International Centre for Tax and Development

📚Another one of our #BookRecommendations right on time for the weekend! Our July list was curated by Frederik Heitmüller. Pick a book and enjoy the read ⬇️ 1️⃣'Senghor, sa nègre attitude' by Ibou Fall (2021) A political history of Senegal centered around the personage of president Léopold Sédar Senghor, who governed the country from 1960 to 1980 and whose legacy is still important today. The book not only provides tons of interesting historical facts and observations key to understanding contemporary Senegalese politics but, coming from the plume of a journalist specialised in satire, is also great fun to read. 2️⃣'Les bouts de bois de Dieu' by Ousmane Sembène (1960) Through narrating the story of a strike of railway workers on the Dakar-Bamako line, the author focusses on the struggle between colonised and colonisers, while engaging with other themes such as the role of women and religious leaders within colonial society, and the relationship between humans and machines. 3️⃣'The Dawn of Everything: A New History of Humanity' by David Graber and David Wengrow (2021) Contrasting archaeological evidence with ideas about ancient civilisations espoused in political writing, the authors refute two ideas often found in the latter: that “development” is a linear process and that the agriculture revolution led societies into a “trap” of social inequality. Instead, the authors present a wealth of case studies which highlight a diversity of political institutions likely to have existed among different ancient civilizations. 4️⃣'The Rainbow Troops' by Andrea Hirata (2005) Based on his own experience, the author paints a very rich picture of a life in a remote village on the Indonesian island of Belitong, by telling the story of a group of students fighting to gain access to education in the hope of a better life. 🗨️ Have you read any of these books? Leave your thoughts ⬇️ #BookLover #BookCommunity #BookReview

As the meeting of G20 finance ministers and central bankers wraps up today in Rio de Janeiro, the world is focused on Brazil's proposal to #TaxTheWealthy 💵But how relevant are these discussions to lower-income countries? Efforts to strengthen the #taxation of the wealthy are particularly needed in lower-income countries, as those governments have struggled most acutely to collect revenues from the rich. According to Wilson Prichard, one way to do that is through property taxation ⬇️ 'More often overlooked is the potential importance of taxes on property – which also represent a direct tax on wealth rather than income. Evidence suggests both that the wealthy in lower-income countries have tended to invest heavily in real estate, and that the taxation of the properties has been hugely ineffective. Collection of income taxes on rental income is notoriously ineffective. Meanwhile, property taxes are by far the most underperforming major tax types across lower-income countries: whereas high performing countries collect 2-3% of GDP in property taxes many lower-income countries collect as little as 0.1-0.2% of revenue.' Do we need new frameworks for that? Giulia Mascagni stresses ⬇️ 'Many of the tax tools needed to capture the incomes and wealth of HNWI, such as taxes on capital gains, rental income, and property, are already enshrined in the tax laws of most countries. Progress on digitisation and international exchange of information provide better data, and systems more than have ever before been available to enforce these tax tools more effectively, although they come with their own challenges. Especially in lower-income countries, much progress can be achieved by simply enforcing existing tax tools, before engaging in more complex processes to introduce new ones, like the wealth tax.' And from an international tax perspective, Mbakiso Makhwade Magwape highlights ⬇️ 'There are two avenues through which the international tax regime provides an opportunity for coordinated taxation of individuals classified as HNWI (1) information sharing through exchange of information mechanisms and (2) substantive rules relating to taxation of HNWI. The first is achievable through bilateral tax treaties such as the OECD Convention on Mutual Administrative Assistance in Tax Matters. On substantive rules, very limited progress has been made.' But what is actually hindering the process? According to Jalia Kangave, PhD⬇️ '[I]n a number of cases, the wealthy are also publicly known. And while some countries may not have sufficient data to enable tax authorities to identify these individuals, in most cases, the main challenge is a political one. What we are finding in our research is that most of the wealthy are either politicians or politically connected.' 📃Read the full news story here: https://ow.ly/gif950SKSzo #TaxExperts #G20Brazil 📸Dave Winer/Flickr

