2 - Tax Reform, Tax Compliance and State-building in Tanzania and Uganda
Corresponding Author(s) : Sohee Kim
Africa Development,
Vol. 43 No. 2 (2018): Africa Development
Abstract
This article sets out to provide a comparative analysis of the effect of tax administration reform on tax performance and quasi-voluntary compliance in Tanzania and Uganda. It aims to reveal two findings via the comparison. Empirically, it is claimed that Tanzania achieved better outcomes in terms of both tax performance and quasi-voluntary compliance in general compared to Uganda. Despite the introduction of similar tax administration reform, the tax administrations of Tanzania and Uganda have developed quite differently. Tanzania’s tax administration effectively changed the strategic and normative factors that enhance quasi-voluntary compliance, whereas Uganda’s tax reforms have been stuck in a muddle. Theoretically, it is proposed that tax performance and quasi-voluntary compliance are interconnected. Quasi-voluntary compliance is necessary for achieving high tax performance in an efficient and sustainable manner. High tax performance from competent and fair tax administration improves taxpayers’ willingness to comply voluntarily. Tanzania’s success in tax administration reform led to positive prospects for directing and cementing the processes of state-building with the maturity of state capacity and the concomitant advancement of state–society relations.
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- Adebisi, J.F. and Gbegi, D.O., 2013, ‘Effect of tax avoidance and tax evasion on personal income tax administration in Nigeria’, American Journal of Humanities and Social Sciences 1 (3): 125–34.
- African Development Bank, 2011, Domestic Resource Mobilisation for Poverty Reduction in East Africa: Lessons for Tax Policy and Administration, Abidjan: African Development Bank.
- Aiko, R. and Logan, C., 2014, ‘Africa’s willing taxpayers thwarted by opaque tax systems, corruption’, Afrobarometer Policy Paper 7."
- Ali, M., Fjeldstad, O.-H. and Sjursen, I.H., 2014, ‘To pay or not to pay? Citizens’ attitudes toward taxation in Kenya, Tanzania, Uganda, and South Africa’, World Development 64: 828–42.
- Allingham, M. and Sandmo, A., 1972, ‘Income tax evasion: a theoretical analysis’, Journal of Public Economics 1 (3–4): 323–38.
- Alm, J., 1992, ‘Why do people pay taxes?’, Journal of Public Economics 48 (1): 21–38.
- Andreoni, J., Erard, B. and Feinstein, J., 1998, ‘Tax compliance’, Journal of Economic Literature 36 (2): 818–60.
- Ayoki, M., 2008, ‘Administration in poor countries: country report Uganda’, Institute of Policy Research and Analysis Working Paper 20.
- Bergman, M., 2002, ‘Who pays for social policy? A study on taxes and trust’, Journal of Social Policy 31 (2): 289–305.
- Bird, R. and de Jantscher, M.C., 1992, Improving Tax Administration in Developing Countries, Washington DC: IMF.
- BMZ, 2003, Evaluierung des Vorhabens, Beratung der tansanischen Steuerverwaltung, Endbericht, Bonn: BMZ.
- Bräutigam, D., 2008, ‘Introduction: Taxation and State-Building in Developing Countries’, in D. Bäutigam, M. Moore and O.-H. Fjeldstad, eds, Taxation and State-building in Developing Countries: Capacity and Consent, Cambridge: Cambridge University Press. Bräutigam, D., Moore, M. and Fjeldstad, O.-H., eds, 2008, Taxation and State-Building in Developing Countries: Capacity and Consent, Cambridge: Cambridge University Press.
- Brewer, J., 1990, The Sinews of Power: War, Money, and the English State, 1688–1783, Cambridge MA: Harvard University Press.
- Cawley, G. and Zake, J., 2010, ‘Tax Reform’, in F. Kuteesa, E. Tumusiime-Mutebile, A. Whitworth and T. Williamson, eds, Uganda’s Economic Reforms: Insider Accounts, Oxford: Oxford University Press.
- Chazan, N., 1988, ‘Patterns of State–Society Incorporation and Disengagement’, in D. Rothchild and N. Chazan, eds, The Precarious Balance: State and Society in Africa, Boulder, CO: Westview Press.
- Cheibub, J.A., 1998, ‘Political regimes and the extractive capacity of governments: taxation in democracies and dictatorships’, World Politics 50 (3): 349–76.
- Child, D., 2008, ‘VAT Administration: Addressing Private Sector Concerns’, in R. Krever, ed., VAT in Africa, Cape Town: Pretoria University Law Press.
