Jean-Paul Bodin is a division chief in the Revenue Administration Division 1 of the IMF’s Fiscal Affairs Department (FAD). William Crandall is a senior panel expert (FAD). The authors are grateful to Mr. Abdel Rahman for his support and advice. They are also thankful to Michael Keen and Mario Mansur (from FAD Tax Policy Division), Olivier Benon (from the Middle East Technical Assistance Center—METAC), Gene Leon (from the Middle East and Central Asia Department), and David Kloeden, Maureen Kidd, and Egil Martinsen (from FADR1) for their comments. The authors alone are responsible for any errors.
These will be identified as “Middle Eastern” countries in the remainder of this paper.
The authors are grateful to Abdel Rahman for his support and advice. They are also thankful to Mario Mansur (from FAD TP), Olivier Benon (from the Middle East Technical Assistance Center—METAC), and David Kloeden, Maureen Kidd, and Egil Martinsen (from FAD R1) for their comments.
A presentation of the preliminary conclusions of this paper was made during the Conference on Fiscal Reforms in Middle Eastern Countries that was organized in Beirut on May 18–19, 2004.
These would include timing, the noncomparability of data, differences in classification of taxes, and the like.
Unweighted. For each revenue classification, only countries for which data are available are included.
1990 is actually 1989–90 for most countries, and 2000 is 1999–2000. For Saudi Arabia, it is 1992 and 2002. Lebanon is a special case: tax files were lost during the war, and efforts in the 1990s focused on customs reforms.
And more so than any sales tax that may have been in place prior to the introduction of a VAT.
Liam Ebrill, Michael Keen, Jean-Paul Bodin, and Victoria Summers, eds., The Modern VAT (Washington: IMF, 2001).
A higher threshold (EUR 200,000) is applied to retailers.
In addition, customs has a major role to play in the protection of society. In recent years, the security role of customs administrations at the border has been increasingly emphasized. Furthermore, tax laws are sometimes used to deliver subsidies through refundable tax credits, although this is more common in OECD countries.
Michael Keen, ed., Changing Customs: Challenges and Strategies for the Reform of Customs Administration, (Washington: IMF, 2003).
As Bird and Casanegra de Jantscher put it in the early 1990s, “Policy change without administrative change is nothing…” (Richard M. Bird and Milka Casanegra de Jantscher, Improving Tax Administration in Developing Countries; Washington: IMF, 1993).
“Upstream” refers to the notion of providing TA at the strategic or direction-providing stages.
Self-assessment for income tax in Egypt is also currently developed.
Resistance to self-assessment on the part of tax officials and policymakers is often a result of perceptions about the illiteracy of small traders in low-income countries, inadequate education of businesses in tax matters, and lack of confidence that taxpayers would be willing to pay voluntarily. Nevertheless, experience has shown that self-assessment systems, administered properly, are actually much more effective in addressing these issues than other systems, and do so in a way that minimizes opportunities for collusion, so rampant in other systems.
This is a legacy of the British approach to domestic tax administration where separate organizations were established for income taxes (Inland Revenue) and for customs operations and excises (Customs and Excise). Subsequently, when the VAT was introduced, responsibility for its administration was added to Customs and Excise. However, the United Kingdom has recently decided to merge VAT and income tax administration.
Typically, large taxpayers account for 60–70 percent of total tax collections, medium-size taxpayers for 25– 30 percent; and small taxpayers for less than 5 percent.
As indicated in Appendix II, modernization of the customs administration in Morocco is considered as a very successful reform, which included an improved customs code, streamlined and simplified procedures, implementation of control based on risk assessment, performance standards, and effective internal audit, effective use of information technology, and a consultation process with the private sector.
The assignment of a regional revenue administration advisor in the IMF’s Middle East Technical Assistance Center (METAC) that was created in October 2004 has enhanced this approach in several countries covered by the center (e.g., Egypt, Jordan, Lebanon, Libya, Sudan, Syria, West Bank and Gaza, and Yemen). Through frequent contacts with tax authorities and TA providers in the region, the advisor has been particularly instrumental in (1) identifying reform needs; (2) coordinating the revenue administration assistance provided by the IMF (FAD and the METAC) with others donors; and (3) providing follow-up assistance to implement major reforms.
Continuation of the IMF upstream assistance to support implementation of revenue administration reforms is normally subject to regular evaluation of progress achieved and assessment of authorities’ commitment.
This includes merging direct and indirect tax administration, and transferring all tax collection responsibilities from the treasury to the tax administration.