Akitoby, Bernardin, Anja Baum, Clay Hackney, Olamide Harrison, Keyra Primus, and Veronique Salins, 2018, “Large Tax Revenue Mobilization Episodes in Emerging Markets Low-Income Countries: Lessons from a New Dataset”, IMF Working Paper 18/234, Washington, D.C.: International Monetary Fund.
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)| false , Akitoby, Bernardin, Anja Baum, Clay Hackney, Olamide Harrison, Keyra Primus, and Veronique Salins 2018, “ Large Tax Revenue Mobilization Episodes in Emerging Markets Low-Income Countries: Lessons from a New Dataset”, IMF Working Paper 18/234, Washington, D.C.: International Monetary Fund.
Crivelli, Ernesto, and Sanjeev Gupta, 2014, “Does Conditionality in IMF-Supported Programs Promote Revenue Reform?”, IMF Working Paper, WP/14/206, Washington, D.C.: International Monetary Fund.
Dell’Erba S. and Gregoire Rota-Graziosi R., 2014, “Tax Revenue Performance in Mauritania”, IMF Fiscal Affairs Department, unpublished manuscript.
Ebrill, Liam, Michael Keen, Jean-Paul Bodin, and Victoria Summers, 2001, The Modern VAT, Washington, D.C.: International Monetary Fund
International Monetary Fund, 2019, “Fiscal Policy and Development: Human, Social, and Physical Investment for the SDGs”, IMF Staff Discussion Note 19/03, Washington, D.C.: International Monetary Fund.
International Monetary Fund, 2018a, Regional Economic Outlook: Sub-Saharan Africa. Washington, D.C.: International Monetary Fund.
International Monetary Fund, 2018b, “The IMF and Fragile States: Eight African Country Cases: Background Paper,” Washington, D.C.: International Monetary Fund.
International Monetary Fund, 2015b, “Current Challenges in Revenue Mobilization: Improving Tax Compliance,” Washington, D.C.: International Monetary Fund.
International Monetary Fund, 2015c, “From Ambition to Execution: Policies in Support of Sustainable Development Goals,” IMF Staff Discussion Note 15/18, Washington, D.C.: International Monetary Fund.
International Monetary Fund, 2015d, “Current Challenges in Revenue Mobilization: Improving Tax Compliance”, Washington, D.C.: International Monetary Fund.
International Monetary Fund, (2013), “Burkina Faso: Ex Post Assessment of Longer-Term Program Engagement—An Update,” IMF Country Report No. 13/228, Washington, D.C.: International Monetary Fund.
International Monetary Fund, 2012, “Fiscal Regimes for Extractive Industries: Design and Implementation, Washington, D.C.: International Monetary Fund.
International Monetary Fund, (2006), “The Gambia: Ex Post Assessment of Longer-Term Program Engagement”, IMF Country Report No. 06/11, Washington, D.C.: International Monetary Fund.
International Monetary Fund, (various years), Fiscal Affairs Department: How to Notes, https://www.imf.org/en/Publications/SPROLLs/How-To-Notes
Keen, Michael and Ben Lockwood, 2010, “The value added tax: Its causes and consequences,” Journal of Development Economics, Vol. 92, pp. 138–151.
Kangave, Jalia, Susan Nakato, Ronald Waiswa, Milly. I. Nalukwago and Patrick Lumala Zzimbe, 2017, “Taxing High Net Worth Individuals: Lessons from the Uganda Revenue Authority’s Experience”, International Centre for Tax and Development.
Kloeden, David, 2011, “Revenue Administration Reforms in Anglophone Africa Since the Early 1990s”, IMF Working Paper 11/162, Washington, D.C.: International Monetary Fund.
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Mansour Mario and Grégoire Rota-Graziosi, 2013, “Tax Coordination, Tax Competition, and Revenue Mobilization in the West African Economic and Monetary Union”, IMF Working Paper WP/13/163, Washington, D.C.: International Monetary Fund.
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von Haldenwang, Christian and Maksym Ivanyna, 2012, “A Comparative View on the Tax Performance of Developing Countries: Regional Patterns, Non-tax Revenue and Governance,” Economics: The Open-Access, Open-Assessment E-Journal, Vol. 6, pp. 1–44.
