Tax Policies and Informality in South Africa

2022

IJRBS

Domestic revenue mobilisation is fundamental if African countries are to fund investments in health, education, infrastructural development, economic growth, human capital development, security, and prosperity to attain the Sustainable Development Goals by 2030. Some goals focus on eradicating poverty, reducing inequalities, strengthening institutions, and providing decent work. This requires resources and investment, yet Sub-Saharan African countries continuously struggle to mobilise enough revenue to meet basic government objectives. Through a critical literature review, this paper focuses on sustainable tax revenue mobilisation in Sub-Saharan African Countries, discussing the challenges, opportunities, and prospects for possible amelioration of tax systems. Challenges identified to explain the ineffectiveness of revenue mobilisation in these countries include the presence of a significant informal sector, weak tax administration capacities, the growth in the digital economy, corruption, governance quality, and increased tax avoidance and evasion by multinational companies. Possible prospects include taxation of the digital economy, taxing the informal sector, the capacitation of tax authorities, and the broadening of tax bases.

Section: Introductionmentioning

confidence: 99%

Sustainable mobilisation of tax revenues to enhance economic growth in Sub-Saharan Africa: Challenges, opportunities, and possible areas of reform

2022

IJRBS

“…Contrary to the developed countries with a comparatively smaller IS, developing countries are characterised by a reportedly large non tax compliant IS. Developing countries are confronted by challenges of fragile direct and indirect tax administration capacities and capabilities in their quest to design effective and productive tax systems (El Badaoui & Magnani, 2013). Institutional corruption in these countries has also worsened the situation (Topal & Sahin, 2017).…”

Section: Introductionmentioning

confidence: 99%

The Informal Sector, the “implicit” Social Contract, the Willingness to Pay Taxes and Tax Compliance in Zimbabwe

Accounting, Economics, and Law: A Convivium

2021

The growth of the informal sector in African countries has largely been viewed as an escape from regulation and deliberate intention to avoid paying taxes and these views have been widely popularised, ignoring significant details to the disadvantage of realistic tax policy design. Zimbabwe adopted a presumptive tax system for various informal sector categories to enlarge the tax base and increase tax revenues mobilised. However, presumptive taxes have not generated significant revenue. Tax compliance in the informal sector has often been studied from the tax structure design, the deterrence model perspective and capacity limitations without paying adequate attention to tax morale. Tax morale can be denoted through the peer effect of the compliance behaviour of other taxpayers, the fulfilment of the psychological social contract, transparency and accountability in the use of tax revenues as well as stakeholder communication, built on mutual trust and respect. In light of these tax morale dimensions, it is evident that tax compliance can never be divorced from the intrinsic motivation to pay taxes. The inextricable link, between tax evasion, tax compliance and tax morale, motivates this study. While previous studies on tax morale have applied single method research approaches, this study adopted a sequential exploratory mixed method research design, combining both qualitative and quantitative (through the use of document reviews, semi-structured interviews and questionnaires) in order to bring a balanced view. The study found out that tax morale was a strong driver of tax evasion and non-tax compliance in the informal sector.

Direct Digital Services Taxes in Africa and the Canons of Taxation

Moloi

2022

Laws

The unprecedented expansion of the digital economy has increased the intricacy of mobilising tax revenues from both domestic and international transactions. Tax evasion and avoidance are perpetuated by the invisible nature of digital transactions. To minimise the untapped revenues, countries all over the world are mapping policy strategies on how to collect revenue from this sector. African countries are not an exception. They have constructed digital tax policies to levy both direct and indirect taxes on digital transactions. This paper focuses on direct digital service taxes (DSTs). Direct digital service taxes have been an issue of debate among governments, policy makers, academics, tax bodies, and development organisations. Disagreements coalesce around their structure, their adherence to the canons of taxation, opportunities, and challenges as well as consequences of implementing them. Through a literature review, this paper assesses the legislative structure and administration of digital service taxes in relation to the canons of taxation. The findings of the review were conflicting. While certain aspects, motives, and possible outcomes of the taxes upheld the principles of taxation, some of these were conflicting with the principles. This could possibly be linked to variations in the economic, political, and social contexts in African countries and between developed and developing countries. The study recommends that while digital service taxes are an irrefutable necessity to tap tax revenues from the digital economy, African countries should ensure that equity, neutrality, economy, and efficiency among other principles are considered and balanced with the fundamental roles of tax policy.