DRAFT

DRAFT

TAXPAYERS PERCEPTION SURVEY

IN SIERRA LEONE (TPS-SL)

MONITORING, RESEARCH & PLANNING (MRP) DEPARTMENT

NATIONAL REVENUE AUTHORITY

CHAPTER ONE

1.0 Background

Revenue mobilization is the key to the future economic and social development of our country and reducing our dependency on the international community for underpinning government spending. This can only be achieved through a combination of a modern revenue service which acts professionally, equitably and fairly towards all taxpayers and a change in the national taxpaying culture where taxpayers understand and have confidence in the revenue administration system and can see tangible evidence that their taxes are indeed improving their social and economic well beings.Since its inception in 2003, the National Revenue Authority (NRA) has made considerable progress in improving the national taxation system and the taxpaying culture in Sierra Leone by bringing together the revenue mobilization functions of the Income Tax and Customs Departments into a single unified Authority and increasing revenue yield year-on-year. This process of merging different cultures and reforming structures has now established a firm foundation on which to build.

The authority has set its Strategy for 2007-2009 which focuses on 3 major strategic issues increased revenue mobilization, improving our national taxpaying culture and developing our organizational capacity through a portfolio of programmes and projects with well defined aims and objectives.

One of the ways these can be achieved is by establishing a cooperative, respectful and trusting relationship with the public. In turn it is expected that the public will adopt a cooperative relationship with the Authority, respecting the legitimacy of the Institution, trusting its processes, and accepting an obligation to pay tax. The relationship is assumed to be symbiotic, with cooperation from one party eliciting cooperation from the other.

Against this background, it is of utmost importance to determine taxpayers perceptions towards taxation in order, not only to influence Government policy regarding taxation and protecting the countrys tax base but also to enable the Authority market itself and its services more effectively to the general public. Hence the need for this study.

1.1Aim and Objectives of the Study

The main aim of this survey is to gauge the perception of taxpayers on the activities and services offered by the Authority since its inception in 2003.

Specific objectives are:

i. To assess the service delivery of the tax offices;ii. To find out whether the tax officers act in accordance with the standards set by the Authority;iii. To assess the level of trust taxpayers have in the tax officers;iv. To assess the level of taxpayers education.1.2Justification of the Study

Specifically, the research findings will help design policies in order to improve:

i. The image and credibility of the institution;ii. Improve the competency of the staff on services delivery in all the operational areas;iii. Assess the level(s) of public understanding of the working environment of the institution.

1.3 Organization of the Report

The report is organized into four chapters. Chapter one presents the background to the study, the study objectives, justification of the study followed by the methodology of the study which describes the scope of the survey, sampling technique and sampling size, analysis of the data and limitations to the study.

Chapter two provides review of relevant literature by other scholars. It discusses both the theoretical and empirical literature. In the theoretical literature, various concepts, definitions about taxpayers perception are highlighted. Other findings and recommendations from various scholars on perception survey are discussed in the empirical literature.

Chapter three comprises data presentation and analysis. It discusses the responses from the administered questionnaires, focus group discussions and key informants interviews.

Chapter four gives a summary of the findings, their implications and recommendations.

1.4Methodology

Research methodology is usually shaped by a number of factors including: the nature of the problem to be investigated, finance, personnel, would-be respondents, and the type of information to be generated. The methodology used in this report recognised these factors. It comprises a number of steps and a combination of data collection techniques.

1.4.1Survey Design

An empirical investigation was carried out by means of a questionnaire. The questionnaire comprised closed- and open-ended questions. Respondents answered closed-ended questions by ticking one box representing the views closest to their own. Open-ended questions were also incorporated to which respondents provided unstructured replies. The questionnaire was also designed so that the data obtained from the open-ended questions can suggest patterns which might influence the perceptions of taxpayers and explain why they differ between the various population groups.

1.4.2Sample Selection

The target population for this study was mainly companies, trades and importers and would be importers. These taxpayers were classified into large, medium and small based on the volume of importation and turnover. Taxpayers with a turnover of at least Le600 million were categorized as large while those between Le201 million and Le599 million classified as medium. Small taxpayers were those whose turnover is Le200 million and below. This includes clearing agents, petty traders and drivers (chatter-men) at border crossing points. The target areas were Freetown, Makeni, Kono, Kenema, Bo, Kabala, Jendema, Gbalamuya and Kailahun. These areas were selected because majority of our taxpayers are either resident or use these routes for trade. More precisely these areas are major entry points and business centers.

Out of a total of 3,668 taxpayers in the country, 2,522 or 68.75 percent were interviewed. Of this number, 1,301 taxpayers or 51.59 percent resides in Freetown whilst 1,221 taxpayers or 48.41 percent are in the provinces. Table I below gives a breakdown of the sample frame for the study.

Higher percent of the small and medium taxpayers were interviewed because they are affected more by changes in tax administration as a result of their direct contacts with tax collectors since they cannot afford to hire a tax consultant unlike the larger taxpayers.

Table I: Number of Taxpayers Recorded in Selected Areas/Districts/Towns

LocationLargeMediumSmallTotalPercent

Freetown Central18134522475029.74

Freetown Western3583771957.73

Freetown Eastern8221661957.73

Peninsula91511606.34

Sub-Total2244596181,30151.59

Bo 4313229046518.44

Pujehun1535501.98

Moyamba95140.56

Mattru2240.16

Sub-Total4315833253321.13

Kenema 2013018033013.08

Kailahun/Bailu10100.40

Kono2651461234.88

Sub-Total4618123646318.36

Makeni 6351051465.79

Magburaka1515210.83

Kabala/Dogolia1560.24

Portloko1228311.23

Kambia/Gbalamuya120210.83

Sub-Total8441732258.92

Grand Total32184213592,522100.00

Source: Field Survey, 2008

1.4.3

Data Collection

a)Questionnaire Administration

Personal, face-to-face interviews were conducted, at the respondents business centers using a structured and semi-structured questionnaire during September and October, 2008. One hundred and sixty five enumerators mainly college/university students were recruited and trained to administer the questionnaires. During training, several interview simulation exercises were conducted to sufficiently prepare the enumerators for the actual one-to-one field interviews. The questionnaire was available in English. During administration, these questions were translated by the responsible enumerators into the relevant languages of the fieldwork areas, before the fieldwork commenced. Interviews were conducted in the respondents choice of language. The fieldworkers adhered to the sequence of the questions, in order to ensure that respondents are not led in answering the open-ended questions.

b) Focus Group Discussions

In order to supplement and enrich the survey data, two focus group discussions were conducted especially at each market centre and border crossing points; one with a cross section of community leaders and the other with a cross section of traders, clearing agents and charter men in towns visited.

c) Pre-testing of Questionnaire

Pre-testing of questionnaires was done mainly in Freetown, Makeni, Bo and Kenema where majority of the taxpayers reside from 1st 8th September, 2008. The purpose of the pre-visits was to test the adequacy of the questions and possible problems encountered so as to help further fine tune the data collection instrument as well as enhance the enumerators proper understanding of the survey instrument.

1.4.4

Data Processing and Analysis

First, two coding sheets were developed for purposes of coding the open-ended and closedended questions. The questions were entered into Excel spreadsheet. The data then exported to Statistical Package for Social Sciences (SPSS) version 16.0 for cleaning and eventual analysis. As part of the data cleaning process, consistency and validity checks were made and frequency runs on all variables to check for any existing inconsistencies and outliers. All the necessary data corrections were done accordingly.

Then using SPSS16.0 software package, data analysis was done following an analysis plan drawn up by the research team. Data analysis basically involved univariate and bivariate analysis on selected variables of interest.

The results of the analysis are interpreted in the light of the problem statement in order to make conclusions and recommendations.1.4.5

Constraints and Limitations of the StudyThe study faced certain constraints as stated below:

The primary limitation of the study was the small sample size due to the rainy season. The study was carried out in September when most of the taxpayers were on holidays especially those dealing in weather sensitive goods such as clothing and perishables items. Thus only sixty eight percent of the total taxpayers were interviewed. Also some of the towns were inaccessible due to bad roads.

Data was collected by students from Colleges/Universities; majority had to rush because colleges were already opened. A lot of flaws were discovered during the coding which made the data processing cumbersome.

CHAPTER TWO

2.0Overview of Sierra Leone Tax SystemSierra Leones tax system and its administration have undergone significant reforms from the mid-1980s to 2002. Over this period, the sales tax was introduced, the Income Tax Act redrafted, and the scope of excise duties scaled back and simplified. The National Revenue Authority (NRA) was established in 2002 with a view to strengthening revenue administration. Consistent with the objective to bring down tariff rates to levels in line with the Common External Tariff (CET) of the Economic Community of the West African States (ECOWAS); import duties have been reduced gradually.

