That day the assistant-chief came to my compound. Some time after we ended the formal greetings he mentioned the main topic of his visit. In the near future a fundraising (Harambee) would be held in the area. The Big Man Nomen Nescio was to be the main Guest of Honour. We could not let the Big Man come empty handed, so the people in a wide area had to collect money. I gave the assistant-chief some notes and asked for a receipt. He apologized for he was unable to give me a receipt. We parted ways after he had thanked me profusely for my generous contribution to the fundraising. He would hand over the money to the chief and the chief would hand over the money to someone else and that someone else would make sure the money finally arrived at the office of the District Commissioner. And this DC would give the money he had collected throughout the district to the Big Man.
There were no checks and balances. No one knew how much the assistant chief had collected and how much he would hand over to his chief. We do not know how much the chief had collected and how much he would pass on to the next in line in the hierarchy. And so on and so on.
I thought of this fleeting experience when I read about the division in certain taxes (chapter 7). Next to the taxes at a national level the three experienced and qualified writers pay attention to small taxes (and the large burdens that come with them for low income earners): * sub-national taxes (e.g. property tax; business tax), * nuisance taxes (e.g. for documents; for cattle), * informal taxes (e.g. communal work). I wondered where my contribution for the fundraising fitted in. Was it a nuisance tax? To many low income workers it was a nuisance indeed, these people paid, but what was the benefit for them? Was it an informal tax? The people I lived with would have preferred working on a dirt road, that would benefit all of us.
Chapter 1 of Taxing Africa is an introduction into the world of taxes in Africa. It tells about the diversity of experiences people have with taxes. It tells about the need to look at fairness, equity and inequality. The links between international, national and local taxes. The political power behind taxation and the need for reform. The need for accountability (in an age of rapid data movements) and nation building.
In the second chapter the writers have a look at history. They had already mentioned the Hut Tax War that took place in Sierra Leone in 1898. From this we arrive in the colonial era with its taxes to keep the colonial system working. From the 1960’s we come to the age of independence and the need for the independent governments to keep running the state structures. This is the extractive era for the products that were exported and sold were bringing in cash (like cocoa, coffee, copper, cotton). The next phase in this historical approach was the aid era. From the mid-1980s to the mid 1990s many governments in Africa received more money in aid than in national taxes. Later on we reach the tax era in which countries see more and more the need to impose national and local taxes to keep the country running.
In this historical overview I missed the many local situations in pre-colonial days. How did rulers, kings, headmen support their power structures? How does this effect presentday informal taxes? Do people (e.g. in Ghana) still have to support their king. Or for that matter in what ways do Yoruba support the Oba?
In chapter 3 we get an insight in present day global complexities. The writers look at the Multi National Companies (MNC) and the High Net Worth Individuals (HNWI). The complexities of international law and the powers of the MNC is shown. These companies have batteries of highly specialized lawyers to find every nook and cranny and loophole in law, both national and international. In this way much money (including prospective taxes) are moved out of African countries. Also rich individuals know the way to move their profits out of the country. And even the money and income that is left in their country of abode is not taxed or hardly taxed. Switzerland is one of the havens for money that is floating out of Africa. Through international treaties attempts are made to get money back to Africa, but it is a hard way. Do not expect in this chapter ‘naming and shaming’, this is not what the writers intend to do. They want to show broader lines and developments.
Chapter 4 shows how hard it is to take appropriate measures. The HNWI are well connected people. They are in power or have friends in high places. The economical and political power of African countries is not very strong, especially as compared to countries like Brazil and China.
Chapter 5 digs deeper in the complexities of taxes by looking at important sources of income for several countries. Oil and gas and minerals are found in many countries. Nigeria is a point in case. Large quantities of oil have been found. The writers dig deep into the mines in Zambia. Copper mines that have politicized very strongly. Chinese influence is tangible. One problem in getting a quick financial result is the long way to prepare the excavation of the minerals, exploration, getting infrastructure in place and so on.
To my surprise I read in chapter 6 that African countries are doing well in collecting taxes at the national level. This compared to the GDP and to other low income countries. Somaliland is doing very poorly, but on the other hand Rwanda is doing very well. The collection of Personal Income Tax (PIT) is a problem everywhere. People get exemptions. Corruption enters the field in a strong way. Friends in high places are important to make sure you will avoid paying PIT. Even pretending you are a Petty Income Taxpayer.
Special attention to the subnational level and the informal taxes is given in chapter 7. A big question in this chapter is: who pays taxes? Many people in Africa do not pay PIT, not just poor people are out of reach of the Revenue Office, also rich people now how to avoid contact with the taxman. At other levels there are many opportunities to give the government its due. You want a driver’s licence? Pay your dues. You want to pass the roadblock? Pay some ‘chai’ to the soldier. You sell some tomatoes and vegetables at your roadside stall? Pay a little fee. In this context the writers wonder about gender issues in the world of taxes. Also they do propose some ways of reforming the system. To highlight just two possible measure: * less nuisance taxes and more property taxes. In this way more fairness will take place, and not an undue burden on low income earners.
We are nearing the end of the book when in chapter 8 the relationship between taxes and good governance is investigated. Is it possible that a better taxation will lead to a better governance? Will taxpayers ask for more clarity and transparency? When all people pay their PIT in a proper way there might be a better involvement of the taxpayer wanting a better use of the money collected. The theory is clear and desirable, but in daily life the resistance by the elite (inside and outside government) is very strong. There is a great need for a strong political will to make reforms.
The last chapter (9) looks forward. * There is a need of a proper speed in reforming the world of taxes in Africa. The use of modern ITC is important in collecting the much needed data. Systems with information have to be linked in order to get a better picture of the financial situation. * So many decades after the start of independence there is still a need to Africanize the face of taxes in African countries. There should be a proper ownership of the taxing of people. What is needed in a national situation? * The political barriers towards a more just and transparant tax legislation are very strong. Civil society can play an important role in keeping the population informed and the government at the edge of its seat.
I am an ordinary taxpayer, not a MNC or a HNWI. Not a specialist in the world of finance. The three writers have done a very good job in writing a very readable book about technical and complicated issues. They do not make shortcuts or simplifications. They have listed the pro’s and the con’s in the raging debates. For those who want more detailed information and backgrounds there is an abundance to be found in Endnotes and a long Bibliography’, next to an Index and a Glossary of Terms.
Africa’ in the title is not referring to the whole of the continent, but to that part south of the Saharan sea of sand (and north of South Africa, see page 17). The information shows the common questions and situations but also the diversity in all these countries (partly due to the colonial legacy).
Mick Moore, Wilson Prichard & Odd-Helge Fjeldstad – Taxing Africa / Coercion, Reform and Development – Zed Books 2018