new domestic resource mobilization in partner countries of belgian … · 2017. 6. 8. · domestic...
TRANSCRIPT
Domestic Resource Mobilization in Partner Countries of
Belgian Development Cooperation
Romain Houssa, & Roukiatou Nikiema
21 May 2017, Ouagadougou
Introduction
•Huge-resource gap required in LICs (DMDF, 2015)
•Focus on domestic taxation•enhance state building and strengthen the state-citizen relationships (Tilly 1975) •relatively more stable
Tax Revenue Across Income Groups
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LIC LMIC UMIC HIC HIC_OECD
Tax Revenue Across WAEMU Members
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Burkina Faso Benin Cote d'Ivoire Guinea-Bissau
Mali Niger Senegal Togo
Policy (Research) Objectives at BeFinD
•We analyze…• The principles of tax design & State of Domestic
Resource Mobilization (DRM) • Taxation of multilateral companies• The role of Value Added Tax (VAT) for DRM•Assessing rooms for improvement in VAT systems• The role of institutions for DRM
Research on Taxation at BeFinD• various (interlinked) studies on DRM capacities of DGD partner countries
(+) other developing countries…recent examples• Institutional quality, economic development and the performance of VAT, BeFinD
Working Paper N°15 (Romain Houssa and Kelbesa Megersa)• The Performance of VAT in DGD-partner Countries, BeFinD Working Paper N°16
(Mattéo Godin, Romain Houssa and Kelbesa Megersa)• .Taxpayer behaviour and institutions in Sub-Saharan Africa, BeFinD Working
Paper N°169 (Roukiatou Nikiema and Pam Zahonogo)• A Review of critical issues on tax design and tax administration in a global economy
and developing countries, BeFinD Working Paper N°7 (Mattéo Godin & Jean Hindriks)
• Follow you, follow me: public investment under tax competition, BeFinD Policy Brief N° 1 (Jean Hindriks and Yukihiro Nishimura)
…for more, visit http://www.befind.be/publications/taxes
Outline• I. Impact of VAT on DRM
• II. Role of institutional quality on DRM
• III. Sources of VAT Inefficiencies: Case study in Burkina Faso
• IV. Conclusing Remarks
I.
Impact of VAT on DRM
Why is VAT important?• VAT is relatively easy to administer Less prone to tax evasion• Suitable for developing countries
• less sensitive to the informal market • If well designed, it can even reduce the size of the informal sector
• Less distortionary among taxes • In comparison with income taxes, VAT does not change consumption decisions
relative to savings and investment decisions
• No cascading effects• Unlike other consumption taxes • Tax on a commodity is charged at separate stages of the production process without
deductions• Sellers or firms paying VAT, can receive credit for the VAT paid on intermediate inputs
VAT adoption across the world
Current state of DRM:Tax and VAT revenue in partner countries
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Average Total Tax Revenue, % GDP (1990-2013)
Average VAT Revenue, % GDP (1990-2013)
High degree of correlation between Tax & VAT revenue in DGD partner countries
VAT, DRM and developing countries:The overall picture…across the developing world & elsewhere
• We estimate the following tax-effort equation
• 𝑋𝑖,𝑡 include: the level of development, size of the informal sector, country size, size of dependent population, institutional quality …
VAT, DRM and developing countries:The overall picture…across the developing world & elsewhere
•Data from 149 countries over the 1970 - 2013
•Developing countries
• Sub-Saharan Africa (SSA) and • Non-SSA Developing countries
•Developed countries
Marginal effects of VAT adoption (1970-2013)
Marginal effects of VAT adoption (1970-2013)
Performance of VAT in SSA
• Marginal effect of VAT adoption (i.e. relative contribution of VAT to tax revenue) is estimated to be strong for SSA and other developing countries
• The positive effect of VAT on tax collection in SSA is reassuring because some earlier studies were not able to identify an overall positive effect for the region
• We show that analysis of data over the recent period (where VAT has become more contributive) is important to highlight its positive role in SSA’s DRM efforts
II.