Sierra Leones Income tax is relatively comprehensive and comprises taxes on profits and on individual incomes, capital gains tax on profits from sale business assets or investment, withholding taxes on a wide range of incomes and presumptive taxes on small businesses. The Income Tax Department (ITD) administers the personal income tax, corporate tax and some domestic indirect taxes like entertainment tax, restaurant tax, message tax, e.t.c.The indirect tax system comprises of the sales tax at a rate of 15 percent imposed on domestic and imported goods; Excise duties are levied on a few commodities such as tobacco, alcohol and a few services, including hotel accommodation and restaurant services. Most indirect taxes namely; import duties, sales tax (import & domestic), excise duties, are collected by the Customs and Excise Department (CED) except for taxes on domestic services which are collected by the ITD. The Road Transport Department collects motor vehicle registration and annual licensing fees. The other charges, fines and royalties from Ministries, Departments and Agencies (MDAs) are collected by the Non Tax Revenue unit of the National Revenue Authority. Since the inception of NRA in 2003, domestic revenue mobilization has been on the increase (see table below). Domestic revenue, minus road user charges, increased to 277.811 billion in 2003 (with NRA) from Le231.766 billion (Pre-NRA) or by Le46.045 billion (20%). Domestic revenue collection improved further with the consolidation of NRAs position to Le 340.113 billion in 2004 from Le277.811 in 2003 or by Le62.302 billion (22%). This trend has continued onto 2008 when total revenue collection increased by 23 percent.

Collection of revenue from Mines and other Departments has surged significantly. For instance, revenue collection from mines in 2005 amounted to Le 8.532 billion, higher than the sum of three years collection (6.270 billion) Pre-NRA (2001, 2002 and 2003) by 2.262 billion. Similar picture is shown for other non-tax revenues.

In Sierra Leone, the Ministry of Finance and Economic Development (MOFED) estimated the tax gap for Sierra Leone (excluding Road Users Charge) in 2008 at 3.63% which represented 0.4% of GDP.

MOFED alluded to the effect of a declining level of tax morality in the country and ascribe this to various factors. These include: Resentment over what is regarded as unfair, burdensome or excessive taxation; High level of smuggling; Ineffective countering of avoidance; and A high scale of evasion. Noldred, (1992) undertook a study on the development of a voluntary compliance tax policy in Sierra Leone on the basis of the Income Tax Act and its related legislation, which if injected into the income tax system would increase revenue and act as a deterrent to non-compliance. Questionnaire survey and interviews of Income tax officers and reports were employed in the data collected. In analysing the data collected use was made of basic mathematical and statistical techniques- such as ratios and percentages, tables and graphs. He recommended Personnel training, computerisation of the department and staff motivation as the way forward to increase tax revenue. Unlike Noldred, the taxpayers perception survey focused on both direct and indirect taxes.

In some developing countries, extreme unwillingness to comply increases the readiness of tax payers to pay bribes in order to reduce their tax liability. A survey conducted in 2003 in Tanzania explored citizens views on taxation and reasons to comply or not with the local authorities in Tanzania. It was revealed that the lower the level of tax evasion and the tax law complexity, the lower is the level of fiscal corruption in a country. (Richardson, Grant, 2006).

Furthermore, the high incidence of corruption among tax officials is likely to reduce tax compliance and provide incentives for corruption. Citizens perceptions about the role of the state, how the tax law is administered, as well as enforcement and trustworthiness of government institutions are also contributing factors to taxpayers behaviour. An opinion poll conducted in June 2006 by Gallup International on behalf of Europe aid in Georgia surveyed 1000 citizens in face-to-face interviews, exploring the Georgian citizens awareness of their rights and obligations under the tax code of Georgia and their perceptions of the tax administration. This exercise was carried out using indicators such as perceptions of public sector corruption, levels of integrity of public officials, public level of satisfaction with the tax system, service assessment and interface with tax officials, etc. Ugandas first National Integrity Survey, conducted in 1998, used a Sentinel Community Surveillance survey, including opinion survey, focus group discussions and key informant interviews, as well as a service workers survey, to gather corruption-related data while involving beneficiaries in the process of evidence-based planning. 94,000 people together with 1600 service workers and 180 key informants were interviewed in this process, gathering both quantitative and qualitative data from representative sites. Although not exclusively focused on the tax administration, the survey collected data on perceptions of the Uganda Revenue Authority (URA) services. The survey showed that the URA services were very good but the punishment for tax evasion was too rigid. Also most of the transit and warehousing services had pitfalls in terms of controls and monitoring. Although not specifically focused on corruption-related issues, the Tanzanian Revenue Authority (TRA) conceived and conducted a TRA stakeholders perception survey in 2003, which was a baseline survey followed between January and April 2005 by a second survey, soliciting the views of stakeholders on how they perceive TRAs operations and tax administration as a whole in Tanzania. It was revealed that the operations and tax administration of TRA was effective due to automation though some level of corruption was evident at the border posts.The South Africa Revenue Services (SARS) in its pilot study of the perception of taxpayers in South Africa (2004) indicated that although the majority of respondents did not feel it is unfair to pay tax, all of the respondents were of the opinion that waste and corruption in government is high. In addition, the majority of the respondents felt that taxes are used by government for meaningless purposes and that the government does not provide enough information about how they utilize taxpayers money. The respondents therefore felt that tax rates should be reduced. One of the most effective tools for making people more positive is to empower them with knowledge. It is submitted that there is no better tool for government to positively influence the taxpayers of a democracy than to provide them with knowledge on how taxpayers money is utilised. Any resistance or inability by government to communicate this most important area of social life, will lead to possible speculation and resistance. CHAPTER THREE

3.0 PRESENTATION AND DISCUSSION OF RESULTS

This chapter presents discussion and interpretation of the data collected from the field in the form of tables and charts.

3.1 Distribution and Socio-economic Characteristics of Respondents

A total of 2,558 respondents were interviewed from districts and regional headquarter towns all over the country. Western Area accounted for more than half of the respondents (52.3 percent), and the provinces provided 47.7 percent of the respondents. The highest number of respondents from the provinces was obtained from South (21 percent). East and North constituted 18 and 9 percents respectively.

The result thus obtained showed a clear indication that the Western Area has more businesses and taxpayers than any other region in the country. In the case of the provinces, the Southern province had more businesses.

Sex

Out of a total of 2,558 respondents, about 18 percent were female, a whopping 82 percent were male. This shows, however, and supports the fact that businesses in Sierra Leone are largely owned by men. Female ownership and control is very minimal as manifested in the study.

Table 1: Respondents Sex

RegionRespondents Sex

MalePercent of MaleFemalePercent of FemaleTotalPercent of Total

West108351.425456.4133781.0

South44421.18919.853383.3

East 38618.37717.146383.4

North1959.3306.722586.7

Grand Total2108100.0450100.0%255882.4

Table 1 showed that the number of males interviewed throughout the country more than four times greater than female. AgeRespondents were grouped into three broad categories: between 15 and 35 (youths), 36 and 56 middle age and the elderly or ageing (above 56 years). The result obtained confirmed that most taxpayers (62 percent) were middle age people between ages 36 and 56 years. Youths also constituted a significant proportion (28.2 percent), whereas the elderly respondents (taxpayers) formed only 10 percent of total businesses interviewed.

Marital Status

Respondents were required to tell whether they were married, single, divorced, separated or have lost a partner through death (widow/widower). From the result, more than three-quarter (78.1 percent) of the respondents are said to be married. With approximately 19 percent being single, a less than significant proportion were found to be widow/widower (1.9 percent), separated (1.7 percent) and divorced (1.4 percent).

Married respondents dominated the number of respondents interviewed in all regions in the country. In each region married respondents exceeded three-quarter of the respondents.

Educational Level

The level of education of taxpayers or business owners is significant in the area of administration, management and control of operation and personnel and also relevant in the areas of record keeping, finance and accounting and in determining the tax liability at the end of the tax period.

The study showed more than three-quarter of the taxpayers interviewed could read and write (western education). See Figure 4 below:

That is, about 46 percent of them completed secondary education and 30.3 percent completed tertiary level education. However, a quarter could not adequately read or write simply because they never attended school (6.5 percent), completed only primary education (5 percent), went through Quranic (8.6 percent) or non formal education (3.5 percent). See Table 2:Table 2: Educational Level of Respondents

Read and WriteNumberPercent of Grand TotalCould not read and/or writeNumberPercent of Grand Total

Secondary117345.9Never Attended school1666.5

Tertiary77530.3Non Formal903.5

Chinese10.0Primary1345.2

Quranic Studies2198.6

Total194976.260923.8

Grand Total2558

Quite a significant proportion of taxpayers is said to be able to read and read. In actual fact, only 3 in 10 or about 30.3 percent could have the knack to handle the management of records and personnel since they were found to have attained tertiary education.

