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1
African Tax Outlook Publication (ATO)
11 July 2018
2018 African Tax Outlook Publication
2
The AFRICAN TAX OUTLOOK flagship publication aims to provide valuable,
practical and relevant descriptive and analytical work on tax issues to
improve tax administrations and inform tax policy formulation and
implementation in Africa.
African Tax Outlook Publication (ATO)
1
26 countries featuring in the 2018 edition
Ghana
Angola
Niger
Malawi
Chad
26 countries featuring in the third edition
Tanzania The Gambia Togo Uganda Zimbabwe
Swaziland
Burundi Cameroon Kenya Lesotho Mauritius
Rwanda Senegal Seychelles South Africa
15 African countries contributed to the data collection of the first edition (2016)
26 countries featuring in the third edition
6 countries joined in the 2017 edition
Benin BotswanaLiberia
Mozambique Nigeria Zambia
26 countries featuring in the third edition
5 countries joined in the 2018 edition
MalawiNiger
Angola Chad Ghana
Launch of the ATO publication
Finalisation of the ATO publication
Validation workshop
Data analysis phase
Data collection phase & Selection of drafting team
Consultative workshop
Constitution of the ATO team
Expression of interest
ATO Data Process
Benefits of the African Tax Outlook Publication
The African Tax Outlook Publication: makes tax statistics and analyses available to African tax administrations allows cross-country comparisons and benchmarking provides comparable data on tax policy, tax administration and tax legislation provide an analysis of the data in terms of taxation trends identifies good practices within the African region to improve on Revenue
Administration.All this will help to improve the efficiency and effectiveness of member country taxation.
Benefits of the ATO Online Data Portal
A big enhancement is the new online ATO data platform which was launched on 22
November 2017.
It is a cross-country international data platform providing members with the unique
opportunity to collect a harmonized set of national-level information and data on tax
and Customs administration.
The online data platform aims to improve the comparability, analysis, consistency,
quality and accessibility of revenue data for participating countries in the ATO
publication
The online is used in future for all data collection, data dissemination, reporting
purposes. Reduces tax administration burden Maximise timeliness and data accuracy
The ATO publication has been divided into two main parts – Themes, sub-themes and indicators.
The first part defines the theme and indicators that guides the reader on quantitative tax statistics. The
second part shows the importance tax and customs administrative data.
The following themes have been covered:
Tax rates;
Tax bases;
Tax revenues;
Non-tax revenues
Organisational structures and functions of tax administrations
ATO Structure and themes
11
GDP and Tax revenue growth
Tax-to-GDP ratios
Tax Composition
Regional Analysis2
TOTAL TAX REVENUE
12
GDP and Tax revenue growth
Growth of Tax revenue and GDP, 2016
-25%
-15%
-5%
5%
15%
25%
Real GDP Growth Real Revenue Growth Population Growth
Countries like Rwanda recorded 8.64% real GDP growth in 2016 which was higher than the 1.4% average for sub-Saharan Africa in 2016 (IMF, 2018).
On the other hand, Burundi, Lesotho, Nigeria and Swaziland recorded negative real GDP growth of between 9% and 3%.