Role of institutional qualityon DRM
Taxation, Institutions & Economic Development
Economic Development
Tax collection
Institutions
Institutional quality & DRM
•A good-institutional environment should improve both the demand as well as the supply factors inherent to the performance of VAT.
• Including: the capacity of the tax administration, government effectiveness in providing public goods, trust in the government, …
•We provide micro and macro evidences
Institution & Taxes (Micro Evidence)
Institution & Taxes (Micro Evidence)survey in 29 SSA countries
please tell me whether you think the action is not wrong at all, wrong but understandable,
or wrong and punishable : Not paying the taxes they owe on their income
Observation Percentage
Not wrong at all 4,566 11.36
Wrong but understandable 14,362 35.73
Wrong and punishable 19,193 47.67
Do not know 2,108 5.24
Total 40,199 100,00
Institution & Taxes (Micro Evidence)
Institution & Taxes (Micro Evidence)• Taxpayer behaviour is affected by quality of institutions • Individuals’ attitudes towards paying tax are significantly dependent on the
quality of institutions
• When the quality of institutions is perceived as good, individuals are more likely to pay taxes
• Indirect effects of quality of institutions:• Individual’s perception of difficulty to evade taxes more likely to pay tax
• Quality of public services offered by the state: • Confidence in the tax authorities (partial or total) & transparency more likely to pay tax • perception of corruption, cheating, quality of health, quality of education, quality of
electricity, confidence , ethnic discrimination… have a significant effect on tax payment!
Institution & Taxes (Micro Evidence)
• Individuals are more likely to pay taxes if they have:•Perception of difficulties to evade taxes;•Better confidence in the tax authorities & transparency,
(less corruption, ethnic discrimination…); •Perception that the quality of public services is good:
health, education, electricity …
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weak institutions strong institutions
weak institutions= (average PRS score<0.5)strong institutions= (average PRS score>=0.5)
unconditional marginsplot
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weak institutions= (average PRS score<0.5)strong institutions= (average PRS score>=0.5)
conditional marginsplot
Institution & Taxes (Macro Evidence)
III.
Sources of VAT Inefficiencies: Case study in Burkina Faso
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VAT efficiency (Selected partner countries)
Benin
Bolivia
Burkina Faso
South Africa
Uganda
Vietnam
Sectoral Sources of VAT gap (1999-2014)
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ACTIVITE D'ADMINISTRATION PUBLIQUE
INDUSTRIES ALIMENTAIRES
ELEVAGE
AUTRES ACTIVITÉS DE SERVICES MARCHANDS
FAB. D'OUVRAGES EN BOIS ET EN METAUX
RAFFINAGE DE PETROLE, FABRICATION DE…
HÔTELLERIE ET DE RESTAURATION
FAB. VERRE, POTERIE ET MATERIAUX POUR…
ACTIVITES FINANCIERES
INDUSTRIES DU PAPIER, DE L'ÉDITION,…
Top Sectors contributing to VAT gap
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1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014ACTIVITE D'ADMINISTRATION PUBLIQUE AGRICULTURE
INDUSTRIES ALIMENTAIRES COMMERCE
ELEVAGE TRANSPORTS, POSTES ET TELECOMMUNICATIONS
AUTRES ACTIVITÉS DE SERVICES MARCHANDS EGRENAGE DE COTON, FABRICATION DE TEXTILES ET ARTICL. D'HABILL..
FAB. D'OUVRAGES EN BOIS ET EN METAUX EXTRACTION
Sources of VAT gap
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compliance gap policy gap
IV.Concluding remarks
What role can donors (Belgium) play?•Conduct more (in depth) studies to identify sources of tax gaps and policy experiments
•Contribute to the capacity building of the taxauthorities and statistical offices
•Encourage/Support instutional reforms thatfacilitate good governance and the provision of public goods
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Thank you!