Improving tax literacy in Africa

The Organisation for Economic Co-operation and Development (OECD) defines literacy as the ability to understand and employ printed information in daily activities at home, at work and in the community – to achieve one’s goals, and to develop one’s knowledge and potential. Tax literacy can therefore be defined as the ability to understand tax laws and use same knowledge in making informed decisions. The general consensus is that tax literacy is equally as important as tax compliance. As a matter of fact, the lack of tax knowledge may lead to a high degree of involuntary non-compliance. The challenge however, has been determining who bears the responsibility of driving tax literacy. While some may agree that all stakeholders should be involved when it comes to tax literacy, most public discussions on tax education often ignore the possibility that taxpayers too have a role to play when it comes to being educated on taxes. With this in mind, we explore the responsibilities of both the revenue authorities and the taxpayers with regard to tax literacy.

The Role of the Revenue Authorities

The question to be asked is whether the current tax education initiatives conducted by revenue authorities have had the desired impact of increasing the levels of compliance and promoting tax literacy in Africa. While there is no readily available data to answer this question, we are of the view that the envisaged tax education programmes could be much more impactful if they were done on a periodic basis. According to a research conducted by the International Centre for Tax and Development (ICTD), tax education can be improved by making the content easy to understand, contextualised it to specific market and making it practical. Tax administrations, for example Rwanda Revenue Authority, use radio and television to drive tax literacy and have National taxpayers’ day which is a day specifically dedicated to taxpayers. Similarly, there exists a tax payers’ education office in Lesotho whose sole purpose is to drive tax literacy in country. It is also worth noting that most revenue authorities in Africa have set up a large taxpayer’s office and created special taxation regimes for small and micro-enterprises. This could be a starting point to having personalised training for various categories of taxpayers.  With the drive towards a more digital world, the recommendation for tax authorities would be to take a more digital approach of tax education to reach more people, rather than the traditional methods of issuing brochures.

The Role of Taxpayers

ICTD in its research identified that the low attendance at tax educational forums hosted by tax authorities is one the factors that hinder the promotion of tax literacy.

The direct consequence of taxpayers not attending the tax education forums is missing out on critical information such as tax benefits available or new tax laws that have been passed.

This makes it very difficult for revenue authorities to drive tax education initiatives, especially amongst the taxpayers who aren’t tax literate. The responsibility of attending tax education forums organized by the revenue authorities therefore lies with the taxpayers.

 For instance, there were significant changes on the new Income Tax Law in Rwanda (Law No 016/2018) on direct income tax which came into force on 13 April 2018 and therefore it’s necessary that tax payers keep abreast with such changes to ensure that they avoid any unnecessary penalties by the revenue authority. By attending tax educational forums, taxpayers can learn of the existing tax benefits which they can take advantage of.

Lesotho has for example introduced voluntary disclosure programs, which is a great starting point to get people compliant and excited about paying and filling taxes. The voluntary disclosure program, launched by the Lesotho Revenue Authority, allows citizens to come clean with regards to non-compliance in the last few years (with no penalties).

Tax literacy plays a vital role in a country’s economy and such, there is a need for tax administrations to develop innovative taxpayer’s education programs and campaigns that will inform and engage both the current and potential taxpayers. Similarly, tax payers should equally be responsible in ensuring that they fully participate in the education programs organized by the tax administrations so as to keep abreast with the tax laws.

Tokiso Nthebe from Lesotho and Aimee Dushime from Rwanda are Mandela Washington Alumni from Northwestern University and Andrew Young School of Policy Studies (AYSPS) respectively. The views and opinions are those of the authors and do not necessarily represent the views and opinions of Northwestern University and AYSPS or the institutions they currently work for.

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