Tuesday, May 7, 2013

UK's HMRC to help Ethiopia and Tanzania collect taxes

Aim is to reduce reliance on overseas funds while ministers hope to distract from lack of aid commitment

Coffee farming in Ethiopia. Nearly 78% of the country's tax revenue came from fewer than 1,000 individuals in 2012. Photograph: Alamy

The government is to help Ethiopia and Tanzania to build their tax-raising powers and so reduce their dependency on overseas aid to run an effective government.
David Gauke, the Treasury minister, will announce the initiative on Tuesday in a public interparty debate on tax transparency and aid organised by the Enough Food for Everyone IF campaign. Ministers hope the move will mollify aid agencies over the absence of legislation entrenching an aid commitment in the Queen's speech.
HMRC claims there has been a 40% increase in tax revenue collection in Ethiopia since 2010, when the British government became involved. Nearly 78% of Ethiopia's tax revenue came from fewer than 1,000 individuals in 2012, the Ethiopian customs and revenue department recently reported.
Tanzania's tax revenues to central government were equivalent to 15.7% of GDP in 2011-12, with the gap between tax revenues and public spending averaging about 12% of GDP over the past three years. The shortfall is covered by aid and government borrowing. Three-quarters of tax revenues are raised in the region of the capital, Dar es Salaam.

Gauke will say HMRC will work with both Ethiopian and Tanzanian tax authorities to undertake a health check to look at the structure of their revenue authorities, their potential to raise tax, and the degree of corruption or evasion either by individuals or companies. The authorities will be focusing on tax inspector training, a complaints handling process and a risk management system.
Separately, campaigners are concerned about the lack of information on tax co-operation by international companies operating in Africa.
Potential revenues lost to developing countries through tax avoidance and evasion amount to three times the sum that they receive in international aid, it has been estimated.
The hugely complex world of tax transparency is high on the agenda for David Cameron at the G8 meeting of industrialised leaders this summer. George Osborne has already announced a deal to increase tax transparency in overseas territories, but campaigners have been seeking greater detail to evaluate its true impact.
In addition, the IF campaign has been pressing for a requirement in the finance bill for UK companies and wealthy individuals to report their use of tax schemes that have an impact on developing countries.
When such tax schemes are identified, the UK should use its current powers to notify the tax authorities of developing countries and assist in the recovery of the money they are owed.
IF also wants the UK to use its presidency of the G8 to launch a convention on tax transparency. Under such a convention, countries would commit to preventing individuals and companies from hiding wealth so that it is untraceable; tax havens would be required to share with developing countries any important information on hidden wealth and assets; and developing countries would receive assistance in recovering taxes due to them.
But Gauke will focus on what the British government can do to help developing countries build their own capacity and tax base.
Gauke said: "This government is committed to building capacity within the governments of developing countries so that they can make changes that will have long-term benefits.
"One crucial part of this is providing expertise in tax collection. Through these projects we will work with the Tanzanian and Ethiopian governments to put in place more effective tax administration and collect the tax which they are owed."
http://www.guardian.co.uk

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