🔴The transition in international tax rulemaking from bilateral tax treaties to global tax coordination has been a tumultuous one. Countries and coalitions with competing interests have jostled for policy space and favourable global rules under the OECD/G20 Inclusive Framework (IF). The outcome has often resulted in rules which have not reflected issues of interest to the Global South, this includes the adoption of simplified rules and redistribution of taxing rights. Furthermore, deficiencies in the rulemaking process, particularly with regards to agenda-setting and decision-making in the IF has led to discontentment in the Global South, resulting in low-perceptions of input, throughput, and output legitimacy. While rule makers search for solutions within international tax, other comparable multilateral systems may provide critical lessons and a reference to design an optimal system – one which takes into account the needs and interests of all participating Member States. ➡️The World Trade Organisation (WTO) international trade regime serves as a useful comparative system. In his latest blog, Mbakiso Makhwade Magwape analyses the comparative differences between both regimes based on three factors: (1) agenda-setting, (2) decision-making and (3) special and differential treatment. He concludes with two proposals to address the shortcomings, providing a political and legal solution to counterbalance power asymmetries relevant to developing countries’ needs in the international tax regime. 📃Read the blog here: https://ow.ly/mIpo50SJRAX #Taxation #TaxExperts #InternationalTax #GlobalSouth African Tax Administration Forum (ATAF) | World Trade Organization | OECD Tax 📸Tom Page, via Washington International Trade Association

A growing body of evidence suggests that individual Africans often make various informal tax payments which extract more money from low-income households than they do from high-income ones. Whereas other studies argue that the majority of personal income taxes is collected from individuals in formal employment (who earn steady but modest incomes) while high-income professionals and wealthy self-employed individuals often go untaxed. ⚠️The result is an under-taxation of the wealthy and over-taxation of low-income earners. 🔎In this paper, Jalia Kangave, PhD, Kieran Byrne and John Karangwa explore to what extent wealthy individuals in Rwanda are tax compliant. To get some insight into the answers to this question, they conducted interviews with government officials from the Rwanda Revenue Authority , Rwanda’s Ministry of Finance and Economic Planning, Rwanda Development Board (RDB), City of Kigali and the Rwanda Land Management and Use Authority in January and February 2019. 🔗The paper then highlights 6 main findings. Discover them here: https://ow.ly/kUfw50SJUzb #Taxation #TaxExperts #TaxTheWealthy #G20Brazil

Appropriately taxing the richest is a priority for every government, even more so in Africa, where higher revenue mobilisation is needed to fund growth. In Uganda, the revenue authority launched, in September 2015, a specific unit to monitor the tax affairs of the richest individuals. Thanks to a close collaboration with the Uganda Revenue Authority (URA) we evaluate the extent to which the unit was able to improve tax compliance by the rich. FINDINGS: We show that the policy only has been partially successful ⬇️ 1️⃣While it increased the probability of filing, especially by politically relevant taxpayers, it produced a seemingly small response in which treated taxpayers would declare less on different margins, with the end result of not declaring more tax liabilities. 2️⃣ On the tax payment side, only a small yet significant impact on tax collected is measured. In parallel, we show a strong compensating response across tax heads. 3️⃣We also measure the spillover effect on companies associated with the richest taxpayers, again documenting complex compensating reactions. 📃Find the full paper here: https://ow.ly/Sj0R50SJme7 📚The study was then published as a journal article in Development Policy Review: https://ow.ly/oeCn50SJo0z Fabrizio Santoro | RONALD WAISWA | ODI #Taxation #TaxExperts #TaxTheWealthy #G20Brazil