13
Tax-to-GDP Ratios
Some ATO countries observed sharp increases in tax-to-GDP ratios. E.g. Uganda, Seychelles and Lesotho respectively saw an increase of 2.37,
2.26 and 2.4 percentage points in their tax to GDP ratio from 2015. Average ATO tax to GDP ration on 2016 is 16% In contrast, countries like Botswana, Zimbabwe and Angola declined by 3.44,
3.18 and 2.18 percentage points respectively in their tax to GDP ratios
0%
5%
10%
15%
20%
25%
30%
GDP per capita and tax revenue per capita, 2016
Tax-to-GDP ratios: Regional Analysis, 2016
0% 5% 10% 15% 20% 25% 30%
Angola
Botswana
Lesotho
Malawi
Mauritius
Mozambique
Seychelles
South Africa
Swaziland
Tanzania
Zambia
Zimbabwe
SADC Average
ATO Average
0% 5% 10% 15% 20% 25% 30%
Benin
Gambia
Ghana
Liberia
Niger
Nigeria
Senegal
Togo
ECOWAS Average
ATO Average
0% 2% 4% 6% 8% 10% 12% 14% 16% 18%
Burundi
Kenya
Rwanda
Uganda
EAC Average
ATO Average
0% 5% 10% 15% 20% 25% 30%
Botswana
Lesotho
South Africa
Swaziland
SACU Average
ATO Average
ECOWASSADC
EAC SACU
34%
32%
35%
37%
34%
13%
23%
23%
28%
22%
15%
10%
16%
22%
16%
5%
15%
9%
2%
8%
17%
7%
5%
2%
8%
5%
8%
1%
0%
4%
11%
5%
11%
9%
9%
0% 20% 40% 60% 80% 100% 120%
ECOWAS
EAC
SADC
SACU
ATO AVERAGE
VAT Personal income tax revenue Corporate income tax revenue Excise
Import duty Other customs taxes: Other Domestic Tax Revenue
Tax-to-GDP ratios, per tax type: Regional Analysis, 2016
The standard VAT rate average in EAC is lower compared to the other regions.
Personal income taxes are the second largest contributor to tax revenue in the ATO, however the PIT’s relative importance is lower in the ECOWAS at only 13% compared to 23% in both SADC and EAC.
The ECOWAS region tends to depend mostly on Customs taxes as import duties account for 17% of revenue making it the second largest contributor to revenue in the ECOWAS region.
Excise taxes have a larger role in the tax revenue in EAC compared to the other regions accounting for 15% of total revenue compared to less than 10% in the other regions.
16
The composition of tax revenue
34% 31% 35% 35% 34% 34%
17% 19%18% 18% 18% 20%
17% 17%16% 17% 16% 15%
10% 10% 10% 10% 10%10%
11% 11% 9% 9% 10% 9%
8% 8% 8% 8% 8% 9%
4% 4% 4% 4% 3% 4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015 2016
VAT Personal income tax Corporate income tax Import duty Other Domestic Tax Revenue Excise Other customs taxes
Indirect taxes (consumption andcustoms taxes) account for 55% of theaverage ATO country’s total taxrevenue.
Direct taxes (corporate and personalincome taxes) account – 34%.
Composition of tax revenue, ATO average, 2011-2016
Contribution to Total Revenue in the ATO, 2016
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Non-Tax Revenue
Other customs taxes
Excise
Other Domestic Taxes
Withholding tax
Import duty
Corporate income tax
Personal income tax
VAT
The largest contribution to ATO revenue in 2016 was VAT at 34% followed by PIT at 20%.
The relative importance of personal income taxes-to-total tax revenue has been increasing within the ATO from an average of 17% in 2011 to 20% in 2016 while CIT revenue has shown a decline in relative contribution to total revenue to 15% from 17% in 2011.
The contribution of Excise taxes to total revenue has also increased slightly from 8% to 9% between 2015 and 2016.
18
The composition of tax revenue
Average growth in real and nominal GDP in ATO countries, 2011-2016 ATO countries show nominal GDP
growth (increases in production andprices), with annual ATO averagegrowth rate of 0.24%
The highest nominal growth rate oftax revenue was Tanzania at 19%
In Angola, Benin, Botswana, Niger,Nigeria, Zambia and Zimbabwe haveexperienced negative growth in theirtax revenue
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Nominal GDP Growth Nominal Revenue Growth
19
Stability of Tax Revenues in the ATO
Countries that had larger share ofCustoms revenue in total tax revenuetended to have a higher level of volatilityin their tax to GD ratios
Mozambique and Togo had the highest volatilityin tax-to-GDP ratios while Mauritius and Kenyahad the least volatility.
The high volatility in Mozambique, Togo, Nigerand Zimbabwe is reflective of positive increases intax-to-GDP ratio over the period.
In Mozambique and Togo, the significantincreases were due to positive performance inincome taxes while in Zimbabwe it is reflective ofthe unstable economic conditions during theperiod.