3.2Business Environment

3.2.1Nationality

The business environment of Sierra Leone has for decades been dominated by foreign nationals such as Lebanese, Indians, Syrians and Nigerians both in terms of number and contribution to trade and growth. However, in recent years, we have experienced gradual growth in indigenous interest in business. Of the taxpayers interviewed, 89 percent were Sierra Leoneans while the remaining 11 percent were other nationals. This indicates that Sierra Leonean businesses now dominate (in number) the business arena of the country as opposed to other nationals. Nevertheless, the preponderance of Sierra Leoneans in the sector did not reflect their influence in the sector. That is, even though they dominate in number yet they were found to be engaged in small scale businesses that are less influential in the areas of productivity, trade, economic growth and contribution to tax revenue.

Other nationals (Fullahs, Marakas, etc) were found in all regions of the country. They trade more in the Western Area (13.2 percent) and Eastern Province (12.5 percent) than in the South (7.5 percent) and Northern regions (3.1 percent).

The small fraction of other nationals appeared to be the driving force in trade, productivity, economic growth and tax payment in the country. They were found to have engulfed (92.3 percent) the large and medium size businesses and thus occupy the heart of trade and investment in the country.

3.2.2Other Nationals in the Business Sector of Sierra Leone

Other Nationals, though few, were found to be very influential in the business sector of Sierra Leone; as over 60 percent of their businesses are large tax cases. A total of 13 other nationals were found engaged in different types of taxable businesses all over the country. They were grouped into five: West Africans, other Africans, Americans, Europeans and Asians. The West Africans comprised of Nigerians, Guineans, Gambians, Ghanaians, Senegalese and Liberians. Other Africans include Moroccans and Equatorial Guineans. Asians include Lebanese, Indians, Chinese, and Koreans. Europeans include British, Italians and Spanish and the Americans include only citizens from the USA.

From Figure 6, it is clear that Asians, mainly the Lebanese (34.4 percent of total other nationals) and Indians (14.0 percent of total other nationals) formed the largest proportion of other nationals engaged in business in Sierra Leone. West Africans formed the second largest group; with Nigerians and Guineans accounting for 28.3 percent and 12.5 percent of respectively. The British accounted for the highest number of Europeans (six out of a total of nine) Taxpayers in Sierra Leone. From the study it could also be noted that four nationals in the other nationals category- Lebanese (34.4 percent), Nigerians (28.3 percent), Indians (14.0 percent) and Guinean (12.5 percent) - accounted for a total of 89.2 percent engaged in taxable activities in Sierra Leone.

3.3Description of Businesses

The variables selected for business description were location, size, nature of business and the category to which the business could be largely related as a taxpayer. Business could be located either in urban, rural or coastal settings. The survey considered all district and provincial headquarter towns as urban. Rural settings constitute those towns and villages that are not headquarter towns. Coastal areas are localities situated along the Atlantic Ocean or seas and rivers across the country.

3.3.1Location of Businesses

In identifying the location of businesses, 86.1 percent of them were found to be in urban areas; 13.6 percent in rural and only 0.3 percent in coastal areas (See Figure 7 below)

From this result it could be inferred that the bulk of the businesses in Sierra Leone are found in regional and provincial headquarter towns. Detail analysis disclosed that Western Urban and Rural has the highest proportion of businesses in its Urban and Rural Areas (54.6 percent and 36.7 percent respectively) than any other region in the country.

Figure 8 revealed that in the Western Area and Eastern region there are more businesses in the urban than rural areas; where as the Southern and Northern parts of the country have more businesses in rural than in their urban settings. Businesses in Coastal areas were found in Western Areas and Eastern Regions. Western area accounted for 85.7 percent of businesses in Coastal Areas and the remaining 14.3 was found in the Eastern Region.

3.3.2Size of Businesses

Business turnover was used to determine the size of the business. The turnover was obtained using the annual total sales of the business. Businesses with turnover less than Le 200 million are categorized as small businesses. Those with turnover greater than Le 200 million but less than Le 600 million were considered to be medium size businesses, while large businesses are those with turnover greater than or equal to Le 600 million.

The result of the survey showed that more than half (54 percent or 1,382) of the businesses in the country are small businesses. Medium size business constituted 33.4 percent of total businesses in the country. Large businesses comprised only 12.6 percent of total businesses in the country.

It could be observed from Figure 9 that small and medium sized businesses account for 87.4 percent of total businesses in Sierra Leone. Put simply, seven in any eight businesses in the country are small and medium sized businesses. It is also evidence from the study that the Western Area host the highest proportion of small, medium and large businesses (46.4, 55.2 and 69.8 percent respectively) (See Table 3).

Table 3: Size of Businesses by Region

Size of Business

SmallMediumLarge

RegionNumberPercent of total NumberPercent of total NumberPercent of total

West64146.447155.222469.8

South 33224.015818.54313.4

East 23617.118121.24614.3

North17312.5445.282.5

Total1382100.0854100.0321100.0

Table 3 revealed that medium and large businesses are concentrated in the Western Area which accounted for more than half of medium size businesses (55.2 percent) and for about 7 in any 10 large businesses in the country. This is pointer to the fact that Freetown and the Western districts are central to business activities in Sierra Leone.

3.3.3Nature of Businesses

Businesses were broadly categorised into five sectors: (i) Production and distribution of goods, (ii) service delivery, (iii) Construction, Real Estate and Housing, (iv) Parastatals and Government Agencies and (v) NGOs. Figure 7 below illustrates that businesses in the production and distribution of goods (87 percent) formed the bulk of businesses interviewed during the survey. Service providers formed a handful of businesses (9 percent) interviewed. Construction, Real Estate and Housing, Government Agencies and NGOs formed a total of 3.4 percent of total taxpayers interviewed for this study.

Figure 7a reveals that majority of the businesses (83.2%) in the Production and Distribution of Goods sector are trades. While producers (companies, agriculture and fishery, mining and artisans) comprised a meagre 3.5 percent, Companies accounted for 1.5 percent of total taxpayers interviewed. The predominance of trades in this sector is an indication that they are major players in the revenue mobilization drive of the Authority.

The key drivers in the service sector are entertainment service providers (1.6 percent of total businesses) comprising of hotels, restaurants, bars, night clubs, casinos and pubs. Finance and Communication service providers also formed an essential component of the respondents. Services not identified were grouped into Other Services (i.e. transportation, aviation, clearing and forwarding, consultancy, accountancy, etc) and formed 4.7 percent of total respondents.

3.3.4 Type of TaxpayerIn trying to ascertain the type of taxes respondents pay, they were required to tell whether they were importers, non importers, clearing agents or tax consultants. Responses on the subject apparently indicated that about three-quarters (76%) of our taxpayers are non-importers. Importers represented 22 percent of the taxpayers; whereas 1.1 percent are tax consultants or accountancy firms and about 0.9 percent is clearing and forwarding agents (See Figure 8).

This however, implies that the commonest taxes paid in this country are the direct taxes and domestic taxes on goods and services such as company tax, personal income tax, and domestic sales tax, withholding tax on rent, excise duty, message tax, entertainment tax, hotel accommodation, restaurant tax, etc. That notwithstanding, importers usually account for the highest proportion of tax collected by NRA over the years. That is to say, the 22 percent of importers paying import duty, import sales tax, excise on petroleum products, and other excises accounts for more than half of total revenue collected by the Authority over the years.

3.4 Knowledge of Taxpayers

An effective tax system that would raise sufficient revenue to meet government expenditure needs, requires a taxpaying public that knows the rationale and conduct of a tax system. This would basically help promote better compliance and effective tax administration. Therefore the extent of taxpayers knowledge is a basic core to orientate and ignite a taxpaying culture which would galvanize, with ease, the desired lubricant to empower government to execute its function. The NRA is fraught with a complex community which has a statutory liability for paying taxes. This section illuminates the extent to which taxpayers are educated on the fundamental issues that constitute a solid tax knowledge background.

3.4.1Raison d'tre for Paying Taxes

To determine the knowledge of taxpayers, respondents were asked why they pay taxes. Table 4 presents an array of reasons among which; a simple majority (59.5 percent) revealed for development purpose, 12.6 percent acknowledged they pay taxes because its an obligation, 3.88 percent cited to operate legally, while 3.87 percent admitted to generate revenue for government and 3.81percent mentioned because they are in business.

Table 4: Why do you pay tax (%)?

ReasonWestSouthEastNorthAverage

Development56.158.46277.359.5

Obligation16.46.813.22.212.6

To operate legally4.265.282.60.83.88

Generate revenue3.813.195.622.23.87

Because I am in business3.295.824.321.33.79

Dont Know1.422.063.021.81.88

Others14.7218.459.2714.414.48

Although insignificant, result shows that some taxpayers perceived other reasons for paying taxes such as; being forced to pay, NRA asked them, and because they are foreigners. In addition to numerous reasons given, about 2 percent admitted they do not know why they pay taxes.

At regional level, over half of the respondents in each region admitted taxes are paid to enable the country develop. While 16.4 percent and 13.2 percent in the West and East, 6.8 percent and 2.2 percent in the South and North regions respectively say they pay taxes because it is a statutory right. With the exception of all other regions, 0.12 percent of respondents from East perceived they pay taxes because they are foreigners. Also, excluding respondents from the East, all other regions noted they pay taxes because they are required by NRA to do so.