- Clarke, J. and Wood, D., 2001, ‘New Public Management and Development: The Case of Public Service Reform in Tanzania and Uganda’, in W. McCourt and M. Minogue, eds, The Internationalization of Public Management: Reinventing the Third World State, Cheltenham: Edward Elgar Publishing.
- D’Arcy, M., 2011, ‘Why do citizens assent to pay tax? Legitimacy, taxation and the African state’, Afrobarometer Working Papers 126.
- de Jantscher, M.C., 1990, ‘Administering the VAT’, in M. Gillis, C. Shoup and G. Sicat, eds, Value Added Taxation in Developing Countries, Washington, DC: World Bank.
- Department for International Development, 2008, Making Uganda’s Tax System More Appropriate in Meeting National Objectives: What Works, What Doesn’t, and Why, Kampala: Institute of Policy Research and Analysis.
- Fjeldstad, O.-H., 2003, ‘Fighting fiscal corruption: lessons from the Tanzania Revenue Authority’, Public Administration and Development 23 (2): 165–75.
- Fjeldstad, O.-H., 2005, Corruption in Tax Administration Lessons from Institutional Reforms in Uganda, Bergen: Chr. Michelsen Institute.
- Fjeldstad, O.-H., Katera, L. and Ngalewa, E., 2009, Maybe We Should Pay Tax After All? Citizens’ Changing Views on Taxation in Tanzania, Dar es Salaam: Mkuki Na Nyota Publishers.
- Fjeldstad, O.-H., Kolstad, I. and Lange, S., 2003, Autonomy, Incentives and Patronage a Study of Corruption in the Tanzania and Uganda Revenue Authorities, Bergen: Chr. Michelsen Institute.
- Fjeldstad, O.-H. and Moore, M., 2009, ‘Revenue authorities and public authority in sub-Saharan Africa’, Journal of Modern African Studies 47 (1): 1–18.
- Fjeldstad, O.-H. and Therkildsen, O., 2008, ‘Mass Taxation and State–Society Relations in East Africa’, in D. Bräutigam, M. Moore and O.-H. Fjeldstad, eds, Taxation and State-Building in Developing Countries: Capacity and Consent, Cambridge: Cambridge University Press.
- Frohlich, N. and Oppenheimer, J.A., 1974, ‘The carrot and the stick’, Public Choice 19 (1): 43–61.
- Gauthier, B. and Reinikka, R., 2006, ‘Shifting tax burdens through exemptions and evasion: an empirical investigation of Uganda’, Journal of African Economies 15 (3): 373–98.
- Holmes, K., 2006, The Uganda Income Tax Act, 1997: A Primer on Concepts and Structure, Amsterdam: IBFD Publications.
- IMF, 1999a, ‘Tanzania: Recent Economic Developments’, IMF Staff Country Reports, 99, 24.
- IMF, 1999b, ‘Uganda: Selected Issues and Statistical Appendix’, IMF Staff Country Reports, 99, 116.
- IMF, 2003, Fiscal Adjustment in IMF-Supported Programs, Washington DC: Independent Evaluation Office.
- IMF, 2004, ‘Tanzania: 2004 Article IV Consultation and Second Review under the Three-year Arrangement under the Poverty Reduction and Growth Facility’, IMF Staff Country Reports, 4, 285.
- IMF, 2011, ‘Uganda: Second Review under the Policy Support Instrument and Request for Waiver of Assessment Criteria’, IMF Staff Country Reports, 11, 308.
- IMF, 2015, ‘Current challenges in revenue mobilization: improving tax compliance’, IMF Policy Papers.
- Kidd, M. and Crandall, W.J., 2006, ‘Revenue authorities: issues and problems in evaluating their success’, IMF Working Papers, 6, 240.
- Langford, B. and Ohlenburg, T., 2016, ‘Tax revenue potential and effort – an empirical investigation’, Working Paper International Growth Centre 31.
- Levi, M., 1988, Of Rule and Revenue, Berkeley: University of California Press.
- Levin, J., 2005, ‘Taxation in Tanzania – Revenue Performance and Incidence’, SIDA Country Economic Report.
- Mansour, M., 2014, ‘A tax revenue dataset for sub-Saharan Africa: 1980–2010’, The Foundation for International Development Study and Research Working Papers 119.
- Mukandala, R., Mushi, S., Barkan, J. and Njema, G., 2005, The Political Economy of Tanzania, Dar es Salaam: World Bank.
- Ndulu, B., Chakraborti, L, Lijane, L, Ramachandran, V. and Wolgin, J., 2007, Challenges of African Growth: Opportunities, Constraints, and Strategic Directions, Washington, DC: World Bank.
- OECD, 2014, Measures of Tax Compliance Outcomes: A Practical Guide, Paris: OECD.