For the case studies, we have read through IMF country reports, while undertaking interviews with IMF staff who engaged with the country authorities on tax reforms. We greatly appreciate the information received during interviews with Debra Adams, Katherine Baer, Ana Lucia Coronel, Margaret Cotton, Yves De Santis, Ricardo Fenochietto, Eric Hutton, Herve Joly, Tetsuya Konuki, Boileau Loko, Mario Mansour, Amine Mati, Andrew Okello, Rene Ossa, Geremia Palomba, Patrick Petit, Laure Redifer, Stephane Schlotterbeck, and Olaf Unteroberdoerster. We are also grateful for helpful comments and suggestions from Hua Chai, Mark De Broeck, Nikolay Gueorguiev, Suhaib Kebhaj, Michael Keen, Vinette Keene, Roland Kpodar, Michel Lazare, Mario Mansour, Giovanni Melina, Muyangwa Muyangwa, Chris Papageorgiou, Saad Quayyum, Alex Segura-Ubiergo, Wei Shi, and Mousse Sow.
In 2016, non-tax revenues and grants were estimated at 2 percent of GDP and 3.7 percent of GDP, respectively in LICs.
SDGs target 17.1; strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection. In LICs, an average tax-to-GDP ratio of 16 percent is not sufficient to support the additional spending required to deliver on the SDG agenda (IMF, 2019). Many countries, including LICs, would need to increase tax revenue by 5 percentage points of GDP in the next decade to fund the SDGs (see IMF, 2015c; IMF, 2019).
For a flavor of the considerations that arise at the next level of detail, see for instance IMF (2012) and IMF (2015d) a series of ‘how to’ notes produced by the IMF, available at https://www.imf.org/en/Publications/SPROLLs/How-To-Notes.
In identifying the episodes of large tax revenue mobilization, Akitoby et al. (2018) focused on countries with more tangible tax revenue mobilization results; (i) countries that have increased their tax-to-GDP ratios by a minimum of 0.5 percent each year for at least three consecutive years (or 1.5 percent within three years); (ii) countries with beyond average increases in their tax-to-GDP ratios; and/or (iii) countries with better tax performance compared with peers in the same income group (utilizing the approach used in von Haldenwang and Ivanyna (2012)).
The paper also uses updated data and includes developments up to 2017 for some countries.
See Mylonas, Victor, 2019. “Revenue Analysis Tool (RAT)” IMF Technical Notes and Manuals (Forthcoming), International Monetary Fund.
Burkina Faso—Ex Post Assessment of Longer-Term Program Engagement (June 2013).
The excise tax rate for alcoholic beverage of 30 percent stayed below the maximum rate set under the directive of the WAEMU and the minimum rates in the WAEMU countries were set at a low level (Mansour and Rota-Graziosi (2013)).
The ministry of finance implemented measures to recover tax arrears. Between 2009–12, a performance contract (‘‘approche unité de recouvrement, AUR’’) with the tax administration—with providing additional resources and financial incentives to staff—was introduced to improve the collection of tax arrears and reduce them. This performance management contract was ended in 2012. Indeed, this type of measure is not consistent with modern approaches to strengthen revenue administration. A broader HR reform, including a review of remuneration levels is preferred.
Tax revenue declined sharply after 2013 owing to the political crisis in 2014. The political uncertainty leading up to resignation of the President caused a slowdown in growth (from 6.6 percent in 2013 to 4 percent in 2014). Lower growth and political uncertainty induced lower tax receipts. Following the general elections in late 2015, the political stability has resumed, and tax collection has been brought back to the pre-crisis level.
As of 2010, The Gambia ranked 14 out of 53 African countries in the World Bank’s Governance Indicators (political stability and absence of violence/terrorism).
The Gambia ranked 176 out of 183 countries in the World Bank’s 2011 Doing Business Report for ease of paying taxes.
A major difference between the VAT and the former sales tax was that under the VAT all supplies are considered taxable unless otherwise specified, while under the sales tax only those supplies specified were considered taxable. In addition to the broadening of the tax base, in general, a VAT gives firms, especially for those selling to other registered taxpayers, some incentive to become registered taxpayers VAT (in order to qualify to claim their credits for VAT paid), while the taxpayers do not face cumulative taxation (so they do not have to be concerned about whether or not to shift hidden and cumulative taxes forward to customers).
