international dimensions of good and bad governance in poor countries, focusing specifically
on taxation. He has done extensive field research in Africa and Asia, especially in Sri Lanka,
Taiwan and India. He was the founding CEO of the ICTD 2010-2020 and is now Senior Fellow,
and is co-author of Taxing Africa with Wilson Prichard and Odd-Helge Fjeldstad, published by
Zed Press London and HSRC Press Pretoria in 2018.

3
Contents

Summary 3
Acknowledgements 5
Introduction 6

1 Organisation 7

2 Tax Administration Challenges in sub-Saharan Africa 7

3 Assessing the Performance of National Tax Administrations in 10

sub-Saharan Africa

4 The Drivers of Tax Administration Reform 12

5 The Nature of Tax Administration Reform 13

6 The TADAT Performance Numbers 16

7 The Use of Digital Technologies 17

7.1 The cost of tax collection 18
7.2 Country case: Malawi 18
7.3 Country case: Sierra Leone 19
7.4 Country case: Rwanda 19
7.5 The inaccuracy of taxpayer registers 19

8 Inactive Taxpayers 20

9 Why So Many Inactive Taxpayers? 22

9.1 Technical explanations 23
9.2 Organisational sociology explanations 23
9.3 Political explanations 24

10 The Registration Obsession and the Ambiguous ‘Informal Sector’ 24

11 Policy Implications 26

References 29

Tables
Table 8.1 Non-filers and nil-filers, eSwatini, Rwanda and Uganda 22

4
Acknowledgements
For very helpful comments on earlier drafts, I am grateful to Richard Bird, Graham Burnett,
Roel Dom, Odd-Helge Fjeldstad, Max Gallien, Jalia Kangave, Susan Nakato, Giulia Mascagni,
Giovanni Occhiali, Will Prichard, Gael Rabelland, Eileen Rafferty, Fabrizio Santoro, Berni
Smith, Seth Terkper, Vanessa van den Boogaard, and Ronald Waiswa.

5
Introduction
What is wrong with tax administrations in sub-Saharan Africa? The question invites a flood of
answers. African taxpayers have plenty of complaints reflecting their personal experiences.
Long lists of problems can be found in numerous consultancy, advisory and aid donor reports.
At a more technical level, the Tax administration Diagnostic Assessment Tool (TADAT)
Secretariat, located in the International Monetary Fund (IMF), has, since 2012, undertaken
reviews and assigned numerical scores for the quality of the performance of 28 key functions
for 28 national tax administrations in sub-Saharan Africa. Those scores are generally low
(Section 3).

The purpose of this paper is not to accumulate lists of actual or alleged deficiencies. Such lists
are not, in themselves, very useful and may indeed be misleading. The formal and informal
evaluations that underpin the standard inventories of problems do not always take into account
how intrinsically difficult it is to collect taxes in African conditions, to avoid upsetting taxpayers,
and to come up smelling of roses (Section 2). More broadly, there is no standard model of
good revenue administration that is valid across a diversity of circumstances. Notions of
internationally-transferable ‘best practice’ are poorly grounded. Appraisals of tax
administrations tend to focus on organisational architecture, rather than systemic functioning
and to evaluate them piecemeal, rather than take a more wholistic perspective on how the
parts fit together within a specific context. The effectiveness of any tax administration depends
in part on its relationship to other actors in its immediate environment, including politicians,
the courts, the legal system, other government agencies and banks. It may be difficult to make
sensible performance judgements without detailed knowledge of the immediate organisational
ecosystem (Vázquez-Caro and Bird 2011).

The objective here is to stimulate discussion on two big, related policy issues in African tax
administration: the use (under-use, misuse) of digital technologies and a set of questions of
who should be taxing small scale business, how, and how much. My conclusions on those
issues are as follows:

• Digital technologies are generally under-used and mis-used relative to their potential and
relative to the current urgent need, in light of the COVID-19 epidemic, to collect taxes with
reduced person-to-person contacts. Digital technologies tend to be used in a rather
fragmented way and for ‘taxpayer facing’ activities rather than for internal control purposes.
They have much under-exploited potential to support additional revenue collection; to
make the collection process less unpleasant and fairer and to address the problem of weak
oversight and accountability of tax administrations.
• There is a great deal of potential for improving the organisational arrangements for taxing
small business in sub-Saharan Africa. The current situation reflects a confluence of several
factors. For a number of reasons, tax administration is relatively centralised; nearly all
revenues are collected by central government tax agencies, leaving very little for sub-
national revenue collectors. In consequence, central government tax agencies have to
organise themselves internally to undertake quite divergent tasks: to collect revenue both
from small numbers of big companies that typically provide nearly all revenues and from
very large numbers of very small scale operators. The latter collectively provide a small
proportion of total revenue, for which collection costs are high. Further, many if not most
national tax administrations have on their books large proportions of inactive taxpayers –
people and companies who are registered with the tax administration, but who do not
actually pay tax. Taxpayer registers are often inaccurate. A major reason for both the large
numbers of inactive taxpayers and the inaccuracy of the registers is that considerable
efforts are continually made to register new taxpayers, even though experience indicates
that few will actually end up paying tax. I label this the registration obsession. It is closely

6
 associated with the idea that the major source of uncollected revenues is the so-called
informal sector – implicitly, small scale businesses and relatively poor people. This
narrative is diversionary. The major sources of uncollected revenues lie elsewhere,
including the incomes and assets of the wealthy and the unjustified tax exemptions granted
to companies. The informal sector narrative serves the purpose of distracting attention
from these real sources of uncollected revenues. African tax administrations have been
extensively modernised and are relatively well resourced and effective. They could raise
more revenue if they were to focus more on these real sources of uncollected revenues.

1 Organisation
Those conclusions emerge from a complex set of inter-related empirical observations. The
material is organised as follows:

Section 2 outlines key aspects of the context of tax administration in contemporary sub-
Saharan Africa, including the high degree of centralisation. In Section 3, I summarise
information suggesting that, in some respects, the quality of tax administration in sub-Saharan
Africa is relatively good when compared to other low income regions of the world. This is the
result of a series of reforms in tax administration and tax policy, most of them originally sparked
by international organisations, that began in the 1990s (Section 4). African tax administrations
are generally being reformed in a positive way. They are adopting structures and practices
characteristic of higher income countries that are conducive to greater efficiency and less
vulnerable to coercion and corruption (Section 5). The most objective and comprehensive
evidence we have on tax administration comes from the IMF-associated Tax Administration
Diagnostic Assessment Tool (TADAT - https://www.tadat.org/home). TADAT data indicate
that African tax administrations are more eager to use digital technology for client-facing
activities like online filing and payment facilities than for internal financial and accounting
controls (Section 6). In Section 7, I assemble of a range of evidence that suggests that tax
administrations do not employ digital technologies very effectively. One aspect of this is the
existence of very large numbers of inactive taxpayers, i.e. people and companies that are
registered for tax, but are not taxpayers in practice (Section 8). The main reason for the large
numbers of inactive taxpayers is that tax administrations engage in recurrent drives to
increase the number of new registered ‘taxpayers’, despite all the evidence that few will in
practice become active taxpayers (Section 9). Why this registration obsession? I argue in
Section 10 that it fits neatly with a powerful narrative, woven around the concept of the informal
sector, that serves (a) to put responsibility for inadequate revenues on the alleged failure of
Africa’s poor to pay taxes and (b) to divert attention from the actual failure of the rich to pay
their share. The policy implications are summarised in Section 11.

2 Tax Administration Challenges in sub-

Saharan Africa
While national tax systems in sub-Saharan Africa have been substantially reformed in recent
decades (Sections 4 and 5), they have rarely been reconstructed from scratch. 2 Colonial
regimes were relatively successful in extracting revenue. Even in countries that have
experienced major internal conflict since decolonisation, like Rwanda and Uganda, current tax

2
Contemporary Somaliland is one of the obvious exceptions. The current revenue system evolved from a wide series of ad hoc
practices developed during the internal conflicts of the 1990s.

7
systems have demonstrably evolved from what was there before. There are, of course,
significant differences between countries in how the tax function is organised. But the
commonalities are more striking. The imprints of colonial structures are still visible. To the
extent that they are being erased, they are being gradually replaced by a loosely defined
model of good practice that is accepted almost globally (Section 5). Provided we remain
sensitive to national and sub-national diversity, it is realistic and practical to talk of patterns
and trends in sub-Saharan Africa generally.

Taking the region as a whole, development aid only briefly – from the mid-1980s to the mid-
1990s (Moore, Prichard and Fjeldstad 2018: 28-30) – surpassed domestic revenue
mobilisation as a source of government income. African governments have been playing the
revenue extraction game for a long time. In some respects, and despite some significant
handicaps, they play it better than governments in other low income regions of the world
(Section 3).

One of those handicaps is the difficulty African governments face in effectively taxing large
transnational corporations in Africa, especially in their large mining and energy sectors
(Moore, Prichard and Fjeldstad 2018: Chapters 3-5). Another is that African tax collectors have
been trying to extract revenue from economies characterised, to a greater extent than most of
the world, by low incomes, small scale enterprise, rurality, subsistence agricultural production,
and the dominance of cash transactions. There is to some extent a ‘natural’ historical evolution
of tax systems toward greater efficiency, as economies become more commercial, more
monetised, more organised into large scale formal economic organisations, more dependent
on banks and other financial intermediaries, better recorded on paper and more digitised
(Mansfield 1987; Moore 2013). Before economies reach that happy state, taxing is difficult;

• It is challenging and costly. Tax collectors need to visit taxpayers personally at their homes
or businesses, or to call taxpayers to their offices. In these circumstances, administration
costs can eat up much of the money collected. 3
• Those unsupervised, unrecorded personal interactions between individual taxpayers and
individual tax collectors who are simultaneously making the assessment and collecting the
cash, constitute the classic locus for corrupt collusion. The government loses twice over.
Some of the revenue to which it is legally entitled goes into the pockets of the tax collector
and taxpayer. And the taxpayers’ experience of corruption undermines their respect for
and trust in the state more generally. Generalised tax resistance is reinforced. 4
• Such records, as are maintained, are expensively entered onto paper and then laboriously
transferred or aggregated onto more paper. Monitoring for efficiency, honesty of fairness
within tax collection organisations is also difficult and expensive. Records are easily
manipulated at any level in the system. 5

It is this historical trajectory that largely explains the fact that the ratio of tax to GDP in sub-
Saharan Africa is low when compared to richer regions of the world (Moore, Prichard and
Fjeldstad 2018: 32). It is hard to raise revenue from economies in which agriculture, small
scale enterprise and personalistic forms of business are prominent. Although African
economies are growing and becoming more commercialised – and tax collection practices
similarly are becoming more ‘modern’ (Section 5) – most of the economic growth in Africa in
this millennium has taken place within small scale enterprises and in the service sector (Jayne,
Chamberlin and Benfica 2018). The fact that the recent overall performance of African tax

3
Beach (2018: Chapters 7-11) has recently provided great insights into the prevalence and costs of this practice on the basis of
ethnographic research with tax collectors in Benin and Togo.
4
Indeed, a rather large proportion of Africans do perceive tax collection as corrupt (Aiko and Logan 2014).
5
The only published analysis we have of this process of manipulating written records within tax administrations relates to Pakistan
(Piracha and Moore 2015).