Angola
Benin
Botswana Burundi
Cameroon
Gambia
GhanaKenya
Lesotho
Liberia
Malawi Mauritius
Mozambique
Niger
Nigeria
Rwanda
Senegal
Seychelles
South AfricaSwaziland
Tanzania
Togo
Uganda
Zambia
Zimbabwe
0,0000
0,0001
0,0002
0,0003
0,0004
0,0005
0,0006
0,0007
0% 10% 20% 30% 40% 50% 60%
Tax
to G
DP
Var
ian
ce
Share of Customs
Domestic and Customs Revenue Share of total tax revenue, 2016
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Domestic Customs
Most of revenue of the ATO countries is from domestic revenue with the largest share of domestic revenue to total revenue observed in Swaziland, South Africa and Lesotho at 88%, 84% and 82%, respectively.
This generalisation however excludes other countries like Togo, Benin and Gambia that are more dependent on Customs revenue with contributions to total revenue of 57%, 52% and 44% respectively.
21
Value Added Taxes
Excise taxes
Trade taxes
Personal Income Taxes
Corporate Income Taxes
ANALYSIS OF THE DIFFERENT TAX TYPES
3ANALYSIS OF THE DIFFERENT TAX TYPES
Breakdown of major tax heads in the average ATO country, 2016
VAT yielded the mostrevenue (35%) in total,followed by individualincome taxes whichcontributed 27%.
Excise taxescontributed 6%, whileother taxes, whichincluded all minor taxtypes combined, hadthe least contributionof 4%.
35%
6%
27%
19%
9%4%
Domestic VAT
Excise tax revenue
Individual Income Tax
Corporate income Tax
Import duty
Other Taxes
VAT-to-GDP ratio, 2016
VAT-to-GDP ratio for 2016 stood at 6.3% on average for the ATO countries, which iscomparable to the OECD average of 6.8%. The ratios of overall VAT revenue-to-GDP werehighest in Senegal, Seychelles and South Africa where they exceeded 10%. Nigeria had thelowest total VAT-to-GDP ratio (1%),
0%
2%
4%
6%
8%
10%
12%
14%
VAT revenue, 2016
Highest growth in domestic VAT were witnessed in Ghana (21%), Kenya (21%), Tanzania(22%), Mozambique (29%) and Togo (29%), whilst Liberia (22%), Malawi (25%) and Swaziland(22%) had the highest growths in VAT on imports, against ATO averages 9% for domestic VATand 4% for Import VAT
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Domestic VAT VAT on imports
VAT Refunds
The ATO data portal has information on both net VAT and gross VAT, since refunds are accounted for on the data portal.
However, since not all countries were able to provide complete information, especially on VAT refunds in previous publications, to accommodate all countries, gross VAT was sometimes used in the analysis of VAT.
Where this was the case, it indeed tended to overstate VAT revenues, and consequently tax-to-GDP ratios.
However, in the 2018 publication, we have already included the analysis on VAT refund. The analysis on VAT included both gross and net VAT revenues, and where countries could not provide information on VAT refunds, they were left out in the analysis where net revenue was used.
0% 20% 40% 60%
Botswana
Burundi
Cameroon
Gambia
Kenya
Lesotho
Malawi
Mauritius
Mozamb…
Nigeria
Rwanda
Senegal
Seychelles
South…
Swaziland
Tanzania
Uganda
Zambia
Zimbabwe
ATO…
0% 10% 20% 30% 40% 50%
Botswana
Burundi
Cameroon
Gambia
Kenya
Lesotho
Malawi
Mauritius
Mozambique
Nigeria
Rwanda
Senegal
Seychelles
South Africa
Swaziland
Tanzania
Uganda
Zambia
Zimbabwe
ATO Average
VAT refunds-to-VAT revenue ratios, 2016
Average VAT refunds-to-VAT revenue ratios,
(2011-2016)
Ratio of Excise taxes to total taxes by tax type, 2016
0,00% 5,00% 10,00% 15,00% 20,00% 25,00% 30,00%
Benin
Botswana
Burundi
Cameroon
Gambia
Ghana
Kenya
Lesotho
Liberia
Malawi
Mauritius
Mozambique
Niger
Rwanda
Senegal
Seychelles
South Africa
Swaziland
Tanzania
Togo
Uganda
Zambia
Zimbabwe
Tobacco Alcohol Fuels Other
With reference to the share of
excise taxes-to-GDP by excise
types, the highest contributor was
fuel, which came first in
Zimbabwe, Uganda, Togo,
Tanzania, South Africa, Seychelles,
Senegal, Kenya and Ghana
Excise on fuel contributed 3.58% toGDP in Zimbabwe, while inSeychelles, Uganda and SouthAfrica, the contributions were2.78%, 2.16% and 1.37%,respectively.
