Tax compliance increases with enhanced communication, a study commissioned by Rwanda Revenue Authority (RRA) shows.
The study, whose findings were released yesterday, was conducted in partnership with the African Tax Administration Forum and International Centre for Tax and Development.
Richard Tusabe, the RRA Commissioner-general, said the agency is looking to increase voluntary tax compliance and was rolling out various strategies.
The tax authorities have previously used several strategies to increase compliance, including audits and general communication.
“The research had to look at how we can increase compliance of taxes through communication. Whatever approach we roll out has to be from an informed basis. We have been trying to communicate in the past just as we have been conducting audits to scale up compliance,” Tusabe said.
The research findings showed that some of the adjustments that RRA ought to incorporate into their communication strategy are personalised messages to clients that include their tax account details.
The study also showed that technology-based communication, such as emails and SMSes, tend to have more impact compared to traditional forms such as letters.
Dr Giulia Mascagni, the research director at International Centre for Tax and Development, one of the lead researchers in the project, said the findings also showed that customer centric manners of communication seemed to have better results than deterrence when trying to increase compliance.
The study involved 3000 personal income taxpayers and about 10,800 corporate income tax payers.
By improving and enhancing communication during the pilot study of the initiative, the tax agency saw an increase in tax compliance by 20 per cent after raking in $9 million in extra revenue.
“The research has shown that through different methods of communication to the various tax bases, we can improve on efficiency. However, different methods have different impact on different tax payer categories,” Tusabe said.
Going forward, he said, they were keen on re-customising their strategy and using specific channels for specific audiences.
In coming days, messages and communiqué sent out by the authorities will have more information on taxpayers’ account status in a bid to create closer ties with them, he said.
“We have also seen from the feedback what we should include in the messaging we send out to taxpayers. For example, rather than only remind one to pay taxes, we could also share with them the status of their tax account,” Tusabe said.
Making the changes and enhancements will not come at a huge cost as the agency already has established communication channels, Tusabe said.
“There is no huge cost for this because we have been communicating to the taxpayers already. We will only need to change some of our approaches in an informed manner and not use a one size fits all approach,” he added.
Some findings and changes that are operational will be implemented immediately while the policy-related kind of findings will go through the Ministry of Finance and Economic Planning to change necessary laws.
Logan Wort, the executive secretary of African Tax Administration Forum, said enhanced communication to increase tax compliance has been tried and tested in middle and high income countries, and yielded positive results.
“This is the first research of its nature in Africa. The other African country that has used a similar model to improve compliance is South Africa. We have seen that having personalised messages and communication, compliance goes up,” Wort said.
He said the study and efforts to invest in communication for compliance was coming at an opportune time and would help translate the recent economic growth into revenue.
“With the growth being experienced in the country in recent years, there is a larger pool to get revenue resources from and that is why RRA ought to improve compliance,” Wort said.