AfDB’s support to tax reforms leads to improved revenues in Togo

Share |

Togo is among the first countries in the world that have improved tax services following reforms in its tax systems, thanks to efforts by the government and the African Development Bank (AfDB).

The reforms, operationalised in 2014 led to establishment of the Togo Revenue Authority (OTR). This has seen tax cash revenue increase by 26 percent to reach US $766 million after OTR’s first year of operation. Due to the reforms, the country has improved its score by four  percent with regard to its business climate, and is among ten countries around the world that have made the most progress, according to “Doing Business 2015”, a World Bank flagship publication.

The idea for ​​reforms  was born in 2008 when the AfDB President, Donald Kaberuka, and President of Togo, Faure Gnassingbé, met to discuss risks associated with the reduction of official development assistance (ODA) in the context of the international financial crisis. After reviewing best practices, the two concluded that transformation of the tax administration into a Revenue Authority would lead to an effective, transparent and impartial application of tax laws.

Throughout the process of designing the OTR, the AfDB provided advisory support to the government. It also guaranteed the quality assurance function in study reviews and official documents, as well as mobilized commitment by other bilateral and multilateral institutions to the reforms.

The process of creating the OTR began with merging specific services to be shared between 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" 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 are accountable to taxpayers.

A key focus has been transparency and traceability of state revenue. The OTR has since established a system of direct collection of tax revenue based on removal of accounting and tax cashier positions, instead, entrusting banks with tax collection transactions. “This has led to an overall reduction in delay of goods, and disappearance of long queues previously experienced when paying taxes”, said Sossadema Pelei, OTR’s Direct of Studies and Strategic Planning.

To combat fraud and corruption, the OTR was the first institution in the country to introduce a system of disclosing its agents’ assets. It has also set up a hotline and an email to receive taxpayer complaints.

The AfDB has continued to support the OTR. In 2013, the Bank allocated US $3 million to strengthen OTR’s capabilities. A proposed E-Tax project, financed by the AfDB is expected to be approved in October 2015. It will cost nearly US $21 million.  The project will enable real-time information sharing through computerised interconnection among taxpayers, tax services and the Treasury.

Some 20 countries in Africa have reportedly adopted the revenue authority model leading to sound fiscal administration, increased revenue, and economic growth.

Sections Connexes