Personal Income Tax (PIT)
Zimbabwe, Zambia, Uganda,Seychelles, Lesotho and Kenyaexperienced PIT revenue-to-GDPratios of 5% while the rest of thecountries were below 5%.
It is interesting to note thatcountries that were above the 5%mark apply bottom marginal taxrates of 10% and above.
Four of them, except Kenya andUganda apply bottom marginal taxrates that are above the ATOaverage of 13%.
Growth in personal income tax revenue 2011 - 16
0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0%
Angola
Benin
Botswana
Burundi
Cameroon
Chad
Gambia
Ghana
Kenya
Lesotho
Liberia
Malawi
Mauritius
Mozambique
Niger
Nigeria
Rwanda
Senegal
Seychelles
South Africa
Swaziland
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average
0% 2% 4% 6% 8% 10%
Angola
Benin
Botswana
Burundi
Cameroon
Gambia
Ghana
Kenya
Lesotho
Liberia
Malawi
Mauritius
Mozambique
Niger
Nigeria
Rwanda
Senegal
Seychelles
South Africa
Swaziland
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average
PIT revenue-to-GDP ratios, 2016
Corporate Income Tax (CIT)
Six ATO countries had CIT-to-GDP ratios above3%, with some going as high as 5%, therebyexceeding the OECD average of 2.8%.
In total eight countries had CIT revenue-to-GDPratios of at least 3% and above.
Mozambique had the highest CIT-to-GDP ratio,attributable (at least in part) to having thehighest statutory CIT tax rate of 32%.
1%
1%
5%
2%
2%
2%
3%
2%
4%
2%
1%
3%
5%
2%
2%
1%
2%
4%
5%
3%
1%
2%
1%
2%
2%
2%
0% 1% 2% 3% 4% 5% 6%
Angola
Benin
Botswana
Burundi
Cameroon
Gambia
Ghana
Kenya
Lesotho
Liberia
Malawi
Mauritius
Mozambique
Niger
Nigeria
Rwanda
Senegal
Seychelles
South Africa
Swaziland
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average
CIT revenue-to-GDP ratios, 2016
29
Social security
Other non-tax-revenue
NON-TAX REVENUE / TAX EXPENDITURES
4NON-TAX REVENUE
30
0,00% 2,00% 4,00% 6,00% 8,00% 10,00% 12,00% 14,00%
Cameroon
Ghana
Kenya
Malawi
Mozambique
Nigeria
Rwanda
Senegal
Tanzania
Togo
Zimbabwe
ATO Average
Contribution of Social Security to GDP in 2016 Contribution of Social Secuty to Tax Revenue in 2016
24 ATO countries have a public health system,although 5 are fully tax financed, 11 are partlytax financed and 8 are partly financed bycompulsory contributions.
With regards to old age pension schemes, threecountries are completely tax financed, ninepartly tax financed and fourteen financed bycompulsory contributions
Ratio of social security contribution to GDP, 2016
Social security
31
Other non-tax-revenue
0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 60,00% 70,00% 80,00%
Angola
Benin
Botswana
Burundi
Cameroon
Chad
Gambia
Ghana
Kenya
Lesotho
Liberia
Malawi
Mauritius
Mozambique
Niger
Nigeria
Rwanda
Senegal
Seychelles
South Africa
Swaziland
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average
Oil Fees and License Royalties Other
Other Non-tax revenue – prone to
swings
ATO countries which rely on oil revenuesuch as Nigeria, Angola, Cameroon,Chad and Tanzania have seen theirrevenue decrease due to pricefluctuations in international markets ofoil.