- Ongwamuhana, K., 2011, Tax Compliance in Tanzania: Analysis of Law and Policy Affecting Voluntary Taxpayer Compliance, Dar es Salaam: Mkuki na Nyota Publishers.
- Osoro, N.E., 1993, ‘Revenue productivity implications of tax reform in Tanzania’’, African Economic Research Consortium Paper 20.
- Rakner, L., 2001, ‘Tax policies in Tanzania in the 1990s: relations between state, interest groups and donors’, Den Ny Verden 34 (3): 79–93.
- Rakner, L. and Golpen, S., 2003, ‘Tax Reform and Democratic Accountability in Sub- Saharan Africa’, in N. Van de Walle, N. Ball and V. Ramachandran, eds, Beyond Structural Adjustment: The Institutional Context of African Development, New York: Palgrave Macmillan.
- Robinson, M., 2007, ‘The political economy of governance reforms in Uganda’, Commonwealth and Comparative Politics 45 (4): 452–74.
- Sennoga, E., Matovu, J.M. and Twimukye, E., 2009, ‘Tax evasion and widening the tax base in Uganda’, Economic Policy Research Centre Research Series 63.
- Steinmo, S., 1996, Taxation and Democracy: Swedish, British, and American Approaches to Financing the Modern State, New Haven, CT: Yale University Press.
- Stigler, G., 1971, ‘The theory of economic regulation’, Bell Journal of Economics and Management Science 2 (1): 3–21.
- Taliercio, R., 2004, ‘Administrative reform as credible commitment: the impact of autonomy on revenue authority performance in Latin America’, World Development 32 (2): 213–32.
- Tanzania Development Initiative Program, 2010, Maendeleo Dialogue: Democracy in Tanzania: 48 Years of Our Fight Agaiainst Poverty, Ignorance and Diseases: Have We Attained out Goal? Dar es Salaam: Konrad-Adenauer-Stiftung.
- Therkildsen, O., 2004, ‘Autonomous tax administration in sub-Saharan Africa: the case of the Uganda Revenue Authority’, Forum for Development Studies 31 (1): 59–88.
- Tilly, C., 1990, Coercion, Capital, and European States, AD 990–1992, Oxford: Blackwell.
- TRA, 2008, Annual Implementation Report of TRA’s Second Corporate Plan for the Year 2007/08, Dar es Salaam: TRA.
- Transparency International Kenya, Tanzania Transparency Forum & Transparency International Uganda, 2009, The East African Bribery Index 2009, Nairobi: Transparency International Kenya.
- URA, 2009, The Taxpayer’s Charter, Kampala: URA.
- Von Soest, C., 2008, Donor Support for Tax Administration Reform in Africa: Experiences in Ghana, Tanzania, Uganda and Zambia, Bonn: Deutsches Institut für Entwicklungspolitik.
- World Bank, 2011, Tanzania – Country Assistance Strategy (CAS) for the Period FY2012– 2015, Washington, DC: World Bank."
References
Adebisi, J.F. and Gbegi, D.O., 2013, ‘Effect of tax avoidance and tax evasion on personal income tax administration in Nigeria’, American Journal of Humanities and Social Sciences 1 (3): 125–34.
African Development Bank, 2011, Domestic Resource Mobilisation for Poverty Reduction in East Africa: Lessons for Tax Policy and Administration, Abidjan: African Development Bank.
Aiko, R. and Logan, C., 2014, ‘Africa’s willing taxpayers thwarted by opaque tax systems, corruption’, Afrobarometer Policy Paper 7."
Ali, M., Fjeldstad, O.-H. and Sjursen, I.H., 2014, ‘To pay or not to pay? Citizens’ attitudes toward taxation in Kenya, Tanzania, Uganda, and South Africa’, World Development 64: 828–42.
Allingham, M. and Sandmo, A., 1972, ‘Income tax evasion: a theoretical analysis’, Journal of Public Economics 1 (3–4): 323–38.
Alm, J., 1992, ‘Why do people pay taxes?’, Journal of Public Economics 48 (1): 21–38.
Andreoni, J., Erard, B. and Feinstein, J., 1998, ‘Tax compliance’, Journal of Economic Literature 36 (2): 818–60.
Ayoki, M., 2008, ‘Administration in poor countries: country report Uganda’, Institute of Policy Research and Analysis Working Paper 20.
Bergman, M., 2002, ‘Who pays for social policy? A study on taxes and trust’, Journal of Social Policy 31 (2): 289–305.
Bird, R. and de Jantscher, M.C., 1992, Improving Tax Administration in Developing Countries, Washington DC: IMF.
