Enhancing the transparency in the collection, administration and management of public taxes came to the fore of discussions at the 12th African Economic Conference on Wednesday, December 6, 2017 amid warnings the increased misuse of government taxes posed double risks to the state investment capability.
"There is the danger of overtaxing the real taxpayer. There is no point in mobilizing the money through public taxation if the government cannot invest the money effectively. It would otherwise be better to leave the money in the hands of the private citizens to invest," said Fitsum Abraha, UN Development Programme (UNDP) officer, addressing participants on Day 3 of the three-day conference in Addis Ababa.
The economists attending the session noted the urgent need to institutionalize the reform of the respective tax administration departments in order to promote transparent management of taxes.
The reforms should focus on both the collection of the taxes and the institutions which collects and manage the taxes with a view to achieving higher levels of revenue performance, said William Lochi, of the European University Institute, who reviewed a paper presented at the conference.
According to the paper presented by researcher Ameth Saloum Ndiaye of the University of Cheikh Anta Diop in Dakar, Senegal, the Senegalese government's tax revenue to the Gross Domestic Product ratio, increased more rapidly between 1970 and 1984, as a result of tax administration reforms.
"Senegal is caught in a weak public investment trap," said Ndiaye, who won the second best prize for an academic paper presentation at the just-concluded AEC, said during a session discussion on "Financing Africa's Development: Tax and illicit financial flows".
Ndiaye said there was need to improve and sustain the revenue collection efforts even as the Senegalese government intensifies its reforms and strengthens its tax administration in the wake of fresh oil discoveries.
Ndiaye also noted the tax administration reforms have both positive and negative impacts on the collection of revenue depending on how the measurement is done, which proves that the scientific methods used to discover the weaknesses and strengths of both systems remain unreliable.
The Senegalese economics lecturer said the reform measures depended on the new policies introduced by the tax authorities each year as well as the tax-related reforms and those geared towards the tax collection institution.
"The persistent tax-related reforms and institutions-related reforms over time would provide robust support to the government to achieve the tax-to-GDP revenue collection ratio near the 30-40 per cent like the rest of the Sub-Saharan region," Ndiaye told the conference.
During the discussions, the participants warned the exclusive focus on the role of the state in collecting revenue for national development was also a risky undertaking because it pushed the private sector and the households from equally accessing the same resources for economic development of the nation.