Among those who do not know why they pay taxes; East recorded the highest (3.2percent), followed by South (2.1percent), North (1.8percent), and West (1.4percent).

Table 5: Where do you pay tax?

Office Percent

Income Tax Dept15.5

Customs House1.7

Non-Tax Dept0.12

Head Office0.6

NRA79.3

Local Council2.27

Dont know0.16

Agents0.4

3.4.2 Where do you pay tax?

One of the targets of NRA is to create an informed tax environment with strategic location of its tax offices that could attract attention and easily be accessible to taxpayers. Respondents were required to identify where they pay their taxes. Survey result reveals that on the whole, 97.4 percent cited making payments to an NRA office.

Among the 97.4 percent of respondents who mentioned that they make payments to NRA office, 79.3 percent did not specify which of the NRA offices/departments they pay their taxes. In other words, these taxpayers only said that they pay to NRA office. However, 15.5 percent reported that they pay their taxes to the Income Tax Department, 1.7 percent to Customs House, 0.12 percent and 0.6percent to Non Tax Revenue Department and Head Office respectively. It is evident from the analysis that majority of taxpayers interviewed knows where to pay their taxes. Nonetheless, a handful (2.27%) cited local councils, while 0.4 percent admitted that agents pay on their behalf with an insignificant percent (0.16) that could not identify where taxes are paid. 3.4.3Types of taxes paid

Government and NRA are confronted with the task of enabling individuals comply with their statutory liabilities as specified in the laws of Sierra Leone. However, with a population of over 70 percent illiterate, the extent of taxpayers knowledge on the different tax categories and tax type payable at every transaction point could pose a serious constraint to tax compliance.

When asked the type of tax paid, majority (42.2%) of the taxpayers identified custom duties, while 39.3 percent cited income tax. About 8 percent acknowledged paying all taxes and, 8.6 percent could not recognize the type of tax they pay. At regional level, respondents in western area identified most types of the taxes paid. Over 80 percent identified paying customs duties and income tax, while 58 percent pay all taxes, 54.4 percent cited having no knowledge on the type of tax they pay. Evidenced in this, is not only the fact that western area accounts for a significant majority of those who could not identify the type of tax they pay, but over 10 percent of respondents in south and east, and 23.5 percent of taxpayers in the north acknowledged ignorance.

Table 6: Type of Taxes paid

Tax TypeWestSouthEastNorthAll

Custom Duties92.01.42.04.644.2

Income Tax83.69.35.81.339.5

All Taxes58.310.013.318.37.6

Dont Know54.410.311.823.58.6

Though table 6 above presents tax type by major categories, taxpayers are expected to know the specific taxes they are obliged to pay at every transaction point. Result shows that about 12 percent of the respondents identified import duty; 6.7 percent pay corporate tax, 7.0 percent assessment, 2.5 percent sales tax and 1.8 percent withholding tax. Among other specific taxes mentioned were entertainment tax, property tax, personal tax and travel tax; each of which was very insignificantly cited.

3.5Type of goods exempted from taxes

Tax exemptions and relief are meritorious privileges enjoyed or rights granted on an individual, group or organization for tax waiver and concession as specified by law. It is a statutory obligation for government to provide tax exemptions for economic, social and political reasons as and when thought fit.

When required to identify the type of goods exempted from taxes, the extent of respondents perceptions varied highly as a large range of items was noted. A significant majority (74.7%) was not aware of the type of goods are exempted from taxes; whilst 7.86 percent revealed none is exempted (see Table 7).Table 7: Type of Goods ExemptedGoodsWestSouthEastNorthTotal

Agricultural Equipment0.310.040.120.350.82

Food2.970.200.780.164.10

Medicine1.880.200.080.122.27

Building Material0.390.080.000.000.47

Machinery and Spare parts0.310.000.000.000.31

Charitable Goods0.780.120.160.161.21

Clothing0.120.080.040.000.23

Computer and Accessories2.540.200.200.273.21

Drinks0.120.040.080.000.23

Rice0.740.080.390.001.21

Educational Needs0.200.000.160.000.35

All types1.020.000.040.001.06

None2.931.453.050.437.86

Dont Know36.5918.6912.437.0074.71

Others0.940.270.310.431.95

Predominant among items which respondents identified as exempted goods were food which recorded the highest (4.10%) followed by computer and accessories (3.2percent), medicines (2.27%), charitable goods (1.21%) and agricultural equipment (0.82%).

Though the sequence of thoughts for food and computer accessories looks consistently identified in all regions as goods with tax exemption, findings showcase mixed views about other goods. Western area and east had a consensus on charitable goods, while south and north cited medicine and agricultural equipment respectively. An insignificant proportion of respondents cited that tax is exempted for clothing, drinks, building materials, machinery and educational needs. What remains lucid is that respondents exhibited an apparently low knowledge on tax exemptions.

3.5.1Who benefits from tax exemption?

To further ascertained taxpayers knowledge, respondents were required to shed light on who benefits from tax exemptions and relief. In table 8 below, majority (69.1%) of the respondents admitted ignorance on who benefits from tax exemptions and relief. This situation is prevalent in all regions as most of the respondents revealed the same; a strong indicator of the need to embark on massive taxpayer education.

Table 8: Who Benefits from Tax Exemptions and Relief?

TypeWestSouthEastNorthTotal

Aged and Children1.170.510.702.705.10

Diplomats0.820.120.040.041.00

NGOs2.311.600.160.314.40

Students0.940.120.940.162.20

Disabled0.900.160.630.702.40

Government1.290.310.980.703.30

Citizens3.050.391.370.435.20

Consumers0.820.000.120.041.00

Dont Know35.3016.4611.186.1469.10

None1.990.120.510.002.60

Others1.760.630.510.903.80

However, for those who perceived to know, most (5.2%) cited the citizens, followed by the aged and children (5.1%), NGOs (4.4%) and Government (3.3%). Perceived beneficiaries such as disabled, students, diplomats, and consumers, were also cited. An insignificant percent of other beneficiaries was noted, whilst 3 percent cited no one benefits from tax exemptions and relief.

3.6: Tax Valuation

Table 9: Have you ever objected to tax valuation?

RegionPercent

YesNo

West21.578.5

South7.392.7

East17.782.3

North25.874.2

Total18.381.7

In table 9 majority (81.7%) of the respondents admitted not objecting to tax valuation, whilst 18.3 percent did. Over 70 percent of respondents in all regions reported to be in agreement with tax valuation; with taxpayers in the south (92.7%) recording the highest. On the other hand, significant responses were recorded in the north, west and east for those who were not satisfied with tax valuation.

Table 10: If so were you satisfied with the outcome?

RegionPercent

YesNoNot applicable

West19.416.064.6

South17.85.376.9

East35.912.451.8

North10.714.275.1

Total19.813.966.3

Result suggests that majority of the taxpayers were satisfied with tax valuation procedures and outcomes. Notwithstanding the high degree of satisfactory tax assessment, the result also revealed controversy especially in the north and west whose impact could be serious on tax compliance.

Whether such controversies were resolved satisfactorily; over half of the discontented respondents (19.8%) admitted, while about 14 percent said no. For some respondents, outcomes were satisfactorily resolved whilst others remained dissatisfied with outcomes for reasons stated in box 1. Box 1: Taxpayers view on Tax assessment/valuationReasons for satisfactory outcomes Because dissents were rectified after reassessment

Revenue generated is for development of the state

Reasons

For maintaining dissatisfaction Method of assessment not convincing

Could not better understand the assessment approach

No action taken when reported

Incurred losses during the period

Tariff levied not compatible with goods

No business for a long time

3.7Obtaining information about taxes

The NRA has the responsibility to enlighten and keep its taxpaying public informed with relevant information that greatly influences their operations and revenue compliance. The use of different medium of information as a way of empowering taxpayers with the requisite tax education is one of the potent tools for making them more positive.Table 11:Sources of Information (%)SourcesWestSouthEastNorthTotal

Radio Programmes3.461.700.781.036.97

Radio Jingles3.801.861.681.528.87

Newspaper Articles10.942.531.951.9717.40

NRA Handbills1.420.950.410.843.63

NRA Offices16.3813.2710.6010.5050.76

Clients/Agents5.052.202.082.0511.38

All of the Above0.650.000.200.181.04

Total41.7022.5117.7018.09100.00

In Table 11, half of the respondents claimed their main source of obtaining information is from NRA offices. Newspaper articles and clients/agents though insignificantly cited are the other most obtained information sources with 17.4percent and 11.38percent respectively. Information got from electronic media is very minimal. Handbills are the least identified sources of information. NRA offices and newspaper articles are the predominantly cited sources of information for all the regions.

Figure 9 presents views on the effectiveness of the different sources of information on taxation to taxpayers. Although radio programmes are not a prominent source of obtaining information, yet the survey revealed that it is the most effective source at (22%), followed by NRA office (14.6%), while handbills (3.5%) is the least. Though obtaining information from newspaper articles and clients are notably high, respondents reported that they are the least effective sources.