They have been making extensivespending cuts across departments andagencies due to the decline in oilrevenue.
32
Domestic VAT Expenditures-to-Domestic VAT revenue ratios,
2016
0% 50% 100% 150% 200% 250% 300% 350%
Kenya
Malawi
Mauritius
South Africa
Swaziland
Zambia
Zimbabwe
ATO Average
Zero-rates Exemptions
On average, for those countries thatsubmitted VAT expenditure statistics,152% of gross VAT revenue wasforgone through the granting of VATexpenditures (zero-rates andexemptions combined).
Kenya (292%), Zimbabwe (263.5%)Swaziland (220%), and Zambia (196%)had the highest ratios of VAT revenueforgone through VAT expenditures.
0% 10% 20% 30% 40% 50% 60% 70% 80%
Kenya
Malawi
Mauritius
South Africa
Swaziland
Zambia
Zimbabwe
ATO Average
Zero-rates Exemptions
The ATO average was 49% for combined domestic VAT expenditures. It was observed that Kenya (74%), Zimbabwe (72%), Swaziland (66%) and Zambia (66%) had highest ratios of VAT revenues forgone as ratios of their potential VAT revenues.
These countries’ ratios of revenue forgone through VAT expenditures exceeded 50% of their potential domestic VAT revenues. Malawi (38%), Mauritius (13%) and South Africa (15%) had the lowest ratios
VAT Expenditures to potential VAT Revenue Ratios, 2016
34
FUNCTIONS, STRUCTURES AND SERVICES MANAGEMENT
IN CUSTOMS/TAX ADMINISTRATION
5 Cost of Tax Administration
Audit for Compliance
Customs Clearance
Staff Productivity
Average Growth in Cost of collection 2011 - 2016
• The data shows that on average in 2016, Revenue Administrations spent
1.6% of the revenue collected on operational costs which represented a
marginal increase over the average proportion recorded between 2011 and
2016.
• Swaziland has the highest cost collection ratio relative to its peers (5.2%)
followed by Zimbabwe (4.0%)
• While Senegal, Cameroon, Seychelles and South Africa had the lowest cost
to revenue ratios of 0.1%, 0.3%, 0.5% and 0.9% respectively.
Average Growth in Cost of collection 2011 - 2016
1,5%
2,2%
2,5%
1,9%
1,5%
2,9%
2,2%
1,6%
0,2%
1,3%
0,4%
1,2%
1,2%
3,0%
1,1%
0,3%
3,4%
1,7%
4,2%
1,0%
1,1%
2,0%
1,7%
1,1%
1,7%
2,7%
0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 3,0% 3,5% 4,0% 4,5%
Average, ATO
Uganda
Tanzania
Rwanda
Kenya
Burundi
Average, EAC
Togo
Senegal
Nigeria
Niger
Liberia
Ghana
Gambia
Average, ECOWAS
Cameroon
Zimbabwe
Zambia
Swaziland
South Africa
Seychelles
Mauritius
Malawi
Botswana
Average, SADC
AngolaA
TOEA
CEC
OW
AS
NA
SAD
C
• Regionally, the EAC recorded the largest increase in the cost of collection to revenue ratios (12.1%) between 2016 and 2015 followed by the SADC region (3.6%).
• The ECOWAS posited the smallest change in the cost to revenue ratio (3.3%) of all the ATO regions.
Audit for Compliance
Benin; 12
Botswana; 29 Burundi; 13
Gambia; 42
Liberia; 9
Malawi; 20
Mauritius; 7
Mozambique; 78
Nigeria; 7
Rwanda; 11
Senegal; 28Seychelles; 14
South Africa; 48
Swaziland; 17
Tanzania; 14
Togo; 1
Uganda; 12
Zambia; 15
Zimbabwe; 12
ATO Average; 20
SADC; 25
Ecowas; 16
EAC; 11 In 2016, there were around twenty employees perauditor in the ATO region.