8
administrations has been modestly satisfactory, if not better (Section 3), is then all the more
notable.

A further handicap faced by African tax administrations results from recent policy choices. The
client profile of the typical African tax administration is strikingly diverse. On the one side,
revenue administrations need to organise themselves, in terms of personnel skills, procedures
and organisational ethos, to tax large companies, many of them very large and transnational.
This requires appreciable accounting, auditing, investigatory and legal skills and knowledge,
and international connections of various kinds. It is the norm in sub-Saharan Africa that the
great bulk of the revenues collected by the national tax administration come from a tiny
proportion of its taxpayers (ATAF 2017: 87). At the same time, most organisational energy
and staff time goes into a very different type of task: trying to tax legions of small enterprises
– auto mechanics, carpenters, caterers, electricians, food preparers, graphic designers,
hairdressers, healers, liquor brewers, motorcycle taxis, photographers, plumbers, porters,
street vendors, watch repairers and welders – who are hard to track down, often move in and
out of different activities, and are rarely high earners. This is a labour intensive set of tasks
requiring a staff cadre who are street smart and mobile and who require close monitoring if
they are not to abuse the power that naturally accrues to them in their face-to-face dealing
with clients. Inevitably, the amount of tax they raise per head is much lower than that
generated by the relatively small number of their colleagues who focus on taxing big
businesses. But differences in revenue productivity are only weakly reflected in salaries and
salaries and other personnel costs account for most collection costs. African tax collectors are
generally well paid, especially those employed in Semi-Autonomous Revenue Authorities
(Section 4).

Some degree of diversity among the clientele of a tax administration is inevitable. It is

particularly high in sub-Saharan Africa because, for two related reasons, national tax
administrations are responsible for managing a large ‘tail’ of these small and often-mobile
taxpayers. The first reason is a high degree of political and fiscal centralisation historically
found in the region, from the colonial period. Revenue is dominantly raised and spent by the
central government (Moore, Prichard and Fjeldstad 2018: 151), to the extent that (reliable)
data on the incomes and expenditures of sub-national governments are often not available. 6
Sub-national governments do not tax – or do not tax effectively – many of the activities and
enterprises that seem naturally to belong to them. They are very reliant for income on fiscal
transfers from central governments.

The second reason for the concentration of taxing capacity in the hands of the central
government is that almost all of the external aid and technical assistance to revenue-raising
in sub-Saharan Africa in recent decades been channelled to the central level. 7 Central revenue
collection agencies have become relatively more effective and have been better placed than
sub-national governments to collect new sources of income. 8 Historical inequalities between
6
Ghana, Kenya and South Africa are among the countries that have well-established systems of sub-national government with
good fiscal data. Nigeria is the only significant exception to the rule that nearly all revenue is collected by central governments.
But this reflects the fact that, until the recent drops in oil and gas prices, the central government was largely dependent on the
energy sector for revenues. In some Francophone countries, even property taxes that are, in most of the world, reserved for sub-
national governments are collected by central government agencies.
7
One reason, no doubt, is that improving national tax systems appeared to be a priority, and perhaps a pre-condition, for
addressing the much deeper problems at sub-national level. Another is that the international organisations involved in designing
and delivering this aid, including the IMF, the World Bank and the OECD, who know a great deal about national level taxes like
VAT, Customs, excises and corporate and personal income tax, have little expertise on the taxes on which sub-national
governments mostly depend, notably property taxes and business licences.
8
For example, as is explained in Section 4, VAT has been introduced to the region in the last two to three decades. It has now
become almost universal and is the biggest single sources of government revenue. It is collected almost entirely by central
governments. The only exception is that there are both central and regional VATs in Ethiopia. By contrast, property taxes –
recurrent taxes on the ownership or occupation of residential, commercial and industrial – that are a classic revenue source for
sub-national governments, have been neglected and provide very little revenue almost throughout the region
(https://www.ictd.ac/network/apti/). The contrasts in capacity between central and sub-national tax administrations have
generated an increasing number of suggestions and initiatives for central tax administrations to collect taxes on behalf of sub-
national governments. This has gone furthest in Rwanda. Since 2016, the Rwanda Revenue Authority has gradually taken over

9
national and sub-national government have been exacerbated. This is especially true where
donors have encouraged the establishment of Semi-Autonomous Revenue Authorities
(Section 4). The implications of the fact that central tax administrations bear responsibility for
taxing so many small enterprises are treated in the later part of the paper. I first explain that,
despite the challenges listed above, the overall performance of African (central) tax
administrations is, in many ways, encouraging.

3 Assessing the Performance of National Tax

Administrations in sub-Saharan Africa
If we are to evaluate the performance of African tax administrations, we should make the
comparisons with those countries that face similar challenges, above all the challenges of
taxing low income and rural populations, and small scale enterprises. To evaluate
performance confidently, we would first need a great deal of reliable basic operational data –
of the kind we have for OECD tax administrations (OECD 2019), but not for Africa or most low
income regions. There are, however, sufficient sets of data to enable us to conclude that tax
administrations in sub-Saharan Africa perform fairly well compared to those in other low
income regions.

If we measure tax administrations by their results – i.e. the amount of taxes raised relative to
GDP, tax effort, and success in levying direct income taxes – then sub-Saharan Africa does
well compared to South Asia and Latin America (Moore, Prichard and Fjeldstad 2018: 31-33).
Those figures might however reflect tax policy choices, as well as the quality of tax
administration. 9 If we focus more precisely on measures of the tax administration process, we
find similar results:

• The World Bank publishes annual estimates by country of two indicators of the efficiency
of national tax administrations. One is a measure of the compliance burden: the number
of staff hours consumed in the typical medium-sized company in dealing with taxes. On
average, in 2018, African tax collectors required 285 hours of company staff time. This is
a little above the world average figure of 234 hours, but much lower than the 519 hours
required in South America. The other statistic is a more direct measure of the efficiency of

collecting all revenues previously collected at the district level. This has been possible, in large part, because the Revenue
Authority is very accomplished in the use of digital technologies and because, since the electricity supply is good throughout the
country, these technologies function reliably in the Authority’s district offices.
9
Within any large scale organisation, the distinction between ‘administration’ and ‘policy’ is to some extent blurred and dependent
on the specific context and on how those terms are defined for practical purposes. Tax is no different. Indeed, specialists have
for some decades been asserting that it is particularly difficult to make the policy v. administration distinction in the tax realm.
They are fond of the phrases ‘tax policy is tax administration’ and ‘tax administration is tax policy’. For present purposes, there is
no need to explore this issue in detail. I use the term ‘tax administration’ to refer first to the execution of the core activities around
what is often popularly termed ‘tax collection’: the identification of taxable subjects (individuals or business enterprises); the
allocation to them of identifiers that will make it possible to recognise them in future (normally today called Tax Identification
Numbers, or TINs); the creation of a system of records on taxable subjects; the establishment of procedures through which
taxable subjects can themselves present to the tax agency (some of) the information needed to assess their tax liabilities (‘filing’);
the regular assessment of tax liabilities; billing taxpayers accordingly; collecting payments; dealing with non-payments, arrears
and refunds; auditing (i.e. examining in more detail) the tax assessments of samples of taxpayers; and dealing with disputes
between taxpayers and tax collectors. The successful execution of those core functions depends, in turn, on the effective
performance by the tax agency of a number of supporting tax administration tasks, including: human resource management
(recruitment, training, posting, promotion etc.); ‘internal vigilance’ (i.e. trying to identify, control and punish staff misbehaviour,
especially corruption); treasury activities (i.e. managing and accounting for the revenues collected); IT support; research and
planning; and, increasingly, taxpayer education and outreach activities. Tax policy, by contrast is the process of making decisions
about what taxes to levy and how. More concretely, tax policymakers deal with such issues as: setting rates, bands and thresholds
for different taxes, deciding whether to use simplified taxation regimes for small businesses, determining how businesses can
allocate the costs of large new investments in their tax returns, revenue forecasting, and assessing the microeconomic and the
macroeconomic impacts of different tax regimes.

10
 tax administration. Labelled the post-filing index, it is a composite measure of efficiency in
(a) dealing with Valued Added Tax (VAT) refunds and (b) correcting errors in Corporate
Income Tax (CIT) returns. For 2018, the Africa region scored better than South America,
the Middle East, and Central America and the Caribbean (World Bank Group and pwc
2020: 9-11).
• The TADAT Secretariat, associated with the IMF, has, since 2012, undertaken reviews
and assigned numerical scores for the quality of the performance of key functions for 28
national tax administrations in sub-Saharan Africa (Introduction and Section 3). Tax
administrations are assigned scores on 28 separate indicators. The average overall score
was 2.4 points (per indicator, per country), out of a possible maximum of 7 points. The
average score for 33 other countries on which we have the data, which are widely
scattered throughout North Africa, Latin America, the Caribbean, Oceania, the Balkans,
Eastern Europe, the Caucasus and Central, West, South and Southeast Asia, was
somewhat higher, at 3.3. Once we take into account the facts that average incomes are
much higher in this latter group of countries – and that higher incomes ease the task of
creating a good tax administration (Section 2) – the sub-Saharan African scores appear
respectable. 10
• Using data from the World Bank’s regular Enterprise Surveys, Awashti and Bayraktar
(2014) produced national level estimates, for the period 2002-12, of the proportion of visits
to firms by tax staff that were reported, by the firms, to be associated with a demand for a
bribe. For 39 countries in sub-Saharan Africa, such a request was reported in 19% of
cases. The incidence of reported demands for bribes was higher, or much higher, in all
other regions covered, except Latin America and the Caribbean.

