Togo Revenue Authority: A model for good tax governance

02Jul2015
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By Carpophore Ntagungira

Operational since 2014, The Togo Revenue Authority (OTR)[1] is a single tax administration body with greater autonomy than a ministerial department. It is the first attempt to unify customs and tax services within the fourteen countries belonging to the CFA franc zone (West African Economic and Monetary Union) and the Central African Economic and Monetary Community.

The idea for this reform was born in 2008 when the President of Togo, Faure Gnassingbé, and AfDB President Donald Kaberuka met to discuss risks associated with the reduction of official development assistance in the context of the international financial crisis. After an overview of best practices, the two authorities came to the conclusion that the transformation of the tax administration into a "Revenue Authority" favoured an effective, transparent and impartial application of tax laws.

Throughout the design and preparation phase of the OTR, the AfDB has worked to provide advisory support to the government, to guarantee the quality assurance function in study reviews and official documents, and to mobilize commitment by other bilateral and multilateral institutions to the reform. Since 2011, the funding from the Togolese government and the AfDB (Governance Trust Fund [2]) have enabled the carrying out of various feasibility studies by three large firms: Crown Agents (United Kingdom), Adam Smith International (United Kingdom), and C2D (Canada).

The process of creating the OTR began in 2014 with the merging of select specific services to be shared by customs and taxes commissioners (administration, communication, finance, anti-corruption, IT, human resources, auditing and taxpayer services). By integrating these services, administrative duplication was reduced, and the impacts of the "law of diminishing returns"[3]  were significantly decreased. Like in the private sector, members of the supervisory board and the OTR board will be appointed, in order to legally reclaim some responsibilities that should be taken from the Ministry of Economy and Finance. The two Managing Directors (customs and taxes) who had a coercive power and were appointed by decree were replaced by "Commissioners" recruited on a competitive basis and accountable to taxpayers.

cThe OTR has recruited its entire staff with these new policies. The major challenge was to manage the influx of 2,030 former staff from the customs and taxes departments on the labour market. The OTR has hired back 52% of this group based on competitive exams, and the total number of staff, including new recruits, was reduced by 17%. This radical restructuring has led to protest movements and strikes, led by the former officers, but also by customs agents confused by the introduction of a new organization based on the “E-Tax” which has fully computerized customs procedures through the single window for foreign trade (Guichet unique du commerce extérieur or GUCE).

Potential uncertainties related to the launch of the OTR urged the Government and the IMF to project a drop in revenue of at least 10% by 2014. The result however confirmed quite the opposite. Thanks to some innovative fiscal instruments arising from the dematerialisation of tax procedures and voluntary consent to taxation, cash revenue increased by 23% to reach US $721 million after the OTR’s first year of operation. In the midst of it all, Togo has improved its score by 4% with regard to its business climate, and is among the ten countries around the world that have made the most progress according to the report “Doing Business 2015”.

To ensure transparency and traceability of state revenue, the OTR has established a system of direct collection of tax revenue based on the nearly total removal of all accounting and tax cashier positions, while entrusting banks with the tax collection transactions. This has led to an overall reduction in delays of goods issues, the disappearance of queues when paying taxes, ultimately, increased state revenue. To combat fraud and corruption, the OTR was first in the country to introduce a system to disclose its agents’ assets, as well as to set up a hotline and an email to collect taxpayer complaints.

In 2013, the AfDB allocated US $3 million for the reinforcement of OTR’s capabilities. A new E-Tax project under preparation – financed by the AfDB for nearly US $21 million is expected to be approved in October 2015. It will enable real-time information sharing through computerized interconnection among taxpayers, tax services and the Treasury.

Some forty countries [4], including neighbouring Ghana, have already implemented this second-generation tax reform, which envisages the integration of tax administrations with a customer service approach. Other French-speaking countries in the Economic Community of West African States and Central Africa are closely watching the developments in Togo. Indeed, the OTR is a pilot whose model could gradually be extended to other countries in Francophone Africa.


[1] Office togolais des recettes (0TR)

[2] This multi-donor Governance Trust aims to help the AfDB’s regional member countries to build capable and responsive states by strengthening transparency and accountability in the management of public resources.

[3] The law of diminishing returns demonstrates that at a certain threshold, productivity decreases as the number of staff increases, while keeping constant the level of other factors of production.

[4] There are nearly 40 Revenues Authorities in the world, located primarily in Africa, Asia and Latin America. Of the 20 African countries that have opted for the model of Revenue Authority, 8 are in Southern Africa (Botswana, Lesotho, Mauritius, Namibia, Seychelles, South Africa, Swaziland and Zimbabwe); 7 are in East Africa (Burundi, Kenya, Malawi, Rwanda, Tanzania, Uganda and Zambia); and 5 are in West Africa (Gambia, Ghana, Liberia, Nigeria and Sierra Leone).

 


Comments

Hilaire HOUNSA - Benin 18/10/2016 10:12
Bonjour.
Je voudrais avoir une documentation fournie sur cette institution OTR qui mérite de faire école dans nos pays africains notamment ceux de l'UEMOA et de la CEDEAO.
Merci pour la diligence.
MOISSULI MOHAMED AZIRI - Comoros 26/05/2016 09:22
Un exemple en afrique d'une institution qui fonctionne bien. Alors en tant que cadre africain opérant dans le domaine, je vous serai gré de bien vouloir mettre à ma disposition le document complet qui indique le schéma de fonctionnement de l'OTR. Merci
Léopold MBOLI - FATRAN - Central African Republic 11/03/2016 11:06
Un bon exemple qui mérite que mon pays suive. Je souhaiterais avoir un document complet sur l'organisation de ces offices : cas des pays francophones, surtout les cas réussis.
Mamoud Kamara - Sierra Leone 17/11/2015 09:37
Why the tax agent arrassing the Tax payers.
Mamoud Kamara - Sierra Leone 17/11/2015 09:34
Why their is an Increase in Taxation,when there are not enought Inport and Export trade in the Country.
Mahmoud Brice AGUEMON - Benin 30/07/2015 18:15
Une institution qui marche et qui mérite d'être rapidement généralisée dans les autres pays africains. Ceci permettrait de lutter véritablement contre la corruption et augmenter les recettes fiscales et douanières, susceptibles de financer les projets de développement.
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