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Taxation and State–Society Relations in Sub-Saharan Africa

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Taxation and State–Society Relations in Sub-Saharan Africa TAXATION AND STATE–SOCIETY RELATIONS IN SUB-SAHARAN AFRICA THE CASES OF CAMEROON, MOZAMBIQUE AND SOUTH AFRICA ALICE SOARES GUIMARÃES | FEDERICA DUCA | THATSHISIWE NDLOVU CAMEROON MOZAMBIQUE SOUTH AFRICA A PARI report Public Affairs Research institute 26 Rhodes Avenue, Parktown West, Johannesburg, South Africa TAXATION AND STATE–SOCIETY RELATIONS IN SUB-SAHARAN AFRICA THE CASES OF CAMEROON, MOZAMBIQUE AND SOUTH AFRICA ALICE SOARES GUIMARÃES | FEDERICA DUCA | THATSHISIWE NDLOVU Acknowledgements Throughout our research, we counted on valuable assistance from many institutions and individuals. This research would not have been possible without the support from FES South Africa, which provided us not only the necessary funds but also support for the logistical aspects. At PARI we were able to discuss the topics of the project with our colleagues on many occasions. These discussions provided us with important insights and feedback relevant to improving our work. In Mozambique, we counted on the help of many people and institutions. Although the list is long, we would like to give our special thanks to FES Mozambique, which provided precious help for the fieldwork. We also want to thank the Autoridade Tributária de Moçambique, which kindly received us and made available relevant data. We also wish to thank FES Cameroon for their unlimited support and interest in the project. Thanks to FES we have been able to identify the main actors involved in taxation in Cameroon. Special thanks go to Armand Leka, Francois Wassouni, Jean Mballa Mballa, and Pierre Madoguou for walking the streets of Maroua with us. The General Directorate of Taxation in Yaoundé was also of great help, as well as the various municipalities we visited. In South Africa, we would like to thank the organizations that responded when we knocked on their doors for generously giving us their time. Disclaimer Any mistakes and inaccuracies are the sole responsibility of the authors. The points of view expressed here do not reflect those of other people and institutions involved in the project. Contents Acknowledgements ............................................................................................................................iv Disclaimer ............................................................................................................................................iv List of Acronyms ..................................................................................................................................vi Introduction ..........................................................................................................................................1 Methodology ........................................................................................................................................3 SECTION ONE Approaches and concepts: critical literature review ......................... 4 1.1 Tax and development .................................................................................................................4 1.2 The global agenda of tax reform and its critics ......................................................................8 1.3 State–society fiscal relations .....................................................................................................11 SECTION TWO The formal institutions: post-colonial trajectories of taxation, institutional designs and current challenges .................. 14 2.1 The case of Cameroon ................................................................................................................14 2.2 The case of Mozambique ..........................................................................................................27 2.3 The case of South Africa.............................................................................................................39 SECTION THREE State–society fiscal relations and tax morale: legitimacy, justice and citizenship .................................................... 53 3.1 Collective memories and shared understanding on taxation...............................................53 3.2 Perceptions of state institutions: corruption, political interference and a lack of transparency .........................................................................................................61 3.3 Fairness, equality and justice: Who should pay what? ..........................................................75 3.4 Taxation, citizenship and the provision of public goods: why pay and for what? .............. 