19/11/2024
Declining Trust in Tax Revenue Offices in Sub-Saharan Africa
Abstract:
The tax system is a key formal institution with a unique role in the social contracts between people and governments, as well as an essential source of revenue for governments to fund public devices and programs that benefit the community. Mobilizing domestic revenue is critical for developing countries to achieve the national development objectives and sustainable development goals. Tax non-compliance, such as tax evasion and tax avoidance, is a major challenge in sub-Saharan Africa(SSA). Research and policymakers have generally focused on law-based compliance and the role of formal rules and institutions such as audits and penalties to reduce tax evasion, referred to as enforced compliance. As trust and power are at intermediate levels, a downward trend may occur, since with trust undermined, a display of power (such as audits and fines) creates even more distrust, leading to non-compliance of tax. Thus, enforced compliance can only work well in an atmosphere characterized by trust. This very trust is in serious crisis in the SSA, compromising tax compliance and hindering the delivery of needed services to the economy. The LoRDA Research Centre dug deep into the innovative Afrobarometer database to shed more light on the worsening crisis of trust in tax authorities and offices in SSA. The Research Centre’s calculations, based on the opinions of sampled taxpayers in 31 SSA countries, indicate that the trust crisis in the tax office has been on the increase over time in Cameroon and most SSA countries, posing a significant threat to the mobilization of tax revenue and the delivery of services in the economies. The Research Centre recommends several ways to rebuild confidence, drawing on good practices from other countries that have succeeded in building this trust.
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The tax system is a key formal institution with a unique role in the social contracts between people and governments, as well as an essential source of