Apparently, respondents obtain little information from sources which could be official, more credible and educative. Whilst obtaining information from NRA offices is the most frequent and effective source, other frequently obtained sources are very less effective. Also noteworthy is that, taxpayers frequently obtain information from other sources which may be unofficial and misleading. The lesson is that NRA should be more proactive in educating taxpayers through available and widespread radio programmes and jingles which are cited as the most effective sources of information.

Respondents were asked to suggest other alternative sources of providing information on taxation. The most frequent alternative sources of information highlighted by respondents are presented in Box 2.

Box 2: Alternative Sources of Providing Tax InformationAlternative

Sources of

Information A tax resource centre at all NRA department

Conduct regular workshops and seminars

Conduct community outreach tax programme

Erect more advertisement bill boards countrywide

More radio programmes in local languages nationwide

Public address system

Handbills and journals

NRA website

Street sensitization

As an auxiliary to empowering taxpayers with better knowledge, respondents were asked to suggest issues on which NRA should give priority in providing information to the taxpaying public. Amongst the numerous suggestions made by respondents the most reoccurring ones are outlined as follows;

Information on how revenues are spent

A list of taxable and exempted goods

Benefit of complying with tax laws

Different categories of taxes and tax exemptions

Comprehensive information about the taxes collected

Guide on how to pay taxes

Detailed information on Customs operation

Changes in tax policy

3.8Knowledge on tax instruments or publications

Tax and other revenue policy measures are enacted by law to regulate the operations of individuals and businesses. Contents of such important documents are reviewed as Government deems fit.

3.8.1Awareness of the existence of tax instruments

To further gauge the knowledge of taxpayers who have the statutory liability for paying tax, Table 12 below presents the extent of awareness respondents have on the existence of such publications.

Majority of taxpayers are ignorant about the entire regulatory instruments that specify the dictates of their daily operations. Respondents claimed to be better acquainted with Income Tax Act 2000 in all the regions. About 46 percent in Western area cited awareness about Income Tax Act 2000, followed by East (34.3%), North (30.2%), and South (24.6%).

Table 12: Knowledge of the Existence of Statutory Instruments (Percent)

RegionIncome Tax Act 2000Customs Act 1978Customs Code 1980Valuation GuideNon-Tax Revenue ActFinance Act 2008

YesNoYesNoYesNoYesNoYesNoYesNo

West45.854.220.879.212.088.012.987.112.088.011.788.3

South24.275.84.595.51.598.52.497.61.598.51.998.1

East34.365.715.384.710.289.89.990.19.390.79.790.3

North30.269.811.688.46.793.39.390.76.793.38.491.6

Total37.962.115.684.49.091.09.990.18.891.29.091.0

The trend is the same, despite the extremely low degree of awareness for the other statutory instruments in all regions.

Table 13a: Knowledge on the Existence of Other Tax Publication (Percent)

RegionsPercent

YesNo

West4.295.8

South2.897.2

East4.595.5

North6.793.3

Total4.295.8

To further find out the extent of taxpayers knowledge on the existence of statutory instruments, taxpayers were asked whether they are aware of other tax publications. In response, only 4.2 percent admitted, while a significant majority (95.8%) said no. Among the minority who acknowledged awareness of other tax publications, most are non NRA related publications.

Although majority of the respondents specified non related NRA tax publications, Table13b presents the existence of other tax publications specified by respondents. Among these, the existence of the Finance Act 2007 was the most cited (13.1%), while NRA leaflets (8.4%) was the least but the only recorded existence in every region. Western area is the only region where over half of the respondents who noted awareness of other tax publications cited the existence of all the specified instruments.

Table 13b: Other Tax Publications

WestSouthEastNorthTotal

Customs Tariffs 19955.60.90.02.89.3

NRA leaflets4.70.91.90.98.4

Finance Act 200711.20.01.90.013.1

PAYE Schedules8.40.90.00.910.3

Other

13.115.017.813.158.9

3.8.2 Access to tax instruments or publications Beyond the level of awareness for the various statutory instruments, the study sought to ascertain the extent to which respondents who claimed having awareness of the existence of tax publications, actually have access to such publications.

In Table 14, an overwhelming majority (71.61%) maintained that they do not have access to any tax publication. For those who attested having access, over two-third cited Income Tax Act2000, whilst 1.9 percent and 1.0 percent cited Customs Act 1978 and Finance Act 2008 respectively. Access to the remaining tax publications were less cited while less than 1percent have access to all. Table 14: Access to Tax Instruments

Statutory InstrumentsPercent

Income Tax Act 200022.65

Customs Act 19781.93

Customs Code0.39

Valuation Code0.87

Non Tax Revenue Act0.19

Finance Act 20081.4

Other Tax Public 0.1

All0.87

None71.61

Figure 10 shows that access to multiple tax publications is almost impossible. This situation is not surprising as findings indicate that majority are ignorant about their existence.

3.8.3 Respondents views on tax publications

In Table 15, perceptions on tax publications revealed Income Tax Act 2000 as the most simple (49.5%), followed by Finance Act 2008 (28.8%) and Customs Act 1978 (23.6%). Whilst Finance Act 2008 and Non-Tax Revenue Act were regarded as the most current; customs Act 1978 (21.5%) was the highest cited as outdated.

Although none of the tax instruments were significantly perceived as complicated, perceptions were closely rated for ambiguous and amendments. However, Finance Act 2008 (13.8%) is the most cited for ambiguity, whilst valuation guide (40.7%) is the highest recorded for amendment.

Table 15: Opinions on Tax Statutory Instruments (Percent)

InstrumentAmbiguousSimpleCurrentOutdatedRequires amendmentScattered / complicated

Income Tax Act 200010.549.514.55.617.03.0

Customs Act 197811.023.612.721.528.72.5

Customs Code 198010.821.79.617.535.54.8

Valuation Guide11.721.69.312.340.74.3

Non-Tax Revenue Act9.219.122.711.330.57.1

Finance Act 200813.828.823.88.821.33.8

Tax policy should be a simple and easy to interpret and administer document so that it is easy to comply with. A complex tax policy may impose a disproportionately high level of compliance cost on taxpayers. Although findings revealed that Income Tax Act 2000 is the most easily understood by respondents, yet none of the tax publications recorded above 50 percent as being simple.

3.9: Service DeliveryThis section discusses the scope and nature of the services delivered by the Authority to the public. 3.9.1Satisfaction on services provided by NRA

In order to better gauge the conduct of NRA staff, respondents were required to provide an assessment on various aspects of their operations. With regards to the speed of response to taxpayers needs, an overwhelming majority (86.8%t) admitted that the speed was good, whilst about 7.0 percent certified that it is poor. Although respondents from other regions claimed the speed of response to their needs is significantly good, about 31.1 percent from the North cited the contrary. Also, with respect to the pursuit of sustaining a credible service delivery, perceptions to standard of work delivered by NRA was significantly noted by majority (88.5%) of the taxpayers to be good. Responses from all other regions were significantly recorded to be at least good except for the north where about 30percent admitted the standard of work to be poor.

On the basis of assessing some of these service delivery criteria, respondents views continue to be consistently good. This trend is evident in the opinions on attitude of NRA staff, ability to solve problems and effectiveness in rendering services. Majority (89%) acknowledged NRA staff to be good. This result is glaringly the same for all the regions for which the south and the north consistently registered the highest and the least views respectively.

On the whole, figures 11 and 12 present an overall outlook on the degree of satisfaction taxpayers derived from the services delivered by NRA. Generally, an overwhelming majority (91%) certified the conduct of services delivered by NRA to be at least good. While 6percent testified to be fair, a total of 2.7 percent noted to be poor or worst.

The regional outlook is that, the south recorded the highest (96.4%) in noting that the overall satisfaction they derived from services rendered by NRA is good. On the contrary, the north recorded poor to very poor in describing the overall conduct services rendered by NRA to taxpayers. The overall results show that at least 80percent of respondents (at every region) admitted the level of satisfaction to be good.

3.9.2Reasons why services provided are fair or worse

For those who rated services provided by NRA to be fair or worse, box 3 presents the most frequent explanations provided to justify their claims.Box 3: Reasons for Rating Services Provided by NRA as Fair or WorseSpeed of Work Always lethargic in executing their duties

Delay in reacting to my needs

Delay in solving problems

Manual processing of documents

The system procedures are outdated

Bureaucracies are unnecessarily many

Standard of work Complex process

Centralised documentation process

Lacks consistency

Sometimes guess in assessment

Attitude of NRA Always bribe them to do their work

We always run after them to pay our taxes

Delay in reacting to my needs

Custom official are always on phone

Very arrogant with customers

Ability to solve problems Regular errors on my assessment

Delays a lot in responding to issues

Lacks basic knowledge on the issues

Difficult to cope even with explanations

Effectiveness Delay unnecessarily

Partial in executing duties

Very slow to make their presence felt in other areas

They only respond when bribed

3.9.3Complaint and response by NRA

In an effort to improve on its communication with the public, the NRA instituted complaints and suggestion boxes in every department and regional office. This is a subsidiary to ease the burden on those who for one reason or the other could not access the relevant authorities to express their grievances or complaints.