Not all the statistics show Africa in such a relatively positive light. Although VAT generates
quite a lot of revenue in Africa, it is so poorly designed and implemented that the average
overall yield, relative to potential, is exceptionally low (Keen 2013). There remains a significant
corruption problem. 11 Although average revenue collection levels relative to GDP are high,
before the impact of the Covid-19 pandemic in early 2020, the proportion of GDP collected in
taxes is somewhere between stagnant and very slightly increasing. Economic growth is not
generating an increase in the ratio of taxes to GDP (Gupta and Liu 2020). Overall, the glass
measuring tax administration performance in Africa seems to be half-full – or half-empty. But
that is something of an accomplishment for a continent whose recent history is marked by
widespread problems in establishing stable, legitimate and effective governance institutions.

How have so many African governments established themselves as relatively effective tax
collectors? The short answer is that many have embraced substantial tax administration
reform. This is especially evident in comparison with South Asia. I summarise the origins of
this reform in Section 4, and the content in Section 5 – and simply note here that there has

10
I am extremely grateful for Justin Zake of the TADAT Secretariat for giving me access to the data, which are in most cases not
publicly available, and for confirming the validity of my interpretation of them. Note: I have used only the assessments conducted
according to the TADAT Field Guide 2015 (FG15). There are data for another 5 countries in sub-Saharan Africa for which the
assessments were conducted under FG19. The two sets are not 100% comparable. Nevertheless, the inclusion of the FG19 set
in the analysis reported in the main text generates virtually identical results to the FG15 set alone.
11
Customs administrations have traditionally been more corrupt than internal revenue organisations, both globally and in Africa
(Fjeldstad, Filho and Rabelland 2020). This is essentially because Customs agents enjoy high levels of bargaining power in their
relations to cross-border traders, notably through their power to detain goods for long periods of time. There is evidence that tax
administrations, especially Customs, often act as funnels to collect and channel money to governing elites (Cantens 2012). Public
opinion surveys indicate that most Africans perceive that tax collectors are to some degree corrupt (Aiko and Logan 2014). Those
findings are however hard to interpret. Most surveys, including the most extensive Afrobarometer series, do not distinguish
between payments made to national tax administrations and those made to subnational governments. Local governments often
collect tax from more people than do national tax administrations; and they sometimes use particularly coercive methods (Moore,
Prichard and Fjeldstad 2018: Chapter 7). Surveys by Transparency International, that capture actual experiences of bribe
requests and payments rather than broad perceptions, are more useful. A survey done in 17 countries in 2013 suggested that
interactions with the police were on average twice as likely to involve bribery as interactions with revenue collectors (Moore,
Prichard and Fjeldstad 2018: 140).

11
been less tax administration reform in the Francophone countries of the region and that this
is reflected in comparative performance measures. 12

4 The Drivers of Tax Administration Reform

Tax administration reform was not forced on Africa by aid donors and international
organisations. Mainly from the 1990s onwards, as part of the process of economic recovery,
African governments were willing to make changes in tax administration (and tax policy).
However, the international organisations and aid donors that were most involved, notably the
IMF, the World Bank and the British aid programme, played a major role not only in strongly
encouraging the reforms, but also in shaping them. The story has been told elsewhere
(Fjeldstad and Moore 2009; Fossat and Bua 2013; Kloeden 2011; Moore 2014; Dom and Miller
2018). The major components are as follows:

• The tax reforms have their roots in what are often term ‘structural adjustment’ or the
‘Washington Consensus’ policies, first introduced in Africa in the 1980s. They were more
successful than most components of the ‘Washington Consensus’ programme. Because
the reforms held out the promise of more revenue and did not involve significant
privatisation or marketisation, African governments showed some enthusiasm and
commitment in adopting them.
• Initially, the reforms were very much shaped by a consensus that began to emerge among
international tax specialists, especially around the IMF, in the 1970s. That consensus has
three main components. The first was that tax administration was really important, and
governments should pay far more attention to getting that right than to continually fiddling
with tax rates, tax bands, tax thresholds etc. (i.e. tax policy). The second was that the
international trade taxes – mainly on imports but still to some extent on exports – on which
African governments were quite heavily dependent for revenue should be drastically cut
back, to promote international trade and economic specialisation. The third was that
governments should introduce the relatively new and complex VAT (value-added tax) on
consumption to replace the revenues lost by cutting international trade taxes and reduce
the economic distortions associated with the sales taxes that most governments were
already collecting.
• With more varying degrees of ambiguity, scepticism and resistance than one can do justice
to here, these policies were generally implemented. International trade taxes shrivelled, in
terms of the rates charged and the amount of revenue raised. Most governments in sub-
Saharan Africa have adopted VAT; it is probably now their largest single revenue source.
Considerable attention has been paid to improving tax administration.
• In addition, and largely at the instance of the World Bank and the British aid programme –
but not the IMF – the creation of Semi-Autonomous Revenue Authorities (SARAs), outside
of ministries of finance, became an important component of the overall reform package –
albeit almost entirely in the Anglophone countries. 13 Because this involves a clear
discontinuity in organisational and legal terms and because SARAs were promoted from
overseas on ideological as much as on pragmatic grounds, the experience has generated

12
For example, the data assembled by Awashti and Bayraktar (2014) indicate that, in the average Francophone country in sub-
Saharan Africa, 25% of visits to firms by tax collectors were associated with a request for a bribe, while the equivalent figure for
other countries in the region was 15%. Similarly, Francophone tax administrations receive lower performance evaluations than
other in the region from TADAT (Section 3): the average score for the nine Francophone countries (including Rwanda) was 2.1,
while the average for the other 17 countries was 2.6. Fossat and Bua (2013) suggest that Francophone Africa has been relatively
slow in digitising tax administration functions. The Francophone tradition of retaining dense networks of local tax offices to
maintain close direct and personal contact with taxpayers has not given way to the kinds of organisational reforms, discussed in
the main text, that in Anglophone countries have led to a shift of personnel and functions to head offices. We have figures on the
ratio of taxpayers to tax administration staff in a sample of African countries in 2015. That ratio was generally lower in the
Francophone countries (ATAF 2017: 154).
13
And also, Burundi, Mozambique, Rwanda and Togo.

12
 much debate and a large research literature (Crandall 2010; Dom 2019; Fjeldstad and
Moore 2009; Mann 2004; Prichard and Leonard 2010; Sarr 2016; Taliercio 2004;
Therkildsen 2004; von Soest 2007; Fjeldstad, Kolstad and Lange 2003). While there is no
detectable evidence that the creation of SARAs contributed to higher national revenue
collections in the long term (Dom 2019), they have generally been conducive to tax
administration reform, both directly and indirectly. In particular, SARAs combine all tax
collection functions within the same organisation and thus increase the opportunities and
incentives for Customs and Domestic Tax departments to cooperate rather than compete.
Although their formal remit is limited to tax administration, they can sometimes exercise
significant influence over tax policy, because their organisational capacities generally
greatly exceed those of the small tax policy units in ministries of finance. SARAs also have
played a significant role in the creation of a regional-cum-international professional
community of tax administrations specialists – as manifested most visibly in the creation
in 2009 of the African Tax Administration Forum (ATAF). 14

Tax administration reform is a continuous process. While international organisations and

actors are still significantly involved in the process in contemporary sub-Saharan Africa, the
relationship is no longer as one-sided as it was in the 1990s. African tax administrations now
have a stronger professional voice, and African tax administrators are more likely to occupy
senior positions in the IMF and other international organisations with revenue-related roles.

5 The Nature of Tax Administration Reform

Thirty years ago, tax administration staff in Africa were generally male, with relatively low
educational qualifications and few professional credentials. While most worked in an
organisation within a ministry of finance devoted to collecting just one type of tax – for
example, trade taxes (Customs), direct domestic taxes (income taxes etc.), indirect domestic
taxes (sales taxes etc.), excise taxes (notably on alcohol), or stamp duties (fees payable of
official transactions) – they did much the same kind of work as people with whom they shared
an office. There was little professional specialisation. They were likely based in a relatively
small local office, close to the taxpayers for whom they were responsible. They tried to keep
close tabs on those taxpayers and know them individually. They made written tax
assessments and prepared tax bills, ensured that those bills were paid, and sometimes
themselves collected the payments. They had considerable personal control over the written
records that they maintained.

Tax administration jobs today are more diverse, specialised and professionalised. One can
best illustrate that by looking at three characteristic changes that have been introduced in the
organisational structure of African tax administrations, independently of the question of
whether domestic taxes and Customs have been brought together under a SARA.

First, internal units are today defined mainly by function, rather than the type of tax they are
tasked to collect. With the exception of Customs, which continues to have a distinct character

14
This professional community arose principally from interactions between (a) the heads and senior staff of SARAs, who enjoyed
more continuity in post and many more opportunities to attend professional meetings than did their peers, who still managed tax
collection from within ministries of finance and (b) tax administration specialists working for or otherwise associated with the main
international tax organisations – especially the IMF and the OECD, but also the World Bank and a number of bilateral national
aid agencies. Leading positions in the African segment of this international network are increasingly held by Africans who have
recent experience in tax administration, rather than the expatriates who played a big role in initiating reforms in the 1990s. When
SARAs were established in Africa in the 1990s, a number of governments employed expatriates from outside Africa to head
them. Those expatriates have all gone home. The only contemporary expatriate head of a revenue authority is from another
African country. Unlike twenty years ago, many of the international tax experts employed in Africa are African. So too are an
increasing proportion of the tax specialists recruited by organisations like the IMF.