From a regional perspective, the staff to auditor ratiowas highest in the SADC region, at 25,
And lowest in the EAC, at 11. However, the EACaverage should be interpreted with caution since only2 out of five countries submitted statistics on thisindex.
At country level, Togo (1 to 1) had the lowest staff toauditor ratio followed by Mauritius (7 to 1), Nigeria (7to 1) and Liberia (9 to 1).
It is worth mentioning that Togo comes as an outlierbecause it included all customs officers who dosearches and verifications at ports of entry, hencetheir low ratio.
Ratio of Tax Administration staff to Auditor
Audit for Compliance
• There were variations among ATO countries with referenceto the assessments issued by auditors.
• Comprehensive audits topped the ATO group at 39%followed by desk audits (27%) and then issue audits (24%).
• Nigeria (100%), Senegal (100%), Liberia (86%), Ghana (78%),Tanzania (67%), Togo (64%) and Zimbabwe (62%), issuedmore assessments from comprehensive audits in 2016.
• Mauritius (0%), Swaziland (6%) and the Gambia (9%) carriedout the lowest number of comprehensive audits
• On the one hand, while Botswana carried 81% issue audits,Mauritius, Mozambique, Togo and Zimbabwe had 0%.
• Mauritius (81%) and Mozambique (68%) had highestpercentages of desk audits carried out, Ghana, Botswana,Nigeria, Senegal and South Africa had nil.
• South Africa carried out 66% of other audits.
Assessments by Audit Type in Selected ATO countries, 2016
0% 20% 40% 60% 80% 100% 120%
Benin
Botswana
Burundi
Cameroon
Gambia
Ghana
Liberia
Malawi
Mauritius
Mozambique
Nigeria
Rwanda
Senegal
Seychelles
South Africa
Swaziland
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average
Number of comprehensive audits Number of issue audits Number of desk audits Number of other audits
Customs Clearance
Lane Country Percentage of goods
Burundi
Nigeria
Mozambique
Gambia
87%
86%
71%
60%
Mauritius
Malawi
Kenya
Gambia
53%
45%
45%
40%
Botswana
Swaziland
Zimbabwe
Kenya
74%
74%
41%
39%
Zimbabwe
Rwanda
Cameroon
48%
32%
25%
The ATO-wide average percentages
of goods going through the lanes are
35% in the red, 24% in the yellow,
12% in the blue lane, 24% in the
green lane and 5% in other lanes.
The ECOWAS region has 68% of
goods going through the red lane
and the SADC community has 35%
of goods through the green lane.
Staff Productivity
0,00 5,00 10,00 15,00
Angola
Benin
Botswana
Burundi
Gambia
Ghana
Kenya
Lesotho
Liberia
Malawi
Mauritius
Mozambique
Niger
Nigeria
Rwanda
Senegal
Seychelles
South Africa
Swaziland
Tanzania
Togo
Uganda
Zambia
Zimbabwe
ATO Average
Revenues per General Tax Administration Employee (millions), 2016
Revenue per Tax Administration employee -: total revenue collected divided by the total number of employees in Tax Administration in the year 2016.
The revenues were converted to international currency using the PPP exchange rate for comparability across the different Tax Administrations;
41
POLICY RECOMMENDATIONS
6
TAX POLICY Diversify Revenue Sources Review VAT Thresholds Consider Reforming Administration of VAT Refunds Embrace Environment Taxes Design Excise Taxes Accordingly Reduce Heavy Reliance on Non-Tax Revenues Review Marginal PIT Rates and Reduce the Number of PIT Bracket Protect Revenue Losses through Streamlining Tax Expenditures
TAX AND CUSTOMS ADMINISTRATION Interact and Improve Communication Channels with Taxpayers Intensify Taxpayer Education Initiatives Increase the Number of Auditors and Aim to Recover More from Audits Decisively Deal with Tax Arrears Intensify Information Exchange and Reduce Import Tariffs to Curb
Smuggling Modernise and Automate Tax Administrations
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