Accountability can boost tax morale, compliance in Africa

Africa’s average tax to Gross Domestic Product (GDP) is 17 per cent, about half of that of developed countries.

This is mainly due to low tax morale hence low compliance. So why do we have very low tax morale?

In most African countries the fiscal contract either does not exist or is being violated. A fiscal contract is where governments, acting as agents of taxpayers, provide public services— e.g. security, roads, water, health care, education — in return for tax revenue.

Under such a scenario, the more accountable a government is perceived to be the more willing tax payers will be to pay for the services offered.

The undocumented fiscal contract between African governments and their citizens has been violated for decades.

Unfortunately, there is no recourse in any court of law for the aggrieved party — the citizens. In most cases the government remains the judge, jury and executioner with respect to any violations of this fiscal contract.

Legislators charged with making tax laws have opted, in most cases, to exempt themselves from taxation. About 40 per cent of African countries’ budgets are misappropriated.

More than 50 per cent goes to paying government workers (in most cases bloated or ghost workers). The rest is lost through corruption, white elephant and inflated projects, or blatant theft. This begs the question; who would volunteer to pay taxes knowing their money will be spent in such a manner?

A person pays taxes because he is receiving good services from the government, or is afraid of the penalties for not paying taxes, or does not want the experience of dealing with tax authorities.

There is low tax morale in Africa because governments have violated the fiscal contract with impunity.

Half of the cost of fuel is mainly taxes which citizens expect to be spent on building roads, but good roads remain a pipe dream on the continent.

Instead of building roads, politicians fly helicopters or use four wheel-drive vehicles to avoid facing their own failure.

In Kenya, recent news about water rationing compounded the doctors’ strike problem which has paralysed health services in public hospitals.

Buying water from private vendors is several times costlier and a great inconvenience. Would such a suffering citizen be happy to pay taxes? Poor public service provision has led to creation of private solutions to public problems. Which comes at a high cost and inconvenience.

A major capitalistic miscalculation has been the creation of private solutions to solve the problem of lack of public services for a profit.

Services that a few decades ago were the sole responsibility of governments are now dominated by private providers. For example, there are more private universities than public ones in Kenya.

The more a lie is told, the more likely it will be accepted as the truth. Citizens have simply accepted paying hefty prices to private providers of services that should be provided by governments that we pay taxes to.

Many Africans walk into a private hospital or enrol their children in private schools without a second thought instead of demanding for improvement in public hospitals and schools.

Private facilities solve a problem but at the same time create a bigger one. Governments have neglected the responsibility of providing these services.

Private hospitals and schools are institutions created by enterprising citizens to solve problems in society which have been neglected by governments. Ironically, the governments still tax most of these organisations.

So how do we motivate a citizen whose cost of living has been increased by the government’s lack of accountability to pay taxes to the same authority.

As the saying goes; scratch my back, I scratch yours. However, African governments have broken this rule.

Citizens should get proper services for paying taxes. At less than 40 per cent, Africa has the lowest tax compliance rate in the world. There is a silent war going on here.

How do we salvage the situation?

First, African governments have to deal with corruption. Taxpayers have to be sure that their hard-earned money will not be blatantly stolen.

The so-called masters of corruption have to be prosecuted and jailed for their ills. I doubt there is any country in the world where laws stipulate the punishment for corruption as merely stepping aside.

Secondly, there has to be dissemination of information on use of public money. There is need for continuous and elaborate communication on how governments spend money. This will help build trust between taxpayers and governments.

Thirdly, governments should involve taxpayers in expenditure planning. This will make the taxpayers to feel that they are part of the process of spending the money they contribute.

President Uhuru Kenyatta moved budget making to his office complaining that most corruption deals emanate from the budget making process at the Treasury. I am not sure if this has tamed mismanagement of public funds.

Lastly, governments should improve public service delivery provided at minimal or zero charges.

This way, taxpayers will feel that they are receiving something from the government and that they are not paying taxes only to receive nothing in return.

Failure to implement these recommendations will lead to more cat and mouse games between taxpayers and governments.

Tax morale and compliance in Africa will remain low as long as there is no accountability by governments.

Mutuku works with Taxwise Africa Consulting LLP