BMZ, 2003, Evaluierung des Vorhabens, Beratung der tansanischen Steuerverwaltung, Endbericht, Bonn: BMZ.
Bräutigam, D., 2008, ‘Introduction: Taxation and State-Building in Developing Countries’, in D. Bäutigam, M. Moore and O.-H. Fjeldstad, eds, Taxation and State-building in Developing Countries: Capacity and Consent, Cambridge: Cambridge University Press. Bräutigam, D., Moore, M. and Fjeldstad, O.-H., eds, 2008, Taxation and State-Building in Developing Countries: Capacity and Consent, Cambridge: Cambridge University Press.
Brewer, J., 1990, The Sinews of Power: War, Money, and the English State, 1688–1783, Cambridge MA: Harvard University Press.
Cawley, G. and Zake, J., 2010, ‘Tax Reform’, in F. Kuteesa, E. Tumusiime-Mutebile, A. Whitworth and T. Williamson, eds, Uganda’s Economic Reforms: Insider Accounts, Oxford: Oxford University Press.
Chazan, N., 1988, ‘Patterns of State–Society Incorporation and Disengagement’, in D. Rothchild and N. Chazan, eds, The Precarious Balance: State and Society in Africa, Boulder, CO: Westview Press.
Cheibub, J.A., 1998, ‘Political regimes and the extractive capacity of governments: taxation in democracies and dictatorships’, World Politics 50 (3): 349–76.
Child, D., 2008, ‘VAT Administration: Addressing Private Sector Concerns’, in R. Krever, ed., VAT in Africa, Cape Town: Pretoria University Law Press.
Clarke, J. and Wood, D., 2001, ‘New Public Management and Development: The Case of Public Service Reform in Tanzania and Uganda’, in W. McCourt and M. Minogue, eds, The Internationalization of Public Management: Reinventing the Third World State, Cheltenham: Edward Elgar Publishing.
D’Arcy, M., 2011, ‘Why do citizens assent to pay tax? Legitimacy, taxation and the African state’, Afrobarometer Working Papers 126.
de Jantscher, M.C., 1990, ‘Administering the VAT’, in M. Gillis, C. Shoup and G. Sicat, eds, Value Added Taxation in Developing Countries, Washington, DC: World Bank.
Department for International Development, 2008, Making Uganda’s Tax System More Appropriate in Meeting National Objectives: What Works, What Doesn’t, and Why, Kampala: Institute of Policy Research and Analysis.
Fjeldstad, O.-H., 2003, ‘Fighting fiscal corruption: lessons from the Tanzania Revenue Authority’, Public Administration and Development 23 (2): 165–75.
Fjeldstad, O.-H., 2005, Corruption in Tax Administration Lessons from Institutional Reforms in Uganda, Bergen: Chr. Michelsen Institute.
Fjeldstad, O.-H., Katera, L. and Ngalewa, E., 2009, Maybe We Should Pay Tax After All? Citizens’ Changing Views on Taxation in Tanzania, Dar es Salaam: Mkuki Na Nyota Publishers.
Fjeldstad, O.-H., Kolstad, I. and Lange, S., 2003, Autonomy, Incentives and Patronage a Study of Corruption in the Tanzania and Uganda Revenue Authorities, Bergen: Chr. Michelsen Institute.
Fjeldstad, O.-H. and Moore, M., 2009, ‘Revenue authorities and public authority in sub-Saharan Africa’, Journal of Modern African Studies 47 (1): 1–18.
Fjeldstad, O.-H. and Therkildsen, O., 2008, ‘Mass Taxation and State–Society Relations in East Africa’, in D. Bräutigam, M. Moore and O.-H. Fjeldstad, eds, Taxation and State-Building in Developing Countries: Capacity and Consent, Cambridge: Cambridge University Press.
Frohlich, N. and Oppenheimer, J.A., 1974, ‘The carrot and the stick’, Public Choice 19 (1): 43–61.
Gauthier, B. and Reinikka, R., 2006, ‘Shifting tax burdens through exemptions and evasion: an empirical investigation of Uganda’, Journal of African Economies 15 (3): 373–98.
Holmes, K., 2006, The Uganda Income Tax Act, 1997: A Primer on Concepts and Structure, Amsterdam: IBFD Publications.
IMF, 1999a, ‘Tanzania: Recent Economic Developments’, IMF Staff Country Reports, 99, 24.
IMF, 1999b, ‘Uganda: Selected Issues and Statistical Appendix’, IMF Staff Country Reports, 99, 116.
IMF, 2003, Fiscal Adjustment in IMF-Supported Programs, Washington DC: Independent Evaluation Office.
IMF, 2004, ‘Tanzania: 2004 Article IV Consultation and Second Review under the Three-year Arrangement under the Poverty Reduction and Growth Facility’, IMF Staff Country Reports, 4, 285.
IMF, 2011, ‘Uganda: Second Review under the Policy Support Instrument and Request for Waiver of Assessment Criteria’, IMF Staff Country Reports, 11, 308.
IMF, 2015, ‘Current challenges in revenue mobilization: improving tax compliance’, IMF Policy Papers.
Kidd, M. and Crandall, W.J., 2006, ‘Revenue authorities: issues and problems in evaluating their success’, IMF Working Papers, 6, 240.
Langford, B. and Ohlenburg, T., 2016, ‘Tax revenue potential and effort – an empirical investigation’, Working Paper International Growth Centre 31.
Levi, M., 1988, Of Rule and Revenue, Berkeley: University of California Press.
Levin, J., 2005, ‘Taxation in Tanzania – Revenue Performance and Incidence’, SIDA Country Economic Report.
Mansour, M., 2014, ‘A tax revenue dataset for sub-Saharan Africa: 1980–2010’, The Foundation for International Development Study and Research Working Papers 119.
Mukandala, R., Mushi, S., Barkan, J. and Njema, G., 2005, The Political Economy of Tanzania, Dar es Salaam: World Bank.
Ndulu, B., Chakraborti, L, Lijane, L, Ramachandran, V. and Wolgin, J., 2007, Challenges of African Growth: Opportunities, Constraints, and Strategic Directions, Washington, DC: World Bank.
OECD, 2014, Measures of Tax Compliance Outcomes: A Practical Guide, Paris: OECD.
Ongwamuhana, K., 2011, Tax Compliance in Tanzania: Analysis of Law and Policy Affecting Voluntary Taxpayer Compliance, Dar es Salaam: Mkuki na Nyota Publishers.
Osoro, N.E., 1993, ‘Revenue productivity implications of tax reform in Tanzania’’, African Economic Research Consortium Paper 20.
Rakner, L., 2001, ‘Tax policies in Tanzania in the 1990s: relations between state, interest groups and donors’, Den Ny Verden 34 (3): 79–93.
Rakner, L. and Golpen, S., 2003, ‘Tax Reform and Democratic Accountability in Sub- Saharan Africa’, in N. Van de Walle, N. Ball and V. Ramachandran, eds, Beyond Structural Adjustment: The Institutional Context of African Development, New York: Palgrave Macmillan.
Robinson, M., 2007, ‘The political economy of governance reforms in Uganda’, Commonwealth and Comparative Politics 45 (4): 452–74.
Sennoga, E., Matovu, J.M. and Twimukye, E., 2009, ‘Tax evasion and widening the tax base in Uganda’, Economic Policy Research Centre Research Series 63.
Steinmo, S., 1996, Taxation and Democracy: Swedish, British, and American Approaches to Financing the Modern State, New Haven, CT: Yale University Press.
Stigler, G., 1971, ‘The theory of economic regulation’, Bell Journal of Economics and Management Science 2 (1): 3–21.
Taliercio, R., 2004, ‘Administrative reform as credible commitment: the impact of autonomy on revenue authority performance in Latin America’, World Development 32 (2): 213–32.
Tanzania Development Initiative Program, 2010, Maendeleo Dialogue: Democracy in Tanzania: 48 Years of Our Fight Agaiainst Poverty, Ignorance and Diseases: Have We Attained out Goal? Dar es Salaam: Konrad-Adenauer-Stiftung.
Therkildsen, O., 2004, ‘Autonomous tax administration in sub-Saharan Africa: the case of the Uganda Revenue Authority’, Forum for Development Studies 31 (1): 59–88.
Tilly, C., 1990, Coercion, Capital, and European States, AD 990–1992, Oxford: Blackwell.
TRA, 2008, Annual Implementation Report of TRA’s Second Corporate Plan for the Year 2007/08, Dar es Salaam: TRA.
Transparency International Kenya, Tanzania Transparency Forum & Transparency International Uganda, 2009, The East African Bribery Index 2009, Nairobi: Transparency International Kenya.
URA, 2009, The Taxpayer’s Charter, Kampala: URA.
Von Soest, C., 2008, Donor Support for Tax Administration Reform in Africa: Experiences in Ghana, Tanzania, Uganda and Zambia, Bonn: Deutsches Institut für Entwicklungspolitik.
World Bank, 2011, Tanzania – Country Assistance Strategy (CAS) for the Period FY2012– 2015, Washington, DC: World Bank."