13
in every African country 15, organisational units identified in terms of ‘Stamp Duty’ or ‘Income
Tax’ have largely disappeared. In their place are units with names like Taxpayer Registration,
Tax Returns, Payments Processing, Debt Collection, Audit and Investigations, Finance,
Information Technology, Human Resources, Legal Affairs, Dispute Resolution, Taxpayer
Services, Research and Planning, and Internal Compliance (i.e. anti-corruption).

Second, because (a) fewer staff need to be in local offices to facilitate face-to-face contact
with taxpayers and (b) specialist support functions like human resource management,
taxpayer services, IT, debt collection and planning have become relatively more important,
there is typically a relative shift in staff numbers from local to headquarters offices.

Third, there is greater use of what is termed ‘segmentation’, i.e. allocating different categories
of taxpayers – in practice, mainly different business sizes – to separate units within the tax
administration. At a minimum, the tax returns, assessments and auditing of large businesses
is undertaken in a special unit, typically labelled the Large Taxpayer Unit in the Anglophone
countries. The ways in which African national tax administrations organise themselves around
the segmentation principle vary widely. Some simply have two separate units: one for large
taxpayers and one for the rest. The South African Revenue Services has six different units,
including ones dealing with, respectively, embassies, tax-exempt organisations and tax
practitioners. 16 The fundamental point behind segmentation is that different types of taxpayer
require different treatment and tax collectors with different skills and abilities. Most important,
the legal and auditing competencies needed to deal effectively with – and if necessary to
challenge – tax returns from large (transnational) companies are very different from those
needed to identify and collect taxes from, for example, small retailers or motorcycle taxis
(Section 2).

In addition to these relatively tangible changes in organisational structure, senior African tax
administrators have increasingly come to define their central goal in much the same terms as
their colleagues in most of the rest of the world: the promotion of ‘cooperative compliance’. 17
This is an encompassing term subject to varying interpretations. It is typically linked to broad
values like trust, transparency and customer orientation, and contrasted with the older notion
that the relationship between tax administrators and taxpayers is inherently adversarial
(Vázquez-Caro and Bird 2011). Some of the more tangible bases of the doctrine are:

• Tax administrations should work hard at: (a) educating taxpayers about the tax system
and (b) making it easy and low-cost for them to comply with their reporting, filing and
payment obligations. 18
• Tax administrations should then assume that most taxpayers will be adequately honest in
their declarations.

15
Even within the framework of SARAs, Customs remains organisationally distinct. This is almost unavoidable, because of the
large – and generally growing – focus of Customs on non-revenue activities, notably trade facilitation and national security.
Common management nevertheless facilitates cooperation between Customs and domestic tax units, the sharing of common
services and, perhaps most important, the interfacing of their software systems such that data on taxpayers can easily be shared.
Even where Customs and other tax collection units have not been placed under the same operational management, there has
been some emphasis on improving coordination between them.
16
For a summary of information on some African tax administrations, see (ATAF 2017: 79).
17
See Crandall, Gavin, and Masters (2019: 77) for evidence on the extent to which tax administrations globally have adopted the
narrative of cooperative compliance.
18
In the case of Customs collection, the equivalent of self-assessment is what are generally known as ‘preferred trader’
arrangements. Importers and exporters who enjoy this status on the basis of a clean record use the electronic transfer of their
documentation to give Customs authorities prior notice of specific shipments, to obtain advanced clearance and thus to obviate
the delays – and threat of delays – embedded in the traditional system of physical verification of every cross-border consignment.
Electronic tagging and sensing of goods will reinforce this trend. Within Africa at present, arrangements of this nature are still
rudimentary and scarce (Geourjon, Laporte, Coundoul and Gadiaga 2013), but very much on the agenda of the East African
Community.

14
• They should focus their auditing and enforcement activities on the taxpayers who are most
likely to be non-compliant, by virtue of the business sectors in which they are involved or
their individual compliance records. 19
• Digital technologies make it easier (a) to undertake statistical risk analysis to identify
categories of taxpayers most likely to be non-compliant (and in need of audit) and (b) to
access ‘third party data’ (see above) to support audit.
• Disputes between taxpayers and tax administrations should be settled as quickly, cheaply
and independently as possible, particularly though using independent tax tribunals, which
are not controlled by the tax administration itself.
• Tax administrations, supported by legislators, should work harder at informing (high
income and corporate) taxpayers in advance about what kinds of complex schemes
intended to reduce tax bills will be considered acceptable and legal (‘tax avoidance’) and
which will be considered illegal (‘tax evasion’).

Finally, as African tax administrations increasingly (a) replace Customs with VAT as a revenue
source (b) assess tax liabilities through analysis of records and accounts rather than physical
inspections (c) collect dues indirectly rather than directly (d) recruit specialist professionals
rather than generalists with low level educational qualifications and (e) re-calibrate their
attitudes from pure enforcement toward cooperative compliance, the historical male monopoly
of jobs tends to diminish. In the national tax administrations of OECD countries, women now
typically account for about 60% of the total workforce (OECD 2017: Table 7.11). 20 Globally,
the proportion of women among the employees of the national tax administration is higher in
countries with per capita income levels (Crandall et al. 2019: 110). We do not have
comprehensive figures for Africa. The average proportion of female employees is probably
around 25-30%, with considerable variation from country to country 21, and lower figures in
countries where governments depend more on Customs revenues. 22 The proportion of female
employees is, however, growing. This is probably, in part, due to broader changes in access
to education, labour markets and gender relations. But it also reflects the changing character
of tax administration jobs discussed above:

• A higher proportion of tax administration jobs are attractive to women because they are
office- and city-based.
• The shift from face-to-face interactions with taxpayers, with the attendant risk of corruption
and occasional threat of violence, increases the incentives for women to consider working
in tax administrations and for tax administrations to hire them.
• The growing need for staff trained or experienced in a variety of specialisms – psychology,
communication, human resources, IT, research, customer relations, as well as accounting
and law – increases the incentives for management to broaden recruitment to include more
women.

19
They should also conduct genuinely random audits of a small proportion of taxpayers, in order to keep the others on their toes.
Currently, audits and audit units are still sometimes used to squeeze taxpayers suspected of having the capacity to pay more or
as a last minute means of helping the tax agency meets its revenue collection targets at the end of the financial year. Risk-based
auditing involves targeting auditing resources on those taxpaying units that are identified, on the basis of statistical risk analysis
that takes into account such factors as business type and individuals’ records, as being especially likely to attempt significant
levels of tax evasion. The immediate objective of risk-based auditing is not revenue collection itself, but preserving the integrity
of the revenue system by deterring the most egregious tax evasion.
20
As in most large organisations globally, women tend to be concentrated in the lower ranks and account for a small proportion
of senior management.
21
Few tax administrations make this information publicly available. The only central source of data is the study of 20 African
national tax administrations reported in the African Tax Outlook 2017 (ATAF 2017Figure 8.1). Those figures suggest that, on
average, women accounted for 36% of employees in the national tax administrations of those 20 countries. That is certainly an
over-estimate for Africa as a whole. The sample over-represents the kinds of countries that have a higher proportion of women
among tax collectors: Anglophones and those located in East and Southern Africa and in the Indian Ocean (Mauritius and
Seychelles). The proportion of women employees is generally lower in West Africa. It is less than 20% in Togo.
22
African Tax Outlook 2017 includes, for 19 African countries in 2015, information on (a) the percentage of total government tax
revenue that comes from import duties and (b) the ratio of males to females in tax administration (ATAF 2017, 41 and 145). The
two sets of figures are significantly correlated in a statistical sense. The greater the proportion of revenue that comes from import
duties, the higher the proportion of males in the tax administration work force. In statistical terms, 38% of the variance in the staff
gender ratio is ‘explained’ by variations in the importance of import duties.

15
It is highly likely that the proportion of women in African tax administrations will continue to
increase, probably with beneficial effects on the quality of the service they provide. 23

The overall trajectory of tax administration in sub-Saharan African is undoubtedly positive. It

is however not quite as positive as is suggested in the many annual reports and conference
presentations. They are rich in statements of commitment to the principles of cooperative
compliance and summaries of organisational reforms underway and new IT systems being
commissioned. It is almost inevitable that these self-reports should be over-optimistic. We now
have data that not only confirm suspicions of over-optimism, but, more important, supports a
more substantive concern about the purposes for which African tax administrations use digital
technologies.

6 The TADAT Performance Numbers

The new TADAT system for scoring the quality of tax administration was introduced in Section
3. The assessment of each tax administration generates numerical scores from 1 to 7 (highest)
for performance in relation to each of the 28 tax administration functions – high level indicators
in TADAT parlance. As of March 2020, assessments had been completed for 28 national tax
administrations in sub-Saharan Africa. As explained in Section 3, the overall average score
for those 28 indicators in 28 African countries was 2.4 points (per indicator, per country), out
of a possible maximum of 7. In this section, I focus on differences in the average scores for
groups of these tax administration functions within these 28 African countries.