Whether respondents complained their grievances, majority (57%) attested no. This situation is similarly prevalent in all regions; where at least 75 percent of respondents admitted they never complained their grievances.

To further evaluate the degree at which NRA addresses complaints by taxpayers, figure 15 shows that over half of those who complained noted their complains were never treated satisfactorily. While 21.0 percent stated that theirs were treated satisfactorily. About 22.0percent could not evaluate.

Generally, Figure 14 shows an apparent prevalence of unsatisfactory treatment to the degree at which complaints are dealt with countrywide. In western area, where over 50percent of the taxpayers are found, 62.7percent of respondents reported unsatisfactory treatment of their complaints. The situation is similar in the north on this issue. Significant number of respondents could not however evaluate whether there grievances were dealt with satisfactorily by the Authority.

3.9.4Behaviour of NRA staff to Taxpayers

Good human relations is a desirable constituent in the operational life blood of any organization; especially those that interface with the public. Over half of NRA staffs especially those in the revenue collection agencies, interfaces with the public on a daily basis. Though there is a code of ethics to regulate staff behaviour, the study sought to know how compatible staff behaviour is to the conduct of goodwill for the Authority. Table 16 presents respondents perceptions on the degree of staff helpfulness and friendliness in the discharge of their duties.

Table 16: How do you agree or disagree with the fact that "staff were friendly and helpful" (Percent).

RegionStrongly agreeAgreeDisagreeStrongly disagreeNone of the above

West16.874.45.61.02.2

South12.183.62.90.21.2

East21.872.14.70.90.4

North22.766.58.61.60.5

Total17.275.25.10.91.6

Majority (75.2%) subscribed that NRA staff are helpful in the discharge of their duties. Whilst relevant to note that majority (92.4%) at least reported on the affirmative, about 6.0 percent disagree and strongly disagree that NRA staff are helpful. Findings show consistency of respondents in agreement to the significant degree of staff helpfulness in all regions. However, the North (10%) recorded the highest number of respondents who at least disagreed.

The study further revealed a significant level of consistency in response in agreement to staff politeness. Table 18 shows that about 92.7 percent of the respondents reported that staff were courteous in the discharge of there duties.

RegionTable17: How do you agree or disagree with the fact that "staff were polite and courteous"(Percent).

Strongly agreeAgreeDisagreeStrongly disagreeNone of the above

West16.475.94.70.82.2

South12.382.83.30.01.6

East20.871.54.01.12.6

North16.774.16.91.70.6

Total16.476.34.40.82.1

3.9.5Comparing NRA to the previous tax administration system.

Table 18: Did you pay tax before the NRA was established?

RegionYes (%)No (%)

West52.447.6

South43.856.2

East57.342.7

North51.848.2

Total51.548.5

Revenue generation was flawed by numerous leakages as a result of pervasive inefficiencies in the previous tax administration system. The NRA was instituted in 2003 as a corrective measure to forestall and sustain strategies that could generate sufficient tax revenue to meet government expenditure needs.

Whether the inception of the NRA has brought desirable service delivery was an issue for the taxpayers to decide. When asked whether they paid taxes before, Table 18 shows that a slight majority (51.5%) admitted they did, whilst 48.5 percent said no. For those who reported paying taxes before, majority (57.3%) are recorded in the east, whilst the west and north recorded 52 percent each. On the contrary, 56.2 percent of respondents in south cited not paying taxes before.

Table 19: Comparing NRA to previous tax administration

RegionBetterSameWorseDon't know

West51.425.314.39.0

South41.935.615.37.2

East43.631.915.88.8

North53.816.726.92.6

Total48.228.015.58.3

Those who reported paying taxes before were required to compare both regimes. Findings indicate that (48.2%) of the respondents admitted that the present tax administration to be better. Whilst 28.0 percent cited no value is added, 15.5 percent described services provided now as worse. However, 8.3percent acknowledged they could not compare regimes.

At regional level, the score card shows two regions for each administration. Slightly over half of the respondents in west and north, and less than 50 percent each in south and east admitted the present NRA is better (see Table 19).

On the whole, although the overwhelming degree of satisfaction reported from services rendered by NRA, yet findings indicate there is a significant degree of respondents who are of the view that NRA is yet to deliver a conspicuous and desirable level of services that could show the difference for which they were created.

To substantiate their assessment in comparing NRA to the previous tax administration service delivery, respondents provided numerous reasons. Box 4 presents justifications for those who believed NRA is providing better services.

Box 4: Reasons for Perceiving NRA Tax Administration as better than the Previous Tax Administration There is significant growth in revenue collection

High level of accountability and transparency

Visible computerized system

Lot of tax education

Better monitoring and disciplinary actions

Visible presence of tax officials and district tax branches

Corruption is minimized

With respect to respondents who perceived NRA tax administration as worse or the same in service delivery as the former tax administration, Box 5 below presents reasons to substantiate their claims.

Box 5: Reasons for Perceiving NRA Tax Administration as Worse or the same as before No improvement in assessment procedures

Introduced many taxes

We now pay tax for every little thing

Tariffs are high

Officials are arrogant

3.9.6Level of Improvement in Service Delivery

About 86.6 percent of respondents reported that NRA provides services in the assessment of business, whilst 58.3 percent and 27.7 percent admitted for issuance of tax clearance and, on the examination and valuation of imported items respectively. Taxpayers further noted that other services provided by NRA include:

Advice to enhance smooth business transaction

Cautious reminder on timely payment of tax; and

Enforcing receipts are received after transactions

As stated in the Authoritys Strategic Plan, the Authority is desirous of transforming its operations to a modern tax administration, which would mobilise revenue effectively and efficiently. This hinges on reviewing structural and technical mechanisms that would improve its operations. Whether the services provided by NRA have improved since its inception, figure 15 presents a national outlook of respondents views on the levels of improvement needed for services specified.

With the exception of services provided on the examination and valuation of imported goods for which over half of the respondents admitted need some form of improvement, more than 60.0 percent of respondents attested the remaining services need no improvement. Whilst an average of 25.3 percent and 16.6 percent of the respondents indicated all the specified services need little and much improvements respectively; over half stated no improvement was required.

Regionally, the eastern region recorded the highest (71.1%) on average of those who acknowledged the services specified needed no improvement. Although the majority (26.7%) of those who cited that all services specified needed much improvement are found in the north, findings indicate that about fifty percent of the respondents in western area, which hosts over half of the taxpayers interviewed, admitted services delivered by NRA need at least little improvement. In support of the Authoritys service delivery transformation drive, respondents outlined issues that could provide the desirable framework for an improved service delivery. The most frequently cited explanations as to why little or much improvements are needed in service delivery are stated in box 6. Box 6: Why do Services need little or Much Improvements? A lot of delays in the issuance of tax clearance certificate

Procedures in the valuation of goods are still cumbersome and unexplainable

Business assessment is not based on profit but rather turnover

Assessments are based on the size of the shop or store rather than content

Taxpayers are not consulted and involved in the assessment of their businesses

Poor records management

There are exemptions in the enforcement of tax laws

No transparency in the valuation and assessment of goods

Payment period is unreasonably short

Most taxpayers are ignorant about the operations of NRA

3.9.7Securing the services of a tax agent

Some businesses or individuals employ the services of agent(s) who are thought to possess the expertise in providing professional services for their clients. Taxpayers therefore place huge confidence on agents in providing relevant tax knowledge and information in their transactions with the Authority. This could pose serious problems when information is misrepresented as a result of conflict of interest.

Nationally, Figure 17 depicts that majority of the respondents (83.2%) reported they do not secure the services of tax agents to facilitate their operations, while about 17percent admitted they did.

Western area recorded the highest (25.7%) among businesses that secure the services of tax agents. However, findings revealed significant number of businesses across regions that do not employ the services of tax agents (see Figure 18).Among several reasons given, a significant majority of the respondents were consistent in listing the following for securing tax agents.

They provide us expert tax knowledge and information

Agents provide us speed and accuracy in preparing our books of account

They expedite the process of clearing goods and provide relevant clearing information

They discuss more with relevant tax authorities

Their services release burden on us

Several suggestions were outlined by respondents for the improvement of the specified services delivered by NRA. Box 7 below presents the most frequently provided suggestions by respondents, among which the need for taxpayers education on the procedures of the services specified was highly prevalent.