The introduction of the VAT was required for ECOWAS member states under the ECOWAS protocol. The VAT replaced the sales tax at the same rate of 15 percent.
IMF TA played an important role in the preparations for the VAT since 2009. In addition, a long-term resident advisor—financed by the European Union and back-stopped by the Fund—was placed around mid-2012.
Many governments tie tobacco excise policy to revenue-raising and health objectives (IMF, 2016,”How to Note”), and The Gambia is no exception. The price per pack of cigarettes in The Gambia was well below the regional average of sub-Saharan Africa. As the low price encourages high rate of smoking which has negative health and economic consequences, the authorities decided to raise the price of cigarettes to the regional average level. The authorities consulted their international partners (e.g., WHO and the World Bank) to introduce a specific excise rate per pack (Note that basing taxes on weight of tobacco encourages the industry to produce lighter but not less harmful cigarettes to pay less taxes (WHO, 2014)).
For more details, see IMF country reports No.12/129 and No. 13/139.
The strong increase in fuel tax revenues played an important role in boosting the tax-to-GDP ratio during 2013–14. Administered retail prices were gradually raised, while international fuel price declined during the period. This led to a gradual increase in operational profits in the oil company and thus boosted tax revenues.
The tax-to-GDP ratio declined by almost 1 percentage point of GDP in 2016, reflecting import compression due to foreign exchange scarcity and low economic activity in the latter part of the year (in part reflecting the political turmoil).
The TGST levied an ad valorem tax on sales of tourism operators, mainly resorts, but also tourist vessels, services such as diving shops, spas, water sports facilities, and other similar items. It was initially set at 3.5 percent and subsequently raised to 6 percent in January 2012, 8 percent in January 2013, and 12 percent in November 2014. Maldives is often recognized as natural amenities of premium tourist destinations.
A broad-based tax on consumption expenditures was needed in the Maldives to offset the adverse revenue impact from trade liberalization. In light of this, a GST in the form of a broad-based, multi-stage, credit-invoice VAT was introduced. A multistage invoice-and-credit system of value-added taxation is a common method for implementing approximately uniform taxation of consumption, as increasing the standard VAT rate would lead to an equiproportionate increase in the ratio of VAT revenues relative to consumption (see Ebrill et al. 2001).
The BPT Act imposed a tax at the rate of 15 percent on profits exceeding MVR 500,000 (approx. USD 32,425) in a tax year. A lower rate of 5 percent is applicable to income generated outside of Maldives (that is, offshore operations of Maldivian companies).
The PRGF arrangement with the IMF was interrupted in October 2008 after the third review was completed in May 2008.
In 2006, Mauritania abolished all major excises (tobacco, nonalcoholic beverages, and cars) in anticipation of oil revenue by 2010. But revenues from oil turned out to be significantly lower than expected, and Mauritania started reintroducing these excises, initially at very low rates (Mansour (2015)).
Based on notes by O. Luca and; Dell’Erba and Gregoire Rota-Graziosi (Fiscal Affairs Department, IMF (2014))
C-efficiency is defined as the ratio of actual VAT collection to potential VAT if all final consumption were taxed at the current standard rate (14 percent), and so is an indicator of how far the VAT differs from a uniform tax, with full compliance, levied on all consumption.
According to IMF (2018b) on “The IMF and Fragile States: Eight African Country Cases”, IMF TA was instrumental in creating the Rwanda Revenue Authority, a key institution.
A hike in tax revenues in 2007 was largely driven by an increase in VAT on imports associated with some large FDI projects.
The tax rate on real estate transaction value was reduced significantly from 15 percent to 10 percent in December 2012 and to 5 percent in March 2015 to: (i) facilitate access to land; (ii) increase the mobilization of revenue by reducing cases of concealment or markdown in real estate transactions; and (iii) reduce transaction costs for both domestic and foreign investors.