I classify the 28 high level indicators into three groups:

• Electronic interface indicators. This group comprises two indicators of the extent to which
taxpayers file tax returns and pay their taxes electronically - use of electronic filing facilities
and use of electronic payment systems. These indicators can be scored quantitatively. 24
• Hard performance indicators. This group comprises five other indicators that (a) are scored
principally or wholly on the basis of quantitative information on a small number of variables
and (b) refer directly to observable tax administration outcomes. They are: accurate and
reliable taxpayer information, on-time filing rate, timeliness of (tax) payments, stock and
flow of tax arrears and time taken to resolve (tax) disputes.
• Soft performance indicators. The remaining 21 high level indicators refer more to the tax
administration processes than to outcomes. They are scored (a) largely or entirely
subjectively and/or (b) with reference to such a long list of more or less measurable
operational indicators that a high degree of subjectivity seems almost unavoidable. 25 In

23
Only one research study has ever been conducted on the relative performance of women and men in tax administrations in
Africa (Mwondha, Kaidu Baraugahar, Nakku Mbiru, Kanaabi and Isingoma Nalukwago 2018). The study was conducted on the
Uganda Revenue Authority, where women have accounted for almost 40% of employees for almost a decade. On the indicators
available, women appeared to perform slightly better than men. Apart from fleet drivers, the only part of the organisation where
women are consistently much under-represented is in Customs posts on remote borders. Women generally choose not to be
posted there. Not coincidentally, male employees face disciplinary actions – mostly for corruption of some kind – at more than
twice the rate of women.
24
The extent to which any tax administration has the opportunity to receive high scores depends in part on factors that are well
beyond its control, notably the reliability of the electricity supply.
25
They include, for example, knowledge of the potential taxpayer base (P1-2), for which the operational indicator is ‘The extent
of initiatives to detect business and individuals who are required to register but fail to do so”(TADAT: 22), and scope of initiatives
to reduce taxpayer compliance costs (P3-8), for which the operational indicator is simply ‘The extent of initiatives to reduce
taxpayer compliance costs’ (TADAT: 53). By contrast, adequacy of the tax administration’s tax revenue accounting system (P8-
27) is assessed according to the following long list of operational indicators: “Does the tax administration have an automated
accounting system that meets government accounting standards? Does the tax administration’s accounting system interface with
the Ministry of Finance revenue accounting system? How long, on average, does it take the tax administration to post a payment
to a taxpayer’s account? Do documented procedures exist to routinely and systematically review the taxpayer ledger (especially
in respect of accounts of taxpayers that contribute the bulk of core tax revenue) to correct accounting errors and omissions?
(Specifically: What account reconciliations are performed? How often is the suspense account reviewed? Is a report of credit
balances produced periodically and reviewed?) For the core taxes, do taxpayers receive or have e-access to a monthly statement

16
 scoring the soft performance indicators, TADAT assessors may be over-influenced by the
claims made by tax administration managers about the efforts they have made and the
initiatives they have taken (TADAT 2019).

For the 28 African countries, the average score for the soft performance indicators was 2.8,
while the average score for the hard performance indicators was 1.6. This difference is
consistent with the suggestion above that tax administration managers have a wider scope to
‘talk up’, without serious challenge, their organisations’ performance in relation to the
intangible soft performance indicators.

Two other comparisons seem more consequential. The average score for the electronic
interface indicators was a relatively high 3.2 – compared to 2.4 for all indicators. This in itself
was not remarkable. These kinds of highly visible customer-facing innovations are
undoubtedly valued by taxpayers. They also provide useful public relations ammunition for
heads of tax administrations and ministers of finance, most concretely because they help
generate high scores for the nation in the World Bank’s annual Doing Business report
(https://www.doingbusiness.org/). Filing and paying taxes online seems very cutting-edge and
modern. But is it any less modern to employ digital technologies internally within tax
administrations to efficiently manage and account for the very large sums of money that flow
through them daily? The evidence from TADAT suggest that less effort is put into improving
performance in this function. For our 28 countries, the average score for P8-23 (adequacy of
the tax revenue accounting system) – a soft indicator that is scored subjectively and thus
vulnerable to ‘talk up’ – was only 1.6, compared to the more objective 3.2 for the electronic
interface indicators.

In the next section I delve a little deeper into the question of how digital technologies are
actually used in African tax administration.

7 The Use of Digital Technologies

Tax administration is a numbers game. For purposes of both internal management control and
external reporting, tax administration, more than many complex public sector activities, can
easily and usefully be condensed into summary statistics. It follows that tax administration is
ripe for digitalisation (Bird and Zolt 2008). Digital technologies can greatly reduce operational
costs, increase collection efficiency by making it possible to cross-check information in tax
returns from a wide variety of sources, further reduce personal interaction between tax
collectors and taxpayers and so further diminish the opportunities and incentives for corrupt
collusion, provide management information much more cheaply and rapidly, and enable the
use of advanced analytics so that the data that accrues in the course of normal operations
can be employed to obtain insights into the effectiveness of the ways in which those operations
are organised, and to test the effects of process reforms (OECD 2017: Chapter 8).

None of those messages are new to African tax administrations. As in most organisations in
the world, discussions and plans for organisational change are increasingly dominated by the
perceived possibilities of digital systems. Whereas the reforms of recent decades were initially
largely driven by (external) ideas about the character of good tax administration and tended
to focus on organisational architecture (Section 4), reforms are now increasingly shaped by

of tax liabilities and credit balances? Is the tax administration’s accounting system audited to ensure that it aligns with the tax
laws (e.g., to ensure that the system correctly calculates tax liabilities, penalties, and interest) and government accounting
standards? If so, how often is the system audited? Who audits the system (e.g., internal audit; government auditor; both)?”
(TADAT: 110-11).

17
more concrete issues around what functions to digitise, what new IT systems to purchase,
how to integrate them with existing systems and how to re-design business processes. 26

We do not yet have deep and comprehensive evidence into how tax administrations in sub-
Saharan Africa are employing digital technologies. However, in addition to the TADAT data
used in the previous section, there are pieces of concrete evidence that collectively suggest
that digital technologies are not being put to best use, particularly from the perspective of
managerial and governance oversight of tax administrations. This section summarises some
of that evidence.

7.1 The cost of tax collection

The cost of tax collection, presented as a percentage of total collections, is a crude but
nevertheless very valuable measure of the performance of a tax administration. 27 It is easily
benchmarked against other countries. It can be deployed as a source of continuous pressure
to reduce costs and improve operational efficiency. It would be especially useful in much of
Africa to highlight the real costs of the use of relatively well paid central government tax staff
to collect revenue from very small taxpayers (Section 2).

In the OECD, the average cost of tax collection is 1% (OECD 2015: 181). We would expect
the figure to be higher in sub-Saharan Africa. 28 One might reasonably expect that
organisations whose principal functions are to collect and transmit money would deploy
digitalisation to determine the total costs of their operations and to allocate them between
capital and recurrent costs. Some African tax administrations do indeed routinely publish some
of this information. 29 But most do not. And attempts to assemble sets of comparable figures
are generally disappointing. 30

7.2 Country case: Malawi

In the course of recent research, Waziona Ligomeka had an unusual degree of access to the
functioning of the Malawi Revenue Authority (2019). He found that five different IT systems
were in use within the organisation. None of them interfaced with any other. One of them had
been officially withdrawn and was being used informally. Two had been first introduced three
decades ago in 1989: one for generating Tax Identification Numbers (TINs) and recording
payments of CIT, Personal Income Tax (PIT), and Withholding Tax; the other for recording
VAT returns. Two different systems were still being used to issue TINs. Different IT systems
were controlled by different units within the Revenue Authority and it was not always possible
for a staff member in one unit to get access to a system controlled by another unit. In addition,
information on the 2% of registered taxpayers managed by the Large Taxpayer Unit (LTU),

26
This parallels a shift in the UK and some other high income countries whose public sector reforms in recent decades have
been heavily shaped by the New Public Management doctrine. Reforms are now shaped less by these abstract ideas and more
by the possibilities offered by information technology (Dunleavy, Margetts, Bastow and Tinkler 2006).
27
Crandall and colleagues (2019: 34-35) provide a useful summary of some of the practical issues around defining and measuring
collection costs.
28
The ratio of the number of ‘active core taxpayers’ to the number of people employed by tax administrations is generally much
lower in low income countries (Crandall et al. 2019: 106).
29
For example, the Uganda Revenue Authority, which is in some respects one of the most transparent tax authorities in sub-
Saharan Africa, gives a figure for the cost of collection in its annual report. It is however a single figure – 2.05% of collections in
2017/18 (Uganda Revenue Authority 2019: 23) – that is not disaggregated in any way. The Rwanda Revenue Authority, which is
exemplary in this as in many other respects, publishes a more detailed breakdown of costs (Rwanda Revenue Authority 2019:
76).
30
The most extensive set of figures available are those reported to the African Tax Outlook by 20 African tax administrations for
the year 2017 (ATAF 2019: 128-132). They do not appear to be very reliable. In several countries, capital investments were
reported as zero or near zero (Ibid: 131). More significantly, in five cases annual operating costs were implausibly low – less than
0.5% of revenue collections (Ibid: 132). Senegal simultaneously reported that its operating costs were only about 0.1% of
collections, and capital investments accounted for three quarters of its total costs (Ibid: 131-2). Part of the problem is that tax
authorities that remain within ministries of finance seem to face particular problems in accessing data on their operational costs
(p130). The average reported cost of collection (operational and capital costs) was about 2.3%. This is likely a considerable
underestimate.

18
which accounted for about 70% of total revenue collections, was stored and managed only on
Excel files controlled by the LTU staff. Among other things, this situation meant that: (a) it was
difficult for staff to do what should be routine cross-checks of, for example, the VAT and the
CIT records for any company; (b) it would be easy for the same taxpayer to be registered
under two or more TINs, to reduce tax liabilities; and (c) it was not easy to check on actual tax
payments or on the flow of funds within the organisation. 31

7.3 Country case: Sierra Leone

The Sierra Leone Revenue Authority has recently been undertaking a thorough review of its
data management processes. The early findings are broadly similar to those reported above
for Malawi. 32 They include:
• The simultaneous use of four different, non-interfacing software systems, including one
donated by the British aid programme for tracking VAT when it was introduced in 2010.
That remains only a trial version, without full functionality.
• The widespread belief, with supporting evidence, that frontline tax collectors frequently
maintain their own records on Excel spreadsheets and upload only some of that data onto
the official IT systems. 33
• Lack of integration of the Revenue Authority software with that of the banks, who actually
collect taxes. Reports from the banks on taxes collected are not always consistent in
structure and sometimes miss data.
• Widespread use in VAT returns of taxpayer identification numbers that were different from
the standard and statutory Taxpayer Identification Number (TIN).

7.4 Country case: Rwanda

The Rwanda Revenue Authority (RRA) is generally believed to be one of the best in Africa. It
is remarkable, in particular, for its enthusiastic embrace of digitalisation and for continually
upgrading its IT systems. Unlike most African tax authorities, it is subject to regular, published
scrutiny from the Auditor General of State Finances. Indeed, this helps to explain its high its
high level of performance. 34 While far from damning, the Auditor General’s reports regularly
comment on a range of basic operational failings of the kind that should be rare in a well-run,
IT rich organisation. They include erroneous or absent data on tax arrears, improperly
maintained cashbooks, poor record keeping, inability to reconcile revenue collection records
with the organisations’ bank accounts and failure to conduct compliance follow-up studies of
cases flagged as risky by its Risk Management and Modernization Department (Chemouni
2020, forthcoming).