Box 7: Suggestions for improving the specified services

Issuance of tax clearance certificate Tax clearance certificate should be issued immediately after payment

Certificate to be issued for at least 5 years

Monitor the business of the certificate issued

Examination and valuation Insist on 100 percent of thorough examination

Request for price list

Educate taxpayers on the procedures involve

Employ and train more staff

Examination officers should be well paid to avoid bribery

Business Assessment Should be based on the value of the goods

To be carried out before the assessment period

Should be done quarterly

Assessment should be based on the profit and not turnover

Reduce tax rate

Educate taxpayers on the procedures

Frequent inspection of business

Employ trained and qualified staff to do the assessment

Collection procedures Deploy staff in border areas

We should pay taxes to the bank

Accept installment payment

Explain collection procedures

Securitized receipts and stamps

Staff to be polite and courteous

Target small businesses to improve collection

Enforcement Review tax laws

Levy fines on defaulters after which confiscate assets

Improve on monitoring without compromise

Educate tax payers on possible distress actions

Close businesses that evade taxes

Pursue court action

3.10: OFFICE ENVIRONMENT

3.10.1Visitation of Taxpayers and Assessment of Office Environment

Visiting tax offices could help bridge the gap between taxpayers and tax collectors through interaction, tax education and sensitization. To this end, a good number of taxpayers (84.5%) confirmed they have visited NRA offices around the country in contrast to 15.5 percent who havent. Taxpayers in the West and East regions (90.1% and 86% respectively) were believed to have visited NRA offices more than those in the South and North (74.9% and 71.1% respectively).

3.10.2Convenience of Office Location

In general, 9 in every 10 taxpayer respondents agreed that the location of the tax offices all over the country is convenient. However, those who strongly agreed formed 19 percent as compared to those who just agreed (71.5%). On the contrary, those who disagreed formed a total of 9.5 percent and were mostly taxpayers from the North, West and South.

This indicated that majority of the taxpayers are pleased with location of the tax offices all over the country.

3.10.3Cleanliness of the Office Environment

Cleanliness and hygiene is a necessary factor that attracts and/or discourages people from visiting a particular place. Once clean, people would be encouraged to sit longer or wait patiently to be attended to. The survey revealed that a total of 91.2 percent of taxpayers agreed with the cleanliness of NRA offices, although very small fraction appeared to strongly agree (18%). Only 8.8 percent disagreed, most of who strongly disagreed (5.3% of 8.8%).

The assessment by taxpayers interviewed regarding the cleanliness of the office environment of tax offices could lead to the conclusion that such offices are kept clean and in line with office cleaning standards nationwide.

3.11Respondent Perception of the Nature of Tax Compliance

This section reveals how respondents perceived the obligation to pay tax in terms of willingness to pay taxes; willingness of others to pay taxes; reasons for paying or not paying taxes; the taxes they are willing or unwilling to pay; fair or unfair tax rates; ideas about tax administration right down to suggestions that may improve tax compliance.

3.11.1Willingness to Pay TaxesIt was revealed that there exists an overwhelming enthusiasm to pay tax amongst taxpayers in the country. An average of 96.1 percent respondents answered yes to the willingness to pay tax. Explicitly, 95.1%, 98.7%, 97.8% and 92.0% were the responses from the Western Area, Southern, Eastern and Northern Provinces respectively.

Although over 90 percent of taxpayers interviewed nationwide reported to be willing to pay tax, it does not reflect in revenues generated. Apart from the western area where over 80 percent of domestic revenue is generated, revenue generated from the other regions does reflect the overwhelming willingness of taxpayers to pay taxes. 3.11.1.1 Reasons for their Willingness to Pay Taxes

Taxpayers were asked why the willingness to pay tax? Most responded that the willingness to pay tax is borne in the desire to develop the country. Few said that, it is a law and that they want to protect their businesses.3.11.1.2 Willingness to Pay Taxes by Other Business People

Most (73.4%) taxpayers demonstrated their ignorance of the willingness of other business people to pay taxes. However, among the few (26.5%) who attested knowledge of the willingness of others to pay tax, only 23.6% agreed on their willingness to pay taxes.Table 20: Willingness to Pay Taxes by Other Business People

Are other business people you know willing to pay tax?

RegionYes(%)No(%)Dont know (%)

Western Province23.42.474.3

Southern Province14.12.683.3

Eastern Province26.83.969.3

Northern Province41.34.953.8

Average23.62.973.4

3.11.1.3 Taxes that Other Business People are least willing to pay

The respondents were asked about which taxes they were least willing to pay. Some (32.1%) said that they are least willing to pay import duties. Similarly, 20.9 percent exhibited their unwillingness to pay import sales tax. On the part of excise duties, 24.3 percent registered their least willingness to pay this indirect tax. Domestic sales tax recorded 67.4 percent of respondent who are willing to pay it and 31.2 percent who are least willing to pay this form of tax. Also, 22.6 percent responded that they were less willing to pay corporate tax whilst 77.4 percent emphasized their readiness to pay same. For personal income tax, 34.5 percent responded that they are less willing to pay whilst 62.7 percent recorded a willingness to pay this type of tax. Almost every taxpayer agreed that willingness to pay taxes is beneficial to the country.

3.11.1.4 Taxes (not Specify above) that Other Business People are least willing to payLocal tax was listed amongst taxes that business people are least willing to pay. However, this tax does not go into the Consolidated Revenue Fund, and it is not collected by NRA.

3.11.1.5 Reasons for the Unwillingness to Pay Taxes

A good number of respondents (55.6%) singled out high tax rates as the reason for their unwillingness to pay taxes. Others advanced factors ranging from inadequate public services (13.2%), misuse of revenue by Government (10.1%), multiple tax rates (5.2%) right down to lack of trust in tax collectors (15.9%).

Figure 22: Rationale for the Unwillingness to Pay Taxes

3.11.1.6Willingness to pay more if the System was Fairer

Upon asking the respondent about their willingness to pay more if they felt the system was fairer, 90 percent replied that they would be willing to pay more if the system was fairer. Only 10 percent said they will not be willing to pay more even if the system was fairer.

Table 21: Willingness to pay more if the Tax System was Fairer

Region

Percent

Yes

No

Western Area

87.8

12.2

Southern Province

95.1

4.9

Eastern Province

88.8

11.2

Northern Province

93.3

6.7

Average

90.0

10.0

3.11.2 Taxpayers Description of the Current Tax and Non-Tax Rates in the Country

About 45 percent taxpayers expressed that the tax and non-tax rates are high. Furthermore, 24.6 percent emphasized that the rates are very high. However, 28.4 percent and 1.7 percent said that the rates are fair and low respectively.

3.11.2.1 Reasons for the Notion about Tax and Non-Tax Rates

Respondents were asked to give reasons for the answers given above. Over half the respondents advanced the slow nature of business (58%) coupled with high tax rates (28%) as the sole reasons. The most frequent response was business is too slow and the tax rates are high. Also, making very low profits as a result of high taxes (13%) was another reason put forward by some respondent. The remaining few (1.0%) stated that the tax rates are affordable.

Figure 24: Reasons for the Opinion about Tax and Non-Tax Rates stated in 4.1.7 above

3.11.3Assessment of the Tax Administration System

Most (73.5%) respondents agreed that the tax administration system is simple. Few (17.0%) differ from this view, and think that the system is complex. The remaining respondents only emphasized that the tax system is very simple (3.1%) and very complex (6.4%).

Table21: Assessment of the Tax Administration System

RegionVery Complex (%)Complex (%)Simple (%)Very Simple (%)

Western Area5.621.570.72.1

Southern Province2.09.484.73.9

Eastern Province2.913.778.64.7

Northern Province27.713.854.54.0

Average6.417.073.53.1

3.11.4 Possible Solutions to the Alleged Complex Nature of NRA Tax System

Respondents were asked to suggest possible solutions to the alleged complex nature of the tax system in the country. Among the proposals put forward, adequate education for the tax paying public was most glaring (with a frequency of 1,500). Also, some (450 respondents) recommended the use of computerized system in tax administration. Similarly, reduction of Protocols and straight forwardness of the system were advanced as other possible solution. The remaining few stated that they do not know what to suggest as would-be solutions.

3.11.5Improvement of Tax Compliance

Among a total of 2,522 respondents interviewed, 2000 respondents consented that NRA should make a reduction in tax rates in order to improve tax compliance. About 300 recommended that the Authority should embark on a thorough tax education/sensitization. Enforcement of tax laws was another popular suggestion made by 5 percent of the respondents whilst the remaining few (4%) made several suggestions that were categorized as others.

3.12: TRUST

This section discusses issues relating to trust by the public for the Authority in carrying out its national mandate. Revenue mobilization function of the NRA is considered very sensitive and therefore requires trust by the public who pay their taxes. Therefore, in its revenue mobilization drive, the Authority has over the years endeavoured to establish a cooperative, respectful and trusting relationship with the public by urging its staff to be of impeccable and respectable character and credible beyond reproach in the performance of their duties. By so doing, it is expected that the public will in turn adopt a cooperative relationship with the Authority, respecting the legitimacy of the institution, trusting its processes and procedures, and accepting an obligation to pay tax.

The survey therefore attempted to measure the extent of trust the public has in the Authority through key variables like the legitimacy of NRA as a revenue collection institution, accountability for revenues collected by tax officials, and valuation or assessment done by officers at the Customs and Excise Department and the Income Tax Department.

