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1. Constraints to Enhanced Revenue Mobilization and Spending Quality in Kenya

Author:
Nelson H.W. Wawire
Publication Date:
01-2020
Content Type:
Research Paper
Institution:
Center for Global Development (CGD)
Abstract:
This study addresses constraints to enhanced revenue mobilization and spending quality in Kenya. The structure and growth of Kenya’s economy and spending quality have a bearing on its taxable capacity. Constraints to enhancement of revenue mobilization and spending quality include the existence of a large informal sector; inadequate information on property ownership; perceived corruption; inefficient use of public resources; political interference; volatile election cycles; abuse of tax incentives; uneven transfer pricing; illicit financial flows; and untaxed online businesses, coupled with poor administrative capacity and tax policy design. Policy implications on revenue performance are (1) the National Treasury and Kenya Revