Challenges of Tax Administration in Developing Countries: Insights from the 5th Annual Tax Administration Research Centre Workshop, 2017

Authors

  • Mohammed Abdullahi Umar University Utara Malaysia, Malaysia
  • Festo Nyende Tusubira University of Exeter, Exeter, Devon, U.K.

Abstract

Tax administration is a challenging task, but developing countries’ tax administrations face greater challenges than their counterparts in advanced countries. As a result of these challenges, tax revenue generation in developing countries is unusually low. The issue has been at the forefront of academic and international development administration discourse since Nicholas Kaldor raised the red flag in 1963. Kaldor stated that developing countries raise about 8 to 15 percent of their Gross Domestic Product (GDP) as tax revenue, while the ratio for advanced countries is 25 to 30 percent. More than sixty years after this issue came to the fore, and after more than thirty years of tax administration reforms in developing countries, it remains largely unresolved. The 5th Annual Tax Administration Research Centre (TARC) Workshop provided delegates with an opportunity to further discuss the issue. This paper presents insights from that workshop. Our analysis of insights from the workshop provides a fresh perspective on the challenges of tax administration in developing countries. Most importantly, we argue that the challenges of tax administration in developing countries are complex and involve deep-rooted, systemic problems that cannot be tackled by tax administration alone. Some of the problems are linked to acts of omission and commission by political leadership. This may account for the continued low levels of tax collection in developing countries despite the fact that series of tax administration reforms have taken place.

References

Adegboye, A. (2017, April). Tax (non)compliance and the Nigeria’s informal sector: Assessing the response of tax agency of subnational governments. Paper presented at the 5th Annual Tax Administration Research Centre Workshop, University of Exeter.

Aiko, R., & Logan, C. (2014). Africa’s willing taxpayers thwarted by opaque tax systems, corruption. Afrobarometer, Policy Paper NO. 7.

Allingham, M.G., & Sandmo, A. (1972). Income tax evasion, a theoretical analysis. Journal of Public Economics, 1(1972), 323-338.

Alm, J., Jackson, B., & McKee, M. J. (1992). Estimating the determinants of taxpayer compliance with experimental data. National Tax Journal, 45(1), 107-114.

Bahl, R. W., & Bird, R. M. (2008). Tax policy in developing countries: looking backward and forward. Working Paper Series, 11B Paper NO. 13, University of Toronto, Institute for International Business.

Bahl, R., & Martinez-Vazques, J. (1992). The Nexus of Tax Administration and Tax Policy in Jamaica and Guatemala. . In R.M. Bird & M. Casanegra de Jantscher (Eds.), Improving Tax Administration in Developing Countries (pp. 66-116). Washington: International Monetary Fund.

Besley, T., & Persson, T. (2014). Why do developing countries tax so little? Journal of Economic Perspectives, 28(4), 99-120. doi:10.1257/jep.28.4.99

Bird, R. M. (1991). Tax Administration and Tax Reform: Reflections on Experience. In J. Khalilzadeh-Shirazi & A. Shah (Eds.), Tax Policy in Developing Countries (pp. 38-56). Washington: The World Bank.

Bird, R.M. (2015). Improving Tax Administration in Developing Countries. Journal of Tax Administration, 1(1), 23-45.

Bird, R.M., & Vaillancourt, F. (1999). Fiscal Decentralization in Developing Countries: An Overview. Cambridge: Cambridge University Press.

Bodea, C., & LeBas, A. (2014). The Origins of Voluntary Compliance: Attitudes toward Taxation in Urban Nigeria. British Journal of Political Science, 46(1), 215-238. https://doi.org/10.1017/S000712341400026X

Brautigam, D.A. (2008). Introduction: taxation and state-building in developing countries. In D.A. Brautigam, O-H. Fjeldstad & M. Moore (Eds.), Taxation and State-Building in Developing Countries: Capacity and Consent (pp. 1-33). Cambridge: Cambridge University Press.

Burgess, R., & Stern, N. (1993). Taxation and Development. Journal of Economic Literature, 31(2), 762-830.

Bulutoglu, K., & Thirsk, W. (1997). Turkey’s Struggle for a Better Tax System. In W. Thirsk (Ed), Tax Reform in Developing Countries (World Bank Regional & Sectoral Studies) (pp. 369-409). Washington D.C. The World Bank.

Casanegra de Jantscher, M. (1990). Administering the VAT. In M. Gillis, C Shoup & G. P. Sicat, Value added taxation in developing countries: a World Bank symposium (pp. 171-179). Washington D.C.: The World Bank.

Casanegra de Jantscher, M., & Bird, R.M. (1992). The Reform of Tax Administration. In R.M. Bird & M. Casanegra de Jantscher (Eds.), Improving Tax Administration in Developing Countries (pp. 1-18). Washington: International Monetary Fund.

Chilenga, T.J. & Guimarães, A. (2017, April). Fiscal decentralization in developing countries: the cases of Nigeria and South Africa. Paper presented at the 5th Annual Tax Administration Research Centre Workshop, University of Exeter.

Di John, J. (2006). The political economy of taxation and tax reform in developing countries. UNU-WIDER, Research Paper NO. 2006/74.

Due, J.F., & Greany, F.P. (1992). The Introduction of a Value-Added Tax in Trinidad and Tobago. In R.M. Bird & M. Casanegra de Jantscher (Eds.), Improving Tax Administration in Developing Countries (pp. 168-210). Washington: International Monetary Fund.

Everest-Phillips, M. (2010). State-Building Taxation for Developing Countries: Principles for Reform. Development Policy Review, 28(1), 75-96.

Fjeldstad, O.-H., & Rakner, L. (2003). Taxation and Tax Reforms in Developing Countries: Illustrations from sub-Saharan Africa. CMI Reports, R 2003:6. Bergen: Chr Michelsen Institute.

Gillis, M. (1989). Comprehensive Tax Reform: The Indonesian Experience, 1981-1988. In M. Gillis (Ed.), Tax Reform in Developing Countries (pp. 79-114). Durham: Duke University Press.

International Monetary Fund. (2011, March 8). Revenue Mobilization in Developing Countries. Retrieved from https://www.imf.org/external/np/pp/eng/2011/030811.pdf

International Monetary Fund. (2015, April). Current Challenges in Revenue Mobilization: Improving Tax Compliance. Washington D.C.: International Monetary Fund. Retrieved from https://www.imf.org/external/np/pp/eng/2015/020215a.pdf

ITC & OECD (2015). Examples of Successful DRM Reforms and the Role of International Co-operation: Discussion Paper. Eschborn: Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) Gmb. Retrieved from https://www.oecd.org/ctp/tax-global/examples-of-successful-DRM-reforms-and-the-role-of-international-co-operation.pdf

Jenkins, G.P., Kuo, C.-Y., & Shukla, G.P. (2000, June). Tax Analysis and Revenue Forecasting: Issues and Techniques. Cambridge, Massachusetts: Harvard University Institute for International Development, Harvard University.

Kaldor, N. (1963, January). Will Underdeveloped Countries Learn to Tax? Foreign Affairs 41(2), 410-419.

Kraay, A., Kaufmann, D., & Mastruzzi, M. (2010). The worldwide governance indicators: methodology and analytical issues. World Bank: Policy Research Working Paper 5430.

Kirchler, E. (2007). The Economic Psychology of Tax Behavior. Cambridge: Cambridge University Press.

Mascagni, G., Moore, M., & McCluskey, R. (2014). Tax Revenue Mobilization in Developing Countries: Issues and Challenges. Brussels: European Union, Directorate-General for External Policies of the Union, Directorate B, Policy Department. Retrieved from www.europarl.europa.eu/activities/committees /studies.do.language=EN

McLure Jr., C.E., & Santiago Pardo, R. (1992). Improving the Administration of the Colombian Income Tax. In R.M. Bird & M. Casanegra de Jantscher (Eds.), Improving Tax Administration in Developing Countries (pp. 124-167). Washington: International Monetary Fund.