The authorities strengthened the General Directorate of Taxes headquarters function by creating three sub-directorates: (i) case management service to plan and monitor field delivery services, (ii) enforce collection service to manage and monitor tax arrears, and (iii) audit service to carry out tax information management and to plan and monitor the execution of tax audits by the field delivery services.
Tax revenue decreased in 2013. This is due to the overall impact of the PIT reform (the elimination of the proportional PIT and the tax shield). This induced a decrease in revenue of about FCFA 30 billion. The adverse impact was temporary and tax revenue bounce back in 2014.
The analysis was undertaken by IMF TA in 2013 using the Revenue Administration—Gap Analysis Program (RA-GAP). The VAT gap is the difference between revenue actually collected and the potential revenues that could have been collected by perfectly enforcing the standard VAT rate applied to various classes of taxable items. The report is available at: https://www.ura.go.ug/Resources/…/INLB/Uganda%20RA-GAP%20RPT%20(2).pdf
The tax policy framework in Uganda was characterized by many exemptions and special treatments. In 2012, 21 items were subject to domestic zero-rating, and the VAT law included 73 exemptions.
In 2015, members of the EAC further increased excise duty on cigarettes to comply with the World Health Organization tobacco control regulations (WHO, 2014).
For more details see Kangave et al. (2017), ‘‘Taxing High Net Worth Individuals: Lessons from the Uganda Revenue Authority’s Experience’’, International Centre for Tax and Development.
The number of HNWI increased from 17 to 117; the numbers of filing in this segment increased from 13 to 78 percent and; and total taxes collected from this segment increased from USD 0.39 million to USD 5.5 million within a year. The share of revenue from HNWI in total tax revenue increased from 0.01 percent in 2015 to 0.2 percent in 2016.
Key areas of intervention focused on: (i) the definition and the characteristics of the MTO, (ii) the organizational structure and functions of the MTO and; (iii) defining compliance strategies for the MTO.
In light of potential scope to further raise tax revenues, Uganda has recently initiated a process that focuses on a comprehensive strategy—as opposed to a piecemeal approach— by adopting a Medium-Term Revenue Strategy (MTRS) in 2017. The MTRS involves the formulation and implementation of the tax reforms—tax policy, tax and customs administration and legal measures—to achieve its medium-target objective of raising tax revenues to 16 percent of GDP.
The Republic of Uganda, ‘‘National Development Plan – 2010/11–2014-15’’, April 2010.
It is important to note that all the countries had IMF programs during the reform period. As outlined in Crivelli and Gupta (2014), IMF programs tend to have a positive effect on tax revenue, particularly in cases where revenue conditionality applies. This is because an increase in the use of revenue conditionality reflects greater reliance on IMF’s TA and the desire of countries to implement technical advice. Also, in some countries revenue mobilization efforts were in response to deteriorating fiscal conditions (e.g. Maldives, Mauritania, and Senegal).
These lessons need some cautions. We look at only successful cases, which limits how much one can conclude. Also, all cases except Senegal started from very low tax levels, which may have made revenues easier to raise. Furthermore, as not all of the measures adopted in these case studies would be seen as good practice for others, reform measures need to be tailored to country circumstances.
IMF (2016) notes that, for developing countries, an indispensable prerequisite to improving tax capacity is commitment from country authorities. More specifically, in view of “not entirely successful” experiences of early LTO initiatives in Anglophone African countries from the late 1990s, Kloeden (2011) points to weak political commitment, backlash from large taxpayers, and most commonly, internal tensions (caused by separate VAT and income tax departments) as causes of such outcomes.
For options for LICs’ effective and efficient use of tax incentives for investment, see IMF (2015b).
While selective excise and broad-based consumption taxes are efficient sources of revenues, it is important to ensure that countries have access to strong safety nets that adequately protect vulnerable from associated price increases. However, discussing this issue is beyond the scope of this paper.
The importance of an MTRS is highlighted in the recent report prepared by the IMF, OECD, United Nations and World Bank Group (“Enhancing the Effectiveness of External Support in Building Tax Capacity in Developing Countries”, July 2016). (http://www.oecd.org/ctp/enhancing-the-effectiveness-of-external-support-in-building-tax-capacity-in-developing-countries.pdf).