Arne's Observations

Arne Doornebal is a Dutch freelance journalist working out of Juba, South Sudan. For Club Africa he shares his experiences living and working as a journalist in Africa

Africa´s road to independence

Time for the tax man

At the end of every year, people around the world have to carry out their least-favourite task: paying taxes. But for Africa there is a lot to gain.

Emie used to rent a very small shop in the city-centre of Kampala. No, in fact she rented only one meter of the shelves that are attached to three of the walls. In the ‘Down-town’ area even a 12 square meter shop can be shared by six different traders. Emie sold some cables, plugs and electric switches. “We all contributed to our landlady by paying tax, which she would than forward to the relevant authorities. No one really knew how much we were supposed to pay, and if we weren’t cheated.”

Out of 33 million Ugandans, only one million pay a regular income tax of usually 30 percent. Yet huge houses are being constructed in the lush suburbs. A visitor can wonder how it is possible that state coffers frequently run dry. One of the reasons is that there is still relatively little tax collection. In chaotic places like markets, tax collectors sometimes lack the authority to actually impose the duties if traders collectively refuse.

Cry for more tax

“Charge more direct taxes, so that citizens know how expensive it is to uphold the state. Then governance will approve.” Those words, spoken by Ugandan activist Arthur Larok, initially surprised me. While people in Western countries like complaining about high taxes, a section of the African public is actually demanding for them. Larok was not alone. Also Andrew Mwenda, a feisty Ugandan journalist/activist once told me that: “If the source of the government’s income are the citizens themselves, then the government would have an interest in the prosperity of its citizens. Because if they become richer, they can collect more tax revenues to meet domestic obligations.”

Mwenda made the point that domestic tax collection will make governments accountable, which does not happen when foreign aid supports the budget. That was two years ago. Now, due to financial crises in the Western world, foreign aid to Africa has reduced. This accelerated a trend which was already ongoing: a decrease in the percentage of aid in the budgets of African countries.

Independent

Africa has become more independent over the years; the Non-Governmental Organization ActionAid estimates that in the last decade, donor dependence in poor countries has reduced by one third. Rwanda, which budget was for 85 percent donor funded a decade ago, has reduced that to 45 percent. Other examples are Ghana (from 47 to 27 percent) and Mozambique (74 to 58 percent).
So if Africa really wants to be independent from Western donors that attach all kinds of conditions to their aid, it should embrace the tax man. This sounds good, but it should be done in a way that not only small traders like Emie have to pay up. Large (foreign) investors should also play their part.

Question: What would be a good way to collect tax in chaotic places?