84 Conclusion ............................................................................................................................................91 References ..........................................................................................................................................94 List of Acronyms ADIN Africa Development Interchange Network GNP New Growth Path ANC African National Congress GST General Sales Tax ANESCAM Association Nationale des Sauveteurs du HRIU High Risk Investigations Unit Cameroun ICE Imposto de Consumos Específicos (Specific ASGISA Accelerated and Shared Growth Initiative for Consumption Tax) South Africa IFI International Financial Institution ATAF African Tax Administration Forum IMF The International Monetary Fund ATM Autoridade Tributária de Moçambique IRPC Imposto sobre o Rendimento de Pessoas Colectivas (Mozambican Tax Authority) (Corporate Income Tax) ATRN African Tax Research Network IRPP Impot sur le revenue des personnes physique ATO African Tax Outlook (Personal Income Tax) CAGR Compounded Annual Growth Rate IRPS Imposto sobre o Rendimento de Pessoas Singulares CDI Centres Divisionnaires des Impôts (Personal Income Tax) ISMP CDC Cameroon Development Company Institut supérieur de Management Publique (High Institute of Public Management ) CEMAC Communauté Economique et Monétaire de ISPC Imposto Simplificado para Pequenos Contribuintes l`Afrique Central (Economic and Monetary (Simplified Tax for Small Taxpayers) Community of Central Africa) LNG Liquefied Natural Gas CET Common External Tariff MPRR Mineral and Petroleum Resources Royalty CFA Central African Franc NDP National Development Plan CFAF Franc of Central African Financial Cooperation NUIT Número Único de Identificação Tributária CGT Capital Gains Tax (Individual Taxation Identification Number) CIP Centro de promocao da integridade publica ODA Official Development Assistance CIT Corporate Income Tax OECD Organisation for Economic Co-operation and CIME Centre des Impôts des Entreprises Moyennes Development (Medium Taxpayer Office) OUTA Organisation Undoing Tax Abuse CONAC Commission National Anticorruption (National PARI Public Affairs Research Institute Anti-Corruption Committee) PAYE Pay-As-You-Earn COSATU Congress of South African Trade Unions PIT Personal Income Tax CRADEC Centre Régional Africain pour le Développement Endogène et Communautaire RDP Reconstruction and Development Programme CSO Civil Society Organization RENAMO Resistencia Nacional Moçambicana (Mozambican DGD Direction Generale des Douanes (General National Resistance) Directorate of Customs) RSI Regime simplifie d`imposition (Simplified tax) DGI Direction Générale des Impôts (General SAA South African Airways Directorate of Taxation) SADC Southern African Development Community DGE Direction Générale des Grandes Entreprises (Large SAFU South African Federation of Trade Unions Unit Taxpayers) SAP Structural Adjustment Programme DTC Davis Tax Committee SARB South African Reserve Bank ENAM Ecole nationale d`administration et de magistrature SARS South African Revenue Service GICAM Groupement Inter-Patronal du Cameroun SEZ Special Economic Zone FES Friedrich Ebert Stiftung SOEs State-Owned Enterprises FRELIMO Frente de Libertação de Moçambique TSPP Taxe spéciale sur les produits pétroliers (special tax (Mozambique Liberation Front) on petrol) GDP Gross Domestic Product UDEAC Union Douaniere et Economique de l’Afrique Centrale (Customs and Economic Union of GEAR Growth, Employment and Redistribution Central Africa Union) GIZ Deutsche Gesellschaft für Internationale VAT Value Added Tax Zusammenarbeit vi TAXATION AND STATE–SOCIETY RELATIONS IN SUB-SAHARAN AFRICA Introduction The centrality of taxation in the making and functioning of modern states is widely recognized in academic literature as well as in public policy debates.1 The powers and legitimacy of the state, allocation of public and private resources, financing of public administration and the ability of government to deliver services are some of the many themes of socio-political and economic life that run through the issue of taxation. Moreover, the autonomous development of nations and their economic growth are highly conditioned by their fiscal systems. Because modern states, independently of the political system, depend on ‘collection of taxes on a large scale’, it is a task ‘always … at the forefront of state activities’ (Giddens, 1985:102; 1981:170). Taxation has the potential to contribute to the development and strengthening of democratic institutions and processes and, accordingly, to good governance and accountability. When revenue from domestic taxation is small, the political elite is less inclined to attend to the needs of the masses. Once the state imposes a significant fiscal burden on its citizens, rulers tend to become more responsive to popular demands. Tax policies can also be used as tools for redistributive measures to promote social justice and equality. Furthermore, in
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