Warning on tax compliance risks across Africa

Warning on tax compliance risks across Africa

- in Risk Management, RM Function
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West African governments are reported to be clamping down on non-compliance among business and individual taxpayers, as they strive to improve their low tax-to-GDP ratios or internally generated revenues.

As the tax year-end looms in Nigeria and Ghana, companies have an opportunity to evaluate whether their payrolls are fully compliant with the laws and regulations around collection of pay as you earn (PAYE) tax.

Magnus Nmonwu, regional director for Sage in west Africa, warned that the tax authorities in both countries are scrutinising more closely whether employers are complying with their tax obligations.

The Ghana Revenue Authority has embarked on an education drive to lift tax to GDP, which currently stands at 16.5%. It has accelerated its drive to bring small, medium and informal businesses into the tax net.

Nigeria, also seeking to improve its low tax-to-GDP ratio, has launched initiatives such as the  voluntary assets and income declaration scheme, which gives taxpayers an opportunity to voluntarily declare all previously undisclosed assets and income. Some 90% of Nigeria’s 14 million taxpayers are salary earners paying PAYE. Government will be focusing heavily on rich individuals with undisclosed assets for enforcement.

Meanwhile, the PAYE tax year-end is also looming in most east African territories and governments are clamping down on non-compliance among businesses and individual taxpayers, as they strive to raise more funding for public spending.

Commenting on compliance in Kenya and Tanzania, Nikki Summers, regional director for Sage in east Africa, said the tax collection authorities in both countries are scrutinising more closely whether employers are complying with their tax obligations.

With a reported tax collection shortfall of KSh40bn in the first four months of the 2017/2018 fiscal year – which ends in July next year – the Kenya Revenue Authority can be expected to take a tough line on enforcement in the months to come.

The Treasury is also reviewing the Income Tax Act with a view to increasing revenue, improving tax administration and sealing tax loopholes.

In Tanzania, PAYE is said to account for about 17% of gross tax, accounting for the biggest share of tax revenues. This is due to increased focus on controlling of revenue leakages in recent years, said Ms Summers. – Commercial Risk Africa

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