7.5 The inaccuracy of taxpayer registers

One of the basic uses of IT in tax administration is to facilitate the maintenance of an accurate
and comprehensive register of actual and potential taxpayers. IT makes it easy for both
taxpayers and tax administration staff to verify and amend registration details. A useful register
should at a minimum contain details of the person or business concerned, a unique TIN and
contact details. It should be regularly updated. The register is the basis on which all other tax
collection functions can be undertaken effectively. Without an accurate register, basic
verification, reconciliation and reporting procedures become difficult or impossible. The formal

31
At the point at which this was published, the Malawi Revenue Authority was planning to replace these different data
management systems with the standard Integrated Tax Administration System (ITAS) (Ligomeka 2019: 17).
32
The information here is from a draft report by Graeme Stewart-Wilson kindly released by Philip Kargbo, Director of Research
at the Sierra Leone Revenue Authority and shared with me by Giovanni Occhiali.
33
This behaviour could be viewed as suspicious. Equally, it could represent sincere efforts by staff to do their jobs effectively and
maintain useable records where the official IT systems are unreliable.
34
For more analysis on the place of the Rwanda Revenue Authority within the Rwandan state, see Chemouni (2020, forthcoming).

19
and legal relationship that the taxpayer should have with the tax administration may then
shrivel to a personal, discretionary relationship to an individual tax collector.

Yet, in contrast to the relative enthusiasm of African tax administrations for establishing online
filing and online payments systems (Section 6), the maintenance of accurate taxpayer
registers does not seem to receive priority. The TADAT assessments suggest this for the
region as a whole. As explained in Section 6, the average TADAT score for 28 key indicators
for 28 tax administrations in sub-Saharan Africa is 2.4 points (out of a maximum of 7).
However, the average score for the key indicator P1-I (accurate and reliable taxpayer
information) is only 1.6. Only four other TADAT key indicators received a lower average score.
We have more detailed information from a study that the Uganda Revenue Authority itself
recently conducted on the integrity of its own taxpayer register (Mayega, Ssuma, Mubajje,
Nalukwago and Muwonge 2019). The researchers reported that inadequate controls on the
online registration process had permitted inaccuracies and allowed duplicate information to
remain undetected. They identified a large number of taxpayers who possessed more than
one TIN and found that tax agents (intermediaries, advisers) sometimes play a major role in
the registration process. The agents often register their own contact details as if they are
themselves the taxpayer, in order to control future communications between the tax
administration and taxpayers. ‘We found that 16,017 individual taxpayers had recorded the
same National Identification Number; 6,173 had the same passport number; 3360 shared a
single email address, and 1,742 had given the same phone number’ (Mayega et al. 2019: 12).

Uganda is not a typical case. The loose controls over registration reflect a major concerted
effort by a range of government agencies in recent years to simply increase in the number of
registered taxpayers. 35 The results were quite spectacular. Over the period 2009-10 and 2017,
the number of registered taxpayers grew from less than 20,000 to 1.3 million, i.e. by a factor
of 70. (Mayega et al. 2019: 9). Of course, the number of people and businesses paying tax
had changed by nothing like this amount. At the time that the research was done, more than
half the registered taxpayers had not communicated or engaged with the Uganda Revenue
Authority for at least 2 years – and far fewer had actually paid any tax (Mayega et al. 2019:
13). In other words, the Authority had on its files a very large number of inactive taxpayers. In
this, Uganda is not unusual. Recent research tells us that the phenomenon of inactive
taxpayers is very common in sub-Saharan Africa. I explore that issue in more detail in Section
8 before coming in Section 9 to the underlying question: Why are tax administrations
apparently obsessed with registering taxpayers when they know that most are likely to be
inactive?

8 Inactive Taxpayers
Conceptually, an inactive taxpayer is taxable entity – an individual or a business – that is
registered with the tax authority for one or more taxes but is not ‘actively engaged’ in the
processes that lead to tax payment. To understand better the various possible operational
definitions of ‘inactive taxpayer’, we need to look more closely at tax administration processes,
and interrogate this rather ambiguous word ‘taxpayer’. Let us examine what it might mean in
relation to the collection of the three main revenue sources of most governments in the world,
including sub-Saharan Africa: VAT, CIT and PIT. In order to collect revenue from any of these
three taxes, a tax administration needs to take potentially taxable entities through the following
basic (simplified) stages:

35
Most of this expansion resulted from the Taxpayer Registration Expansion Program, that was targeted at the informal sector.
It was a joint operation between the Uganda Revenue Authority, the Uganda Registration Services Bureau, the Kampala Capital
City Authority and other sub-national governments, such that registration with any one agency resulted in automatic registration
with the others. Large numbers of government staff were employed to make physical checks on for potential business enterprises
on a locality basis.

20
• First, they need to be registered. If they remain unregistered, they should have no
substantive dealings with the tax man.
• Once registered they are normally required to file, i.e. to submit annual (or quarterly etc.)
tax returns with information on their income, turnover, costs and profits. Alternatively, and
especially in cases where PIT is deducted from salary by the employer and paid directly
to the tax administration, the filing of the relevant information is effectively done by a third
party.
• If they fail to submit tax returns they are labelled non-filers.
• Alternatively, although they file, their returns may indicate either no economic activity (no
income, no profit) or such a small amount of activity that they fall below the threshold of
tax liability. They are then labelled nil-filers. 36
• They may file and receive an assessment, but fail to pay – non-payers.
• Only if they file and pay what is due do they become taxpayers in the strictest sense of the
term.

There is then no unique operational definition of the word taxpayer. The same is true of
inactive taxpayer. The term is normally applied to taxable entities who are registered for tax,
but either non-filers, nil-filers or non-payers – or sometimes just non-filers and nil-filers. But
for how many consecutive years should a registered taxpayer ‘fail’ in one or more of these
ways before they are labelled as inactive? There is no obvious answer to that question. The
definitions of inactive taxpayers that are in use are diverse and not always explicit.

Our ultimate concern here is not with definitions, but with the evidence that, using any
reasonable definition of inactive taxpayers, there seem to be a very large number of them in
sub-Saharan Africa.

• More than half of Uganda’s registered taxpayers were recently classified as inactive (see
Section 7, and Table 8.1).
• The Malawi Revenue Authority defines as inactive those taxpayers who are registered but
have filed no tax return and/or made no tax payment over a three year period. In the 2015-
6 fiscal year, almost 50% of taxpayers were inactive (Ligomeka 2019: 14).
• In their submission to the International Survey on Revenue Administration (ISORA) for
2016, the Nigerian federal revenue authorities declared the following proportions of
inactive taxpayers: 98% for PIT, 94% for CIT and 95% for VAT. Note that these figures
were produced after ‘successful initiatives’ to register new taxpayers, which led to 530,000
new corporate registrations in the first quarter of 2016 – a 67% increase. The source
correctly notes that one would not expect these newly registered taxpayers yet to be
paying much revenue. If we ignore all these newly registered corporates, we would then
find, for CIT, that the proportion of inactive taxpayers was 88%, rather than the figure of
94% quoted above. In other words, the big push to register more CIT taxpayers took place
when the CIT register was already full of inactives (IMF 2018)
• Mascagni and Mengistu (2016) examined all annual CIT returns filed with Ethiopian
Revenue Collection Authority over a seven year period (2006/7-2013/4). For about a third
of observations, firms reported some economic activity, but costs that exceeded revenues,
and therefore losses that exempted them from CIT liabilities. A further 23% of returns
were from what I term pure nil-filers: firms that reported zero economic activity for every
year in which they filed. 37
• The only known attempts to carefully measure and explain the incidence of inactive
taxpayers in sub-Saharan Africa have been made recently in eSwatini and Rwanda.

36
In principle, we might distinguish between two categories: pure nil-filers, who simply report no economic activity, and other nil-
filers, who do report some economic activity, but either losses or insufficient profits to have any tax liabilities. Separating the two
categories on the basis of company filings with the tax administration can be challenging.
37
The researchers had no information on the proportion of registered firms that did not file returns (non-filers.)

21
 Depending on the specific tax, the year, and whether or not the taxpayers are newly
registered, the research generates estimates of inactives ranging from 60-80% of
registered taxpayers (last two columns of Table 8.1). 38 In the Rwanda case, as with the
Uganda and Nigeria cases cited above, there had been a recent ‘successful’ drive to
register new taxpayers.

Table 8.1 Non-filers and nil-filers, eSwatini, Rwanda and Uganda

Non-filers as a % of Nil-filers as a % of filing Non-filers + nil-filers as a %

registered taxpayers taxpayers of registered taxpayers
CIT PIT CIT PIT CIT PIT
Rwanda (all registered
- - 53 19
taxpayers) FY 2013-8 - -
Rwanda (all registered
48 75 - -
taxpayers) FY 2018 - -
Rwanda (newly registered
taxpayers) FY 2015 43 64 60 16 77 70

eSwatini (all registered 60 68

43 57 30 26
taxpayers) FY 2013-8
eSwatini (newly registered
44 46 46 29
taxpayers) FY 2013-8 70 62
Uganda (all registered 74 90
44 86 53 27
taxpayers) FY 2014-8
Note
1. Two-thirds of CIT payers in eSwatini and Rwanda who filed ‘nil’ at least once over the period 2013-8 actually filed ‘nil’ over
the whole period. In eSwatini only, about half of combined CIT and PIT non-filers are actually non-filing over the whole period.
2. In Rwanda, just 5% of combined CIT and PIT taxpayers who failed to file in 2015 filed a return in 2016. And 2.5% of those who
failed to file in 2016 filed in 2017.
Source: These figures were kindly provided by Fabrizio Santoro. The results for eSwatini and Rwanda come from research that
he and ICTD colleagues undertook jointly with staff from the Rwanda and eSwatini Revenue Authorities. Ronald Waiswa kindly
provided the data for Uganda. I am grateful for permission to use these data. See (Mascagni, Santoro, Mukama, Karangwa and
Hazimana 2020; Santoro and Mdluli 2019).