Talks about taxing the wealthy have been gaining international momentum recently 💵💵 In January, 260 billionaires and millionaires called on global leaders to introduce higher taxes for the extremely wealthy; and this week at the meeting of G20 finance ministers and central bankers, Brazil is set to push for a joint declaration in support of a proposal to tax the rich. ICTD has long been studying the taxation of high net worth individuals (HNWIs) from both the compliance and revenue collection perspectives across several low-income countries including Nigeria, Rwanda, Sierra Leone and Uganda. This week we will be highlighting some of this work starting with Sierra Leone ⬇️ In 2019, Sierra Leone signalled its intention to develop a strategy to increase the tax compliance of high net worth individuals. In this paper Jalia Kangave, PhD, Giovanni Occhiali and Ishmail Kamara provide an initial assessment of how fit for purpose Sierra Leone's current legal setting is, and give a general picture of the most likely characteristics of HNWIs in the country. 🔎FINDINGS: Sierra Leone has a relatively strong legal framework to facilitate taxation of HNWIs. Nevertheless, tax experts in the country believe that there is a need to further strengthen the law by explicitly designating HNWIs as a taxpayer category, and incorporating stronger provisions for the national revenue authority's access to bank information. 📃Find the full paper here: https://ow.ly/zo3650SIk1e #Taxation #TaxExperts #TaxTheWealthy #G20Brazil

Check the June edition of our newsletter which highlights insights from our latest research on taxing the informal economy. Plus more events, blogs and new stories! Read ➡️https://ow.ly/fAM150SEbXS 📫Subscribe to receive the next edition: https://ow.ly/40Sn50QxVQI #Taxation #TaxExperts #TaxNews

The tabling of Kenya's Finance Bill 2024 in parliament, one month ago, sparked one of the broadest protest actions in the country's history. President Ruto was then forced to withdraw the bill which introduced new tax increases. At the time, ICTD's Wilson Prichard explained that these levies “risked increasing the cost of living for lower- and middle-income people at a time when those groups are struggling, and when they feel like they’re not getting enough in return for the taxes they pay”. Eric Magale, PhD and Mario Schmidt provide in depth background analysis of the situation based on an upcoming ICTD working paper that studies the social impact of taxes. 'At the core of these protests is the idea of a fiscal social contract, that is, a “deal” in which citizens willingly pay taxes in return for government using these resources to provide services such as education and health. In Kenya that contract has been breaking down gradually and culminated in the storming of the parliament and the killing of protesters,' they explain. 📃How can the government renew citizens' trust? Read the full blog post here: https://ow.ly/34PL50SFt4T Max Planck Institute for Social Anthropology | The Conversation Africa | Institute of Development Studies #TaxExperts #Taxation #KenyaProtests #RejectFinanceBill2024

🆕In our latest publication we explore the efficiency of machine learning to identify fraudulent (i.e. non-existing) firms. Here is how Aprajit Mahajan, Shekhar Mittal, Ofir Reich and Taha Barwahwala conducted their research in an Indian state: ➡️ Train a machine learning-based model to predict fraudulent firms ➡️Use the model predictions to carry out field inspections of firms identified as suspicious by the machine learning tool ❗They find that the machine learning model is accurate in both simulated and field settings in identifying non-existent firms. ➡️Estimate, from a randomly selected group of firms, the causal impact of machine learning-driven inspections. RESULT: Despite the strong predictive performance, the model-driven inspections do not yield a significant increase in enforcement, as shown by the cancellation of fraudulent firm registrations and tax recovery. Read the full analysis here: https://ow.ly/5Vsv50SFacT University of California, Berkeley | National Bureau of Economic Research | Abdul Latif Jameel Poverty Action Lab (J-PAL) | Center for Effective Global Action (CEGA) | Columbia | Department of Economics #Taxation #TaxExperts #MachineLearning

#Ethiopia #development strategy has often received particular attention from development economists as its pursuit of manufacturing-led growth was associated with significant poverty reduction. However, its #environmentalimpact received much less attention - and this could have dire consequences. In my latest International Centre for Tax and Development working paper with Seid and Tiruwork, we argue that the country approach to environmental management is substantially ineffective: the Ethiopian Environmental Protection Agency severely lacks human and technical resources, and environmental protection is seen as an unaffordable luxury. Can #environmental #taxes help address this issue? Find the answer in the paper!