The customer is king: Evidence on VAT compliance in Tanzania

Fjeldstad, Odd‐Helge; Kagoma, Cecilia; Mdee, Ephraim; Sjursen, Ingrid Hoem; Somville, Vincent

doi:10.1016/j.worlddev.2019.104841

Cited by 20 publications

(14 citation statements)

References 19 publications

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“…We might expect technology, in this case EBMs, to provide incentives for taxpayers to report accurately so that EBM amounts are consistent with their tax declarations. This might, in turn, reduce opportunities for evasion, to the extent that firms feel obliged by buyers to issue formal receipts (Naritomi, 2019;Fjeldstad et al, 2020).…”

Section: Administrative Datamentioning

confidence: 99%

The VAT in practice: equity, enforcement, and complexity

Mascagni

Dom

Santoro

et al. 2022

Int Tax Public Finance

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The value-added tax (VAT) is meant to be an efficient and self-enforcing tax on consumption. Yet, being a rather sophisticated tax, the VAT can also be complex and costly to administer. By examining the case of Rwanda, this paper assesses the extent to which the VAT’s potential materialises in the context of a lower-income countries. Using a mixed-methods approach, which combines qualitative information from focus group discussions with the analysis of administrative and survey data, this paper makes two contributions. First, it documents reporting inconsistencies in VAT data, providing new evidence on how weak capacity prevents tax administrations in lower-income countries from reaping the full benefits of the VAT. Second, it shows that the VAT, as applied in practice, differs substantially from its theoretical functioning. This generates differences in tax burdens across firms, despite a proportional tax rate, with important distributional implications. We also document that the VAT chain often breaks down, with implications on the VAT’s efficiency.

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Section: Administrative Datamentioning

confidence: 99%

The VAT in practice: equity, enforcement, and complexity

Mascagni

Dom

Santoro

et al. 2022

Int Tax Public Finance

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“…While we observe buyers' under-claiming, our administrative data does not allow us to observe whether taxpayers declare all the relevant sales accurately. It is quite likely that some firms under-report their VAT sales and make limited use of EBMs, as documented elsewhere (Fjeldstad et al 2020). Substantial underreporting of sales could be consistent with widespread under-claiming of inputs.…”

Section: Tax Evasionmentioning

confidence: 74%

The VAT in Practice: Equity, Enforcement and Complexity

Mascagni¹,

Dom²,

Santoro³

2021

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The value added tax (VAT) is supposed to be a tax on consumption that achieves greater economic efficiency than alternative indirect taxes. It is also meant to facilitate enforcement through the ‘self-enforcing mechanism’ – based on opposed incentives for buyers and sellers, and because of the paper trail it creates. Being a rather sophisticated tax, however, the VAT is complex to administer and costly to comply with, especially in lower-income countries. This paper takes a closer look at how the VAT system functions in practice in Rwanda. Using a mixed-methods approach, which combines qualitative information from focus group discussions with the analysis of administrative and survey data, we document and explain a number of surprising inconsistencies in the filing behaviour of VAT-remitting firms, which lead to suboptimal usage of electronic billing machines, as well as failure to claim legitimate VAT credits. The consequence of these inconsistencies is twofold. It makes it difficult for the Rwanda Revenue Authority to exploit its VAT data to the fullest, and leads to firms, particularly smaller ones, bearing a higher VAT burden than larger ones. There are several explanations for these inconsistencies. They appear to lie in a combination of taxpayer confusion, fear of audit, and constraints in administrative capacity.

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“…In particular, a team of authors analyze the factors defining the parameters of the VAT gap in an economy and conclude that three key categories of actors-final consumers, sellers, and the tax administrationmust ensure the good-faith fulfilment of their duties [13]. Noting the negative impact of VAT fraud, certain researchers conclude that this illegal activity creates some of the most dangerous consequences for an economy [14,15] and proclaim that such activity can be implicated in the direct or indirect financing of terrorism [16]. The most important instrument for combatting VAT fraud is the development of international cooperation [17] and use of modern technologies [18].…”

Section: Introductionmentioning

confidence: 99%

Analytical View on the Sustainable Development of Tax and Customs Administration in the Context of Selected Groups of the Population of the Slovak Republic

et al. 2022

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Participation in the tax system of the country and tax liability itself are two of the basic characteristics of the functioning of all economically active subjects belonging to national economies. The revenues from taxes represent a substantial part of the resources in each state’s budget, so it is not easy to achieve any form of joint action by all concerned in this area. Within the revenues obtained by taxes, customs, and levies, the issue of taxes is one of the most sensitive areas. Higher efficiency of tax collection is possible to achieve by implementing not only external tools (e.g., tax control, detecting tax fraud, etc.) but also internal ones (e.g., internal motivation of taxpayers). Therefore, it is important to improve the perception of the tax system among the population and thus to influence and create a responsible approach to the collection of taxes and levies. Due to the COVID-19 pandemic, some changes and restrictions have been implemented into the system of tax and customs collection in the Slovak Republic, but very unexpectedly and purposefully. It results in a more complicated and confused system of tax and customs administration. Therefore, our research efforts are aiming to identify and analyze the key significant factors that affect the perception of tax and customs administration in the Slovak Republic from the perspective of its inhabitants, to capture differences in perception of taxpayers. The novelty of this study lies in its approach to identifying and eliminating redundancies and opacities in tax collection processes performed by institutions of tax and customs administration systems in Slovakia, namely the approach from the taxpayer point of view, to promote voluntary compliance with tax duties. Due to the lack of such oriented studies, a survey performed in three regions of Slovakia using the research tool (the questionnaire) developed by authors is presented in this article. To solve this complex problem, a solving strategy based on exploratory analysis (KMO = 0.641) and later confirmatory factor analysis is proposed to extract four key common factors from the items of the research tool (with a total value of 80.623% of the explained variability). The reliability of the used research tool, pre-tested in the pilot study, is demonstrated by the achieved Cronbach coefficient value of 0.827%. In order to evaluate the obtained data, the respondents were divided into groups by gender, residence, and occupation, in accordance with the indications and outputs of the pilot study. Finally, experimentally obtained data were analyzed and compared. The significant differences in the respondents’ perceptions of the extracted factors between selected groups are confirmed by applied analysis, both between men and women and between respondents depending on the place of residence. The main differences are observed in the questionnaire items Q10 “Administrative complexity of the tax and customs agenda,” Q7 “Ease of tax collection,” Q16 “Labor costs for staff dealing with the tax and customs agenda,” and Q5 “Helpfulness and willingness of administrative workers”. Time costs for tax processing are considered critical.

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The customer is king: Evidence on VAT compliance in Tanzania

Cited by 20 publications

References 19 publications

The VAT in practice: equity, enforcement, and complexity

The VAT in practice: equity, enforcement, and complexity

The VAT in Practice: Equity, Enforcement and Complexity

Analytical View on the Sustainable Development of Tax and Customs Administration in the Context of Selected Groups of the Population of the Slovak Republic

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