Inactive taxpayers are not just making occasional appearances on taxpayer registers in sub-
Saharan Africa. The phenomenon is clearly widespread, and perhaps even the rule. It seems
quite possible that, within the region, most ‘taxpayers’ registered at national level are not
paying taxes at all. 39 The extent to which this undermines the efficiency of tax administration
is unclear. The cramming of digital information systems with redundant and inaccurate data
surely makes them less effective in terms of day to day operations. Perhaps more importantly,
the potential to use them as management information tools is severely diminished.

The case for not having so many inactive taxpayers on registers seems clear. Why are they
there?

9 Why So Many Inactive Taxpayers?40

38
Note those figures do not include non-payers, who are typically very few in number.
39
The main potential sources of information on the incidence of inactive taxpayers in Africa do not help. The International Survey
on Revenue Administration has not been very successful in attempts to collect accurate data on the ratio of active taxpayers to
registered taxpayers (Crandall et al. 2019: 63-4). The statistics on active taxpayers (as a % of registered taxpayers) for 22 African
countries in Table 5.3 of the African Tax Outlook 2019 are seriously misleading (ATAF 2019). Overall, the table indicates that,
for VAT, CIT and PIT, active taxpayers represented 76%, 62% and 69% of registered taxpayers respectively. But several
countries, including Rwanda (see Table 8.1 in main text) reported figures of 100% for each of the three taxes. The eSwatini
figures were close to 100%. In total, 53% of entries to the table were for 90% or above. The experience of the researchers who
did the work reported in Table 8.1 suggests that a major reason is probably that many tax administrations do not know the true
figures and cannot easily determine them because of the poor state of their tax registers and other records.
40
The prevalence of inactive taxpayers is not just an African phenomenon. In the financial year 2017/18, only 32% of registered
Pakistani income taxpayers filed a tax return and only 23% both filed and actually paid income tax. The equivalent figures for
VAT registrants were 64% and 20% (World Bank 2019: 8). On the basis of her research in India, Dr Tejaswi Velayudhan reports
that about 45% of registered VAT taxpayers file returns that imply zero tax liabilities (private communication, 21 July 2020).

22
To answer this question adequately, we need more research. We also need to bear in mind that non-
filers and nil-filers may be inactive for different reasons. On the basis of available information, I suggest
that there are three broad categories of explanation. I label them technical, organisational sociology,
and political.

9.1 Technical explanations

There will always be a few legitimate nil-filing inactive taxpayers, i.e. business owners who
happen to be making losses or tiny profits in any tax period, especially at start-up, but intend
to continue in business and become profitable. It is likely, in the cases discussed above, that
these legitimate nil-filers account for only a small fraction of all nil-filers – and an even smaller
proportion of all inactive taxpayers. Few enterprises will continue to operate if making
continuous losses. These legitimate nil-filers are likely greatly outnumbered by people and
businesses who are on the taxpayer register for bureaucratic or procedural reasons
unconnected with revenue raising. Tax administrations habitually seek to persuade other
government agencies not to grant access to valued services – like passports, government
contracts, business licences, vehicle or real estate registrations, access to foreign exchange
and driving licences – to citizens or businesses who cannot produce a TIN or a tax clearance
certificate from the tax administration. 41 People and businesses register as taxpayers because
that helps them achieve some other goal. In addition, companies that are formally bankrupt
may be remain on registers and in some countries a few businesses are registered purely for
the purpose of selling fake VAT documentation to other businesses. 42

9.2 Organisational sociology explanations

The most thorough investigation to date of the reasons for the prevalence of nil-filing was
undertaken recently at the Rwanda Revenue Authority (Mascagni et al. 2020). Using the
Rwanda tax administration data and experimental nudges, the researchers attempted to
understand the reasons for high levels of nil-filing in respect of corporate and personal income
tax revealed in Table 8.1. One of the more specific findings was that the process of de-
registering a business was so cumbersome that it was often easier for taxpayers simply to
continue to file nil returns year after year. 43 More generally, while they partially succeeded in
identifying statistically-valid explanations for nil-filing, the researchers also discovered high
levels of ‘taxpayer confusion, due to unclear administrative practices, which are sometimes
inconsistent with the law, complex procedures, and generally low taxpayer knowledge of how
the system works. As a result, taxpayers adopt pragmatic strategies to cope with the tax
system that allow them to reduce compliance costs, while reducing the probability of being
caught evading – or, in the case or taxpayers below the exempt threshold, without evading at
all’ (Mascagni et al. 2020: 26). The overall conclusion is that nil-filing is not principally a tax
evasion device, but instead ‘lies at the interaction between aggressive recruitment campaigns
by the RRA (Rwanda Revenue Authority) and taxpayer’s response to a complex and often
confusing tax system’ (Mascagni et al. 2020: 1). In some cases, at least, there seems to be
an understanding that, if taxpayers nil-file, tax collection staff will not pursue them in the way
they would for non-filing. Indeed, in eSwatini, the tax regulations encourage nil-filing; it is a
way of avoiding scrutiny and escaping penalties for late filing (Santoro and Mdluli 2019: 20). 44

In sum, the nil-filing dimension of inactive taxpaying is to some extent a by-product of tactics
used, individually and interactively, by both tax collectors and taxpayers to navigate around

41
Beach (2018: 287-91) provides useful insights into these issues. In a private communication (27 June 2019), Fabrizio Santoro
explained that, in eSwatini, taxpayers that ask for a tax clearance certificate are then required to clear all their past filing
requirements. Tax officials encourage them to file nil so that the procedural requirements for issuing the certificate are met.
42
I am grateful to Roel Dom for these points.
43
In many countries, business de-registration requires the approval of both the business registration agency and the tax
administration.
44
The reasons for these arrangements are unclear. We cannot dismiss the possibility that field level tax collection staff are
complicit: they encourage nil-filing, ensure that the returns will not be scrutinised or audited and gather some small reward.

23
the legal and formal procedural complexities surrounding revenue collection – sometimes to
cheat, but sometimes just to make the system manageable.

9.3 Political explanations

Collectively, these technical and organisational sociology explanations can only begin to
account for the very large numbers of inactive taxpayers on the books of some contemporary
African tax administrations. There is an obvious more important factor, mentioned several
times above, and taken to absurd lengths in Uganda: deliberate drives to register more
taxpayers, with little apparent concern about the effectiveness in terms of revenue collection.
But what lies behind this registration obsession?

10 The Registration Obsession and the

Ambiguous ‘Informal Sector’
Here are three possible explanations for the registration obsession: 45

• First, government and tax administration leaders might genuinely believe that registering
more taxpayers will reduce tax evasion and help raise more revenue. However, senior tax
administrators in particular know that this is very unlikely to be true. Aggressive expansion
of tax registration numbers is highly likely to result in the registration mainly of small scale
enterprises that will in practice pay little or no tax. To the extent that it results in additional
new actual taxpayers, the costs of collection are likely be high relative to the additional
revenue collected (Section 2). Mass registration is not an efficient way of detecting tax
evasion or avoidance on a significant scale. That would require more targeting and greater
use of intelligence, in the broad sense of the term, including assessment of where the
uncollected potential revenues are actually located (see below). And the experienced staff
of tax administrations have a lot of relevant information, both formal and informal, about
those uncollected potential revenues. They know that rich Africans generally are grossly
under-taxed (Kangave, Nakoto, Waiswa and Zzimbe 2016; Kangave, Nakoto, Waiswa,
Nalukwago and Zzimbe 2018; Kangave, Byrne and Karangwa 2020), that digital
technologies are rarely devoted to collating the wide range of data, including ‘third party’
data, that would allow their incomes and wealth to be taxed more effectively (Section 7),
that African governments typically forego revenue on a large scale by giving many more
tax breaks to investors than could be justified by the amount of investment they actually
attract ( Akitoby, Hondo, Miyamoto, Primus and Sy 2019; Geourjon and Rota-Graziosi
2014; James 2010; Kinda 2014; Madies and Dethier 2010; Therkildsen and Bak 2018).
Further, the routine functioning and management of most tax administrations in sub-
Saharan Africa is strongly focused around achieving revenue collection targets. Their
managers will tend to lack enthusiasm for an activity like registering unproductive
taxpayers that seems diversionary.
• Second, heads of governments and tax administrations, like leaders of almost all public
organisations in contemporary states, are under constant pressure to be seen to be solving
45
I acknowledge a further possible explanation, embodied in the following comment by Vanessa van den Boogaard on an earlier
version of this paper: ‘I believe this is related […] to donors’ distaste for/ discomfort with informality, i.e. the longstanding
association of informality with chaos/disorder, contrasting with Weberian ideal type institutional images. Within donor policy
documents, the common narrative often centres on the need to rationalize that which is viewed as irrational — whether or not it
is, in fact, rational to do so from a revenue perspective/ cost benefit analysis. It should be noted that the epistemic community of
tax experts, including African policymakers, largely embraces such a perspective, even if individual policymakers may have better
understandings of the realities on the ground. While the pressure may in part be coming from international actors, it may also be
seen as a pressure to conform with institutional ideals and norms that are widely accepted/ embedded within globalized networks’.

24
 problems, or at least making a convincing effort to do so (Brunsson 1989). Since
registering additional taxpayers is relatively cheap, this could be understood as an easy
way to appear to be doing something constructive. Field level tax collectors can report
success in increasing registrations to their superiors. Tax administration leaders can report
to their ministers. Ministers can report to international organisations and aid donors. This
may constitute a small part of the overall explanation. It more plausibly explains the
attitudes and behaviour of politicians and government leaders than of senior tax
administrators.
• Third, external agencies play some part. The IMF, the World Bank and other international
organisations continually advise African governments to ‘broaden the tax base’. This is
intended in part to be a diplomatic way of saying ‘stop giving unjustified tax exemptions
and ensure that those who can make a substantial contribution actually do so.’ But the
messaging is oblique. The recipients are likely to take the words at face value: ‘get lots
more people to pay tax, and start by getting them onto the tax register’. This is all the more
likely because some external agencies use increases in the number of registered
taxpayers as performance indicators for the revenue development projects that they fund,
in sub-Saharan Africa and elsewhere. A tax administrator with decades of experience in
Africa recently told me, in a private communication (21 August 2020): ‘Donors are forever
looking to make increases in the numbers of registered taxpayers into performance
indicators and we always have to keep telling them that it is a meaningless statistic as
there is no point in foisting on the tax administration thousands of small taxpayers who
cost more to administer than the revenue they bring in’. 46

But we have no reason to believe that aid donors are more enthusiastic than recipient
governments and tax administrations in setting these registration targets. Some tax
administrations anyway have their own ambitious targets for new taxpayer registrations. More
generally, these three explanations listed above do not seem sufficiently powerful to generate
the registration obsession. I believe that much of the underlying drive derives from a strong
synergy between the registration obsession and a narrative about taxation in sub-Saharan
Africa that is widely believed and reproduced by African elites because it provides them (a) an
alibi for not raising more tax revenue and (b) an interpretation of the revenue problem that
diverts attention from their own failures to pay reasonable amounts of tax. The linchpin of that
narrative is the phrase informal sector.

