1. STAKEHOLDER CONFERENCE GOOD FINANCIAL GOVERNANCE 3 November 2010
Ramada Hotel – Tunis, Tunisia
Key Priorities in Good Tax Governance
Overview of the Good Tax Governance Research Paper

2. OVERVIEW OF TAX IN AFRICA
Colonial history – mainly poll / head tax, income tax and customs duties and administration organised around tax-type / product
Renewed interest in tax – driven by African reform agendas and spurred on by global financial crisis to create tax compact between state and citizen
Tax bases – mainly four: direct, indirect, trade and natural resources – with resources taxation on the increase – tax as % of GDP generally low in Africa
DRM – demands that tax base needs to be extended to incorporate host of other tax bases – land, property and wealth
Local government taxation – central government 5% of population vs. local government 30%

3. TAX GOVERNANCE IN AFRICA
Institutional reforms – autonomous or embedded within Treasury / Finance Ministry; organisational culture shift to service and compliance
Shifts – from product to functional organisation and some even to hybrid market segmentation structures
Professional service – drive to strong culture of honesty / ethical behaviour
Autonomous administration – sense of belonging, conditions better, target- orientated, become victims of own success by taking on non-tax duties
Autonomy – jury still out on positive impact on corruption, perceptions still negative
Clear shift – customer orientation by “making it easier & cheaper to comply”
Heightened awareness – electronic administration to improve service through education & increase compliance based on risk identification

4. AFRICAN TAX GOVERNANCE CHALLENGES
Change – slow, implementation difficult, lack of ownership, coordination with other reforms, conflicting demands and lack of customisation
Tax expenditures – exemptions, holiday, special dispensations to attract FDI – arbitrary, unfair and uncertain plus corrupt undermines confidence
Illicit financial flows – via tax havens to offshore financial institutions from evasion, corruption, theft and transfer pricing
Sophisticated evasion – complex erosion of tax base due to lack of capacity and capability and lack of international collaboration
Tax literacy – misdirected and don’t deal with non-compliance culture to address state building and taxation
Tax paid and service provision – tenuous link erodes accountability, trust and legitimacy
Lack of harmonisation – 14 sub-regional groupings to promote integration, trade and monetary/fiscal policies but taxation systems vastly different

5. PRIORITIES FOR IMPROVING GOVERNANCE (1)
Compliance focus – evasion
– internal (large vs. informal sectors, complexity vs. simplified/presumptive)
– external (illicit financial flows, tax havens and offshore financial institutions, transfer pricing, info exchange)
Administrative capacity – complex financial arrangements, base broadening, resource mobilisation and perceived unfairness of tax burden on poor
Enforcement equity – focus on soft targets, lack of risk-based approach
Corruption – legitimacy → improved conditions for employees, compliance costs for business and service delivery codes

6. PRIORITIES FOR IMPROVING GOVERNANCE (2)
Tax preferences – curtail special dispensations for vested interests, protect tax base against tax competition
DRM – not just tax collected but how collected – legitimate, fair, soft targets, capacity and corruption
Compliance culture – tax paying and benefit provision nexus, cost of non-compliance, customer orientation, targeted education campaigns
Natural resource taxation – extractive industries – lack of legal capacity
Politics – Legitimising reforms → social consensus and state support, nation building

7. Acknowledgements Prof Joseph Ayee – Lead Researcher
Mr Aidan Keanly – Researcher
Dr Odd-Helge Fjeldstad – Reviewer
Mr James Sethibe – Botswana Unified Revenue Service (BURS);
Mr Denis Mukama – Rwanda Revenue Authority (RRA); and
Mr Brian Kgomo – South African Revenue Service (SARS).