Serving the people by taxing them

In 2004, Gambia’s National Assembly passed a law to establish the Gambia Revenue Authority (GRA). The goal was to enhance the efficiency of the nation’s tax adminstration in order to improve revenue collection and encourage compliance by taxpayers. For this purpose, earlier institutions that had specialised in certain kinds of revenues like income tax and customs duties were merged.

The reform was successful. The GRA is performing well. Some experts consider it a model for other African nations, says Ousman Bah, the GRA’s corporate affairs officer. In the past few years, delegations from the national revenue services of Nigeria, Malawi and Liberia visited the GRA, eager to learn from the Gambian success.

The GRA collects a host of taxes. They include personal and corporate income taxes, a tax on corporate turnover and sales taxes on goods, imports and services. There also is a tax on capital gains which is imposed when capital assets like land, machinery or company shares are sold. The fringe benefit tax is imposed on employees whose employers provide housing, telecommunication services or other benefits in kind. On top of various taxes, the GRA also collects various fees for licences, registration and other matters.

Agriculture is the most important sector of the Gambian economy. It con­tributes 32 % to GDP, provides employment and incomes for 80 % of the population, and accounts 70 % of the country’s foreign exchange earnings. The main cash crop is groundnuts.

Close to the people

One of the GRA’s strong points is that it has offices all over the country. The people appreciate this decentralised structure because it allows them immediate access to officials. Whereas many people evaded taxes in the past, the general feeling now is that everybody is paying taxes, which boosts a civic sense of nationhood. For people with very low incomes (up to 7,500 dalasi which is the equivalent of around 190 euro per year), the tax code provides a zero band. In other words, the poor are exempt from taxation. This is generally considered to be fair.

In Gambia, the understanding has taken root that the Revenue Authority is serving the nation by securing its financial viability. Its practice of issuing receipts, moreover, has made tax matters more transparent than they were before.

According to estimates, the GRA collects about 70 % to 80 % of the funds that are at the government’s disposal for paying civil servants, servicing debts, investing in infrastructure et cetera. The Finance Ministry estimates that domestic revenues will grow by four per cent this year.

Apart from the GRA money, the Gambian government relies on grants and loans form various international donor agencies. Key partners include the European Commission, the African Development Bank and the World Bank as well as the Islamic Development Bank, the Kuwait Fund and the Government of Taiwan. According to David Dunn, who represents the International Monetary Fund in Gambia, the country is still facing a heavy debt burden, though the structural reform agenda continues to progress steadily.

The GRA does not benefit directly from foreign donor support. However, it does cooperate closely with the World Bank and the International Monetary Fund through the Ministry of Finance. The country has also relied on GIZ advice on issues of government revenue. The idea is to improve service delivery and meet international standards.

Indeed, there still are shortcomings. For instance, it may happen that GRA officers refuse to issue a motorcycle licence, arguing that they have run out of receipt documents.

GRA operations are managed by a commissioner general. The authority has a seven member Board of Directors that monitors performance and decides on issues of staff and procurement independently. This limited autonomy has boosted performance. Whereas some Board members represent the government, others represent the private sector.

The GRA is meant to clamp down on tax evasion. Typical ways to evade taxes include
– keeping two or more books of accounts simultaneously,
– not reporting incomes and expenditures fully and accurately and
– not registering business activities.

The tax law includes penalties for all who fail to pay their taxes diligently. Those who pay late, for instance, must pay a penalty of five per cent of the outstanding taxes per month. The maximum penalty is 25 %. Moreover, late payers are charged interest on their outstanding tax payments. Those who under-declare their taxes knowingly or recklessly face fines of up to 50,000 dalasi or imprisonment for up to one year.

Good public finance governance, however, does not depend on revenue services alone. The courts matter too. In Gambia, several persons, including government officers, are currently standing trial, accused of economic crimes. Among other things, they are charged with having forged tax records and receipt books.