Like most or all of the taxpayer registration crusades mentioned above, the Uganda campaign
was explicitly justified as a means of taxing the allegedly-untaxed informal sector. What is the
informal sector? There are dozens of definitions. 47 Long papers discussing the issue are still
being written. Seeking the ‘real’ meaning of the term would be a wild goose chase. It is more
useful to focus on the purposes it is made to serve it. In this context, the power of the phrase
lies in part in its ambiguity: it can be used to signal that the revenue problem lies in the failure
to collect tax from poorer people, without incurring the political risk that would arise from saying

46
Thanks principally to the help provided by Farooq Chata, Roel Dom, Odd-Helge Fjeldstad and Eileen Rafferty, I have
documentary evidence of the use of increases in the number of registered taxpayers as performance indicators for revenue
development projects, both completed and current, funded in sub-Saharan Africa and Pakistan by Norway, Sweden, the UK and
the World Bank. Without more detailed contextual knowledge of each project, it is impossible to determine the motivation for the
use of these indicators or how seriously they have been taken in practice. There is however evidence of the over-enthusiastic
use of figures on registrations as indicators of project success. For example, in the Department for International Development
(DFID) Tax Modernisation Programme in Tanzania (2008-13), the target for increasing the number of registered taxpayers was
100% over the 2008 level. The increase achieved was 400%. The Project Completion Report gives no figures on changes in the
number of active taxpayers – https://devtracker.dfid.gov.uk/projects/GB-1-105369/documents. Conversely, donors are not
consistently naïve on this issue. Some focus on more sensible targets, such as the proportion of registered taxpayers who actually
file returns and/or pay.
47
The Wikipedia entry on the term informal sector illustrates the contortions and contradictions rather well. It attributes the origin
of the term to the economist Arthur Lewis, who used it to refer to any employment or livelihood generation ‘outside of the modern
industrial sector’. It identifies it as a development from the notion of ‘traditional economy’, refers to a range of other definitions,
notes the suggestion that ‘informal sector’ and ‘informal economy’ should be distinguished from one another, and lists ‘small
scale’ among a number of defining characteristics (https://en.wikipedia.org/wiki/Informal_economy). The publications that show
up in a Google Scholar search for the term informal sector dominantly focus on small-scale economic activities.

25
that explicitly. Further, the adoption of a term that is rarely applied to rich countries can signal
that there is something about the history of countries that are afflicted with an informal sector
that makes it particularly difficult for their governments to raise revenue. 48

How would a tax authority normally be expected to approach the problem that underlies this
discussion: the difference between estimated collectable revenues and those actually
collected (the tax gap)? There are three main steps:

• Produce a broad estimate of the size and characteristics of the shadow economy, i.e.
those parts of the economy that are not officially recorded and therefore the main sources
of the tax gap.
• Decide what organisational resources are worth devoting to attempts to reduce the tax
gap and broadly where and how they should be deployed.
• Within any economic sector or domain of economic activity where a significant tax gap
seems likely, focus on finding the larger economic operators. These are the people and
businesses who are potentially significant taxpayers themselves and whose conversion to
tax compliance can increase the tax compliance of smaller operators. Information on non-
compliant small operators is useful mainly to the extent that it can help identify the big
operators. It is, for example, the financiers and masterminds behind unrecorded large
scale gambling that need to be identified and subjected to a compliance process, not the
people who collect and carry cash accumulated from large numbers of small bets. Simply
registering large numbers of small scale operators may do nothing for compliance or
revenue collection unless the information is used to track down large scale operators and
sizeable economic transaction.

These procedures are standard regardless of whether a country is rich or poor. The term
shadow economy is conceptually unambiguous. It refers simply to economic activity that is
officially unrecorded. That could be the smuggling activities of large cigarette manufacturing
companies or large volume lending by unregistered bankers, as well as to the humble earnings
of house painters who work purely for cash. It does not have the implications of small scale
enterprise that are indelibly associated with the informal sector.

By their very nature, these claims that the informal sector narrative serves diversionary
purposes and actually influences tax policy are very hard to prove. My understanding has
been shaped by listening to conversations about taxation within government, elite and middle
class circles. 49 An additional piece of evidence is that African tax administrations are much
more likely to operate special programmes to deal with the perceived problem of the under-
taxation of the ‘informal sector’ than to tackle the problem of the under-taxed rich. Of the 26
tax administrations surveyed for the 2108 African Tax Outlook, 15 had one or more ‘special
programs or initiatives to deal with the informal sector’, while only 4 had ‘special sections for
High Net Worth Individuals (HNWIs)’ (ATAF 2018, 107).

Finally, if my interpretation here is wrong, how do we then explain the registration obsession?
It appears very much like the proverbial smoking gun.

11 Policy Implications

48
The statistics tell us that the opposite is true: governments of low income countries today raise a higher proportion of GDP in
public revenue than did now-rich countries when their incomes were at similar levels (Long and Miller 2017).
49
The people concerned do seem, genuinely if often mistakenly, to believe that poorer people pay little or no tax. Poor Africans
bear much of the burden of taxes like VAT and import duties, as well as large informal levies of many kinds (Moore, Prichard,
and Fjeldstad 2018: Chapter 7).

26
This paper has covered a range of inter-connected issues relating to tax administration in sub-
Saharan Africa, with a focus on two topics where there is need and scope for considerable
improvement.

The first area is the use of information technology. The central problem seems clear: the IT
that is installed is under-used or poorly used in various ways, in a context in which the potential
advantages of using IT are very high, especially now that Covid-19 has rendered problematic
face-to-face interactions over tax collection. The causes of the problem are less clear. There
are at least five benign explanations: (a) all public sector IT projects tend to disappoint; (b) the
people who run tax administrations tend to be lawyers, accountants or managers who don’t
understand IT; (c) it is hard for tax administrations to pay the salaries needed to recruit and
retain skilled IT professionals; (d) there is a ‘normal’ level of staff resistance to being asked to
work very differently; and (e) too many IT decisions are made under the influence of offers by
aid donors to pay some or all of the costs –often at the cost of using their preferred suppliers,
or accepting their definitions of what is needed. Two other explanations are less benign. One
is that IT procurement decisions are made corruptly. The other is that tax administration staff
at different levels actively oppose the transparency and accountability that generally result
from the existence of integrated, well-functioning IT systems. They prefer to manage ‘their’
taxpayers on a discretionary, individual basis. It is likely that most or all of these explanations
are valid to some extent. Only people closely involved can produce more accurate and case-
specific diagnoses and determine how best to solve the problem. Insofar as there is a general
policy lesson, it applies particularly to aid donors: do not assume that financing additional IT
capacity in tax administrations in itself will be productive and worthwhile.

The second topic – the taxation of small business – covers more territory. There are three
main policy dimensions. The first and most important is the need for more specialisation of
organisational structures and processes around relating to different categories of taxpayers –
in effect, an extension of the principle of segmentation (Section 5). On the one side, this
implies using more intellectually skilled, more qualified and higher paid staff to close the major
revenue gaps arising from the inadequate taxation of high incomes, wealth, and many
transnational economic transactions. On the other side, there is a case for radical
reconsideration of how small businesses are taxed and by whom. To what extent does it make
economic sense for relatively high cost central tax administrations to be responsible for taxing
small business? To the extent that central tax administrations continue to be responsible,
should they create distinct cadres of staff, with ‘street-smart’ rather than intellectual skills, and
salaries to match? Should income taxes on small business not be integrated with the annual
business licences that businesses are often obliged to purchase separately from another
government agency? Is it desirable in the long term that so much government revenue should
be collected by central government agencies, leaving sub-national governments weak and
ineffective from a fiscal perspective? Would it not be a good first step to devolve more
responsibility for taxing small business to metropolitan authorities in the fast-growing big
cities? Again, the answers to these questions will vary very much from place to place, and
cannot be determined externally. 50

The second policy dimension is in principle much more straightforward: African tax
administrations should renounce the registration obsession, i.e. stop trying to register large
numbers of businesses that they cannot in practice manage and turn into actual taxpayers.
The existence of large numbers of inactive taxpayers wastes resources on both sides and
contributes to undermining tax morale.

50
It is worth re-emphasising that most countries in sub-Saharan Africa are relatively highly centralised when it comes to revenue
raising. The solution is unlikely to be to suddenly give a great deal of taxing authority to sub-national governments, that currently
often tax rather badly (Moore et al. 2018: Chapter 7). There is a very wide range of possible arrangements for cooperation
between central and sub-national governments in revenue collection (Bird 2019).

27
However, if my analysis is correct, the registration obsession is, in practice, entangled with the
third main dimension of the issue of small business taxation: the popularity of the term informal
sector in the context of a broader narrative that locates the cause of revenue deficiencies in
the failure of ‘smaller’ and poorer people to pay tax – while the most significant tax delinquents
populate the other end of the income scale. This is a very political issue on which outsiders
have little to contribute. The IMF, the World Bank and other external agencies could help a
little by ceasing to encourage taxpayer registration for its own sake, desisting from using the
term ‘broadening the tax net’, and being clear what they really mean: stop giving large scale,
unjustified tax exemptions to investors. The bigger battles about how we should understand
taxation will have to be fought within Africa.

28
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