The regional analysis on Africa as indicated in the “Paying Taxes 2014: The global picture” report shows that at 52.9 percent, Africa has the highest average total tax rate of any region.
Striking the right balance is a great challenge for governments when designing tax policies. Some of the challenges revolve around: whom to tax, by how much and how.
The survey shows that at 36.1 percent Africa has the highest average number of payments of any region.
While Africa has a higher-than-average number of taxes, it is the lack of electronic filing in the region that contributes most to the difficulty of paying taxes. However, only three of the 53 economies do the majority of companies use electronic filing for all major taxes.
‘Other’ taxes are the largest element of the total tax rate for Africa, while labour taxes are the smallest part, which is the reverse of the global picture. “The elimination of cascading sales taxes is beginning to change this profile,” the report states.
According to the report, Africa has the second highest average for the time to comply of 320 hours. Consumption taxes (VAT) take the most time in Africa – 127 hours on average.
While the average Total Tax Rate for the region has fallen significantly since 2004 (by 16 percentage points, largely as a result of the replacement of cascading sales taxes), the reduction in the average time to comply has been more moderate (28 hours) and the fall in the average number of payments has been small (2.3 payments).
The most significant falls in the time to comply have been in labour taxes, though this has increased slightly in recent years, the report states further.
Looking into Nigeria, experts note that the Federal Government, especially through the Federal Inland Revenue Service (FIRS) and the Joint Tax Board (JTB), has been making efforts to reform the tax system in a structured and coordinated manner.
One such initiative was the development of a National Tax Policy (NTP) aimed at simplifying the tax system, eliminating multiple levels of taxation and ensuring tax transparency.
Taiwo Oyedele of PwC Nigeria in his comment notes that: “While the introduction of new taxes is one option for increasing tax revenues, this should not be the main focus as more could in fact be achieved through increased compliance with existing laws. We welcome any measures that make tax systems more efficient and easier to follow thereby increasing compliance.”
He says that “one positive step is the on-going effort to introduce an electronic tax system called the Integrated Tax Administration System (ITAS). The new system will automate tax filing and documentation of taxpayer information.”
Iheanyi Nwachukwu