Moore, M. (2004). Revenues, State Formation, and the Quality of Governance in Developing Countries. International Political Science Review, 25(3), 297-319.

Moore, M. (2013). Obstacles to Increasing Tax Revenues in Low Income Countries: ICTD Working Paper 15. Brighton: International Centre for Tax and Development. Retrieved from https://assets.publishing.service.gov.uk/media/57a08a47e5274a27b2000501/ICTD-WP15.pdf

Ndajiwo, M. (2017, April). SWOT Analysis: A case of a Sub-National Tax Authority. Paper presented at the 5th Annual Tax Administration Research Centre Workshop, University of Exeter.

Nyanga, M. (2017). TADAT: Strategic Objectives and Emerging Lessons from Completed Assessments to Date. Paper presented at the 5th Annual Tax Administration Research Centre Workshop, University of Exeter.

Oates, W. E. (1999). An Essay on Fiscal Federalism. Journal of Economic Literature, 37(3), 1120-1149.

OECD (2014, February). Fragile States 2014. Domestic Revenue Mobilisation in Fragile States. Paris: OECD Publishing. Retrieved from http://www.oecd.org/dac/governance-peace/conflictfragilityandresilience/docs/FSR-2014.pdf

Palil, M. R., & Faizal, S.M. (2017, April). The Mediating Effect of Power and Trust in the Relationship between Procedural Justice and Tax Compliance. Paper presented at the 5th Annual Tax Administration Research Centre Workshop, University of Exeter.

Prud’homme. R. (1995). The Dangers of Decentralization. The World Bank Research Observer, 10(2), 201–220.

PwC & the World Bank Group. (2017). Paying taxes 2017.

Rosid, A., Evans, C., & Tran-Nam, B. (2017, April). Perceptions of Corruption and Intentional Non-compliance Behaviour: Policy Implications for Developing Countries. Paper presented at the 5th Annual Tax Administration Research Centre Workshop, University of Exeter.

Sewell, D., & Thirsk, W. (1997). Tax Reform in Morocco: Gradually Getting It Right. In W. Thirsk (Ed), Tax Reform in Developing Countries (World Bank Regional & Sectoral Studies) (pp. 329-360). Washington D.C. The World Bank.

Silvani, C., & Baer. K. (1997). Designing a Tax Administration Reform Strategy: Experiences and Guidelines. IMF Working Paper, WP/97/30.

Silvani, C. A., & Radano, A. H. J. (1992). Tax Administration Reform in Bolivia and Uruguay. In R.M. Bird & M. Casanegra de Jantscher (Eds.), Improving Tax Administration in Developing Countries (pp. 19-65). Washington: International Monetary Fund.

TADAT (2013, December) Program Document. Retrieved from www.tadat.org/files/TADAT_programDocument_ENG.pdf

Thirsk, W. (1997). Overview: The Substance and Process of Tax Reform in Eight Developing Countries. In W. Thirsk (Ed), Tax Reform in Developing Countries (World Bank Regional & Sectoral Studies) (pp. 1-32). Washington D.C. The World Bank.

Umar, M.A. (2017, April). Tax Noncompliance and Audit Effectiveness in Developing Countries: A System Theory Approach. Paper presented at the 5th Annual Tax Administration Research Centre Workshop, University of Exeter.

Volume 3.2 of JOTA - Umar and Tusubira Cover

Downloads

Published

06-12-2017

How to Cite

Umar, M. A., & Tusubira, F. N. (2017). Challenges of Tax Administration in Developing Countries: Insights from the 5th Annual Tax Administration Research Centre Workshop, 2017. Journal of Tax Administration, 3(2), 108–123. Retrieved from https://jota.website/jota/article/view/109