A Technical Insight into Tax Expenditures in East Africa

In Dar es Salaam, Tanzania, in-depth discussions on the technical aspects of the tax expenditure policy cycle took place from 6 to 8 December 2023.

Over 50 participants from 9 countries in East Africa gathered in Dar es Salaam, Tanzania, from 6 to 8 December 2023 to explore the technical details of the different stages of the tax expenditure policy cycle, ranging from benchmarking to data requirements for estimation and evaluation of tax expenditures (TEs), and ultimately the reform process.  

Participants included members of parliament, representatives of ministries of finance and revenue authorities, as well as international and regional tax experts. Over ten sessions distributed throughout two-and-a-half days, this variety of stakeholders engaged in technical discussions and hands-on activities on operational considerations/dimensions of TEs, as well as governance topics around them.  

The technical meeting in Dar es Salaam stems from the insights gained in the first ATI regional workshop on TEs within an East African context, that took place in October 2022 in Nairobi (Kenya). The format used also aims to serve as an opportunity for participants to learn from each other and share their knowledge and experiences, further consolidating the regional network of TE experts initiated in its preceding workshop.

The programme started with presentations of the latest TE-related developments in Madagascar, Uganda, and Zambia, all ATI partner countries in East Africa
The technical meeting was an opportunity for participants to learn from each other and share their knowledge and experiences © GIZ

 

The technical meeting 

The programme started with presentations of the latest TE-related developments in Madagascar, Uganda, and Zambia, all ATI partner countries in East Africa. Madagascar introduced its expanded TE report which currently includes not only TEs on the national level, but also local government TE, revealing an increased commitment to estimating and reporting. The Malagasy Ministry of Finance recently published the Tax Expenditures Report for the fiscal year 2021 on their website, which reflects a proactive approach to transparency. The report points out that TEs in 2021 amounted to 1627.8 billion MGA, accounting for 2.92% of the country’s GDP.

tes tz
The programme started with presentations from Madagascar, Uganda, and Zambia © GIZ 

 

Transparency in tax expenditures ensures that their costs and benefits are assessed and included in the budget. It has a key role in ensuring that tax expenditures are legally grounded, that criteria for granting them are clearly defined that their efficiency is considered by decision makers who are responsible for tax policy.

Uganda introduced recent developments in their tax expenditures estimations and accountability, and delegates from Zambia provided insights on a pilot study they participated in, part of a joint work of the United Nations Economic Commission for Africa (UNECA) and the African Tax Administration Forum (ATAF). In this ATAF-UNECA initiative, the overall approach to measuring TEs focuses on Corporate Income Tax (CIT) and Value Added Tax (VAT).

Uganda introduced recent developments in their tax expenditures estimations and acoountability  , and delegates from Zambia provided insights on a pilot study they participated in, part of a joint work of the United Nations Economic Commission for Africa (UNECA) and the African Tax Administration Forum (ATAF). In this ATAF-UNECA initiative, the overall approach to measuring TEs focuses on Corporate Income Tax (CIT) and Value Added Tax (VAT).
Speakers at the technical meeting in Dar Es Salaam © GIZ

 

Subsequent sessions focused on data requirements for the estimation and evaluation of TEs, followed by parallel activities for officials from ministries of finance and parliamentarians on benchmarking and for participants from revenue authorities on redesigning tax return forms.

The workshop also featured discussions on estimating revenue forgone, TE reporting, and exercises on ex-ante assessments of TEs and ex-post evaluation, the latter with a particular emphasis on evaluations in cases of limited available data. In addition, breakout sessions for Parliamentarians highlighted the crucial role these stakeholders play in the governance and evaluation of TEs and allowed for the presentation of the upcoming ATI publication of a Pocket Guide on Tax Expenditures for Parliamentarians. A discussion on governance and reform within TE policy concluded the technical follow-up meeting.

The East African follow-up workshop allowed for in-depth technical discussions on practical aspects around tax expenditures with regional partners and international experts, peer-learning, and networking opportunities. One relevant takeaway of the meeting in Dar es Salaam is the key role of parliamentary budget officers in equipping Members of Parliament with the expertise and technical knowledge needed for effective oversight and legislative decision-making on tax expenditures. 

collages TEs TZ
Participants at the technical meeting in Tanzania © GIZ

 

The series 

The series of regional workshops and follow-up technical meetings on tax expenditures is a collaborative effort by the Addis Tax Initiative (ATI), the Council on Economic Policies (CEP), and the German Institute of Development and Sustainability (IDOS), which aims at establishing a platform to strengthen sustainable and long-term regional and global TE networks. On this occasion, the African Tax Administration Forum (ATAF) and the Tanzania Revenue Authority (TRA) joined in the organisation of this technical meeting in Dar es Salaam as local partners.  

While the first series of regional workshops aimed at introducing the topics of TE estimation, reporting, and evaluation of TEs, the follow-up meetings intend to provide more detailed insights, including technical aspects and the application of tools and methods related to those issues. 

In this sense, the ATI organised a regional workshop on tax expenditures for West Africa in Lagos (Nigeria) in July 2022, and its follow-up technical meeting in Accra (Ghana) in September 2023. Insights on TEs from an Asian perspective were shared in Manila (Philippines) in March 2023, with its upcoming follow-up meeting to be held in the first half of 2024.

The East African follow-up workshop allowed for in-depth technical discussions on practical aspects around tax expenditures with regional partners and international experts, peer-learning, and networking opportunities.
Discussion groups during the technical meeting in Dar Es Salaam  © GIZ

 

Background 

The joint initiative is founded on two key elements that aim at fostering international cooperation towards transparency around tax expenditures.  

First, it supports Commitment 3 of the ATI Declaration 2025, by which ATI members commit to implementing coherent and coordinated policies that foster domestic revenue mobilisation (DRM) and combat tax-related illicit financial flows (TIFFs). 

Secondly, it expands the scope of the Global Tax Expenditures Database (GTED) and the Global Tax Expenditure Transparency Index (GTETI) – today grouped under Tax Expenditures Lab -, launched by CEP and IDOS. These directories underscore the varying scope and quality of TE reports worldwide and emphasise the need for standardised transparency around tax expenditures around the globe.

testimonial tzI got an opportunity to meet members of the network. We had discussions, we shared experiences, it was amazing. I look forward to the next workshop.

 

Isaac Arinaitwe 

Senior Economist, Ministry of Finance, Planning and Development, Uganda 

 

testimonial teI have enjoyed the exercise of the estimation of revenue forgone as a result of the tax expenditure. Back at home, I will be sharing it with our tax policy unit as well.

 

Machnaem Ndaitavela Haidula

Manager, Namibia Revenue Authority