3.12.1Trust in NRA as a Revenue Collection Institution

Generally, it is believed that trusting the legitimacy of NRA as a revenue collection institution goes a long way in making taxpayers honour their tax obligations as and when they fall due. Findings from the study revealed that 93.4 percent of taxpayers interviewed have trust in NRA as a revenue collection institution. This was reflected in the regional analysis as over 90 percent of taxpayers interviewed in the West (93.6%), South (93.6%), East (93.5%), and North (91.6%) reported to have trust in the Authority. Thus, such a favourable response regarding trust in the Authority by taxpayers could be said to be closely correlated with the increase in revenue yield yearly since the inception of NRA.

However, an illustration in Figure 26 below shows that less than 9 percent of taxpayers interviewed, regionally, do not have trust in the Authority as a revenue collection institution.

From analysis in Figure 26 above, it is apparent that the taxpaying public interviewed greatly recognizes the role of the Authority and that the level of trust they have in the Authority does not vary much across regions. Respondents were then asked to give reason why they have trust in NRA as a revenue collection institution. Amongst the multitude of reasons advanced, the most frequent ones were:

NRA is a government entity established to collect tax

NRA is collecting revenue for government

Issue receipt for every transaction

Staff of NRA are competent and are willing to work

There has been an improvement in revenue collection

NRA is reliable

Great difference in the present administration compared to the previous administration.

Although majority of the respondents stated to have trust in NRA as a revenue collection institution, there were few of them (6.6%) who mentioned that they do not have trust in NRA. When asked to give reasons why they distrust the Authority, the following were common amongst others:

There has been no improvement since NRA started

Most officers of the NRA are corrupt

NRA collect revenue to develop themselves

Accountability of the office in unknown by the grass root

Does not know how NRA uses our taxes collected

Due to frequent rumors of corruption

Given the above reasons why some respondents do not trust NRA as a revenue collection institution, one would infer that the Authority has some lapses relating to staff integrity and professionalism, and information dissemination. Hence, there is need for the Authority to improve on these issues. By disseminating information about the operations of the Authority, coupled with rigorous audit and monitoring exercises, it is very likely that issues on staff integrity, the Authoritys accountability and use of taxes collected could not be questioned by the taxpaying public.

3.12.2 Accountability of Tax Officials Regarding Revenues Collected

To further assess the extent of trust taxpayers have for NRA, the survey attempted to gauge taxpayers perception regarding accountability of revenues collected by tax officials. To this end, respondents were asked to state whether they strongly agree, agree, somewhat agree, disagree, or strongly disagree with the statement that tax officials account for the revenues collected. Generally, whilst 58.4 percent of the respondents were of the opinion that tax officials strongly account for revenues collected, only 6.9 percent strongly believed that revenues collected by tax officials are not accounted for. In other words, whilst 8.3 percent strongly agree, 29.8 percent agree, and 20.3 percent somewhat agree that tax officials strongly account for revenues collected, the remaining 34.7 percent of respondents indicated that they do not know whether revenues collected by tax officials are strongly accounted for as shown in Figure 27 below:

According to responses by respondents in Figure 27 above, it can be observed that about one- third (35%) of taxpayers interviewed do not know whether tax officials strongly account for revenues collected. This is consistent with earlier report that respondents who do not trust NRA said they dont know how NRA uses tax revenues. This implies that a good number of taxpayers are not informed about the operation of the Authority, an issue that needs urgent attention of the NRA.

On the regional front, the analysis revealed that taxpayers in the north (67.2%) are of the strongest opinion that tax officials account for revenues collected followed by taxpayers in the west (61.6%) and east (58.1%) respectively. Taxpayers in the south are of the least opinion, comparatively, regarding accountability of revenues collected by tax officials because the majority (46.1%) of those interviewed mentioned that they do not know whether tax officials account for revenues collected (see Table 22) below.

Table 22: Accountability of Revenues Collected by RegionRegionStrongly Agree (%)Agree

(%)Somewhat Agree

(%)Disagree

(%)Strongly Disagree (%)Dont Know (%)

West8.432.021.24.61.732.1

South5.521.121.52.63.246.1

East10.432.315.45.92.233.8

North8.329.820.39.73.020.0

It can be observed from analysis in Table 22 above that very few taxpayers (1.7%) in the west strongly disagree and 2.6 percent in the south disagree that tax officials strongly account for revenues collected. However, the fact that over 20 percent of taxpayers interviewed in all regions dont know whether tax officials account for revenues collected signifies that a good number of the taxpaying public lacks knowledge about the operations of the Authority.

3.12.3Trust in the Valuation of Import at Customs and Excise Department

The survey also endeavoured to gauge the extent of trust taxpayers have in the valuation of import done by Custom Officers. Valuation is a mechanism used by Custom Officers to determine the amount of tax to be paid on goods imported into the country. According to the survey data, the extent of trust taxpayers interviewed have in this process is generally not impressive. Whilst 20.6 percent of respondents fairly trust this process, 8.8 percent have trust in it to a large extent and very few (1.4 percent) acknowledged having trust in this process to a very large extent. However, those who perceived valuation done by Custom Officers as poor accounted for 6.7 percent. Given that only 22 percent of taxpayers interviewed were importers, more than half (62.5%) could not give their opinion on valuation done at Customs. Figure 28 below shows the extent of trust taxpayers have in the valuation of import at Customs and Excise Department.

Analysis by region shows that taxpayers in the west have more trust in valuation than those in the provinces. While 10.6 percent of respondents in the west trust this process to a large extent, 5.3 percent in the south, 8 percent in the east and 8.8 percent in the north have similar trust in this process. Also, respondents who regarded this process as being fair were highest in the west (26.6%), compared to less than 18 percent in each of the other regions. This is a reflection of the fact that more importers (32.5%) were interviewed in the Western area compared to 25.8 percent in the Northern and 12.5 percent in the east. The not applicable cases were also in the majority in all the regions since over half of the taxpayers interviewed were non importers with little or no knowledge in this process (see Table23 below).

Table 23: Trust in Valuation of Import at Customs by Region

RegionVery Large Extent

(%)Large Extent (%)Fair

(%)Poor

(%)Not Applicable (%)

West1.310.626.68.453.1

South1.95.39.63.679.6

East1.7817.53.269.6

North1.18.817.513.159.5

According to data in the above table, taxpayers who perceived valuation of import at Customs to be poor were highest in the north at 13.1 percent compared to 8.4 percent in the west, 3.6 percent in the south and 3.2 percent in the east. In summary, taxpayers in the west are found to have the highest trust in valuation of import at 38.5 percent, followed by those in the north (27.4%) and east at 27.2 percent.

3.12.4Trust in the Assessment of Business by Income Tax Department

Like valuation of import at Customs, assessment of business by Income Tax Department is a process during which tax officials assess businesses in order to determine the tax to be paid by such businesses. Thus, respondents were asked to indicate whether they have trust in this process. Responses by respondents revealed that 46.7 percent regarded this process as being fair, another 29.9 percent trust it to a large extent, while 6.2 percent to a very large extent have trust in assessment of businesses. Figure 29 below shows that 9 percent of taxpayers interviewed however reported that assessment of businesses by tax officials is poor.

It can be depicted from Figure 29 above that unlike valuation of import at customs; the not applicable cases for assessment of businesses by Income Tax Officials were very few. This indicates that more taxpayers responded to this question, a reflection of the fact that over 70 percent of taxpayers interviewed comprised of non-importers compared to the 22 percent of importers interviewed. Although responses in favour of trust in the assessment of businesses carried out by Income Tax Officials could be regarded as encouraging, the Authority needs to improve on this process in order to further reduce on the percent of taxpayers who perceived it as being poor.

Regarding regional analysis, it is observed that taxpayers interviewed in the north recorded the highest responses (20.4%), followed by those in the east at 5.5 percent and then the west (4.9%) who trust assessment of businesses to a very large extent. The south followed by the west recorded the highest responses 34.2 and 29.4 percents of respondents that have trust in this process to a large extent. Greater percent of respondents, who regarded this process as fair, were in the east at 50.9 percent closely followed by those in the west (see Table24 below).

Table 24: Perception of Trust in Assessment of Businesses by Income Tax Officials by Region

RegionVery Large Extent

(%)Large Extent (%)Fair

(%)Poor

(%)Not Applicable (%)

West4.929.449.110.26.4

South3.934.244.05.312.6

East5.529.050.98.36.3

North20.424.430.212.012.9

Table 24 above also shows that the north had the largest percent (12%) of taxpayers, followed by those in the west (10.2%) and the east (8.3%), who referred to assessment of businesses as being poor. Overall, regional ranking of taxpayers who have trust regarding assessment of businesses by Income Tax Officials, put taxpayers in the east in lead at 84.5 percent, next to those in the west at 83.4 percent and then the south (82.1%) and north (75%) respectively. Since majority of the taxpayers interviewed were non importers, it can be observed from the data in Table 24 above that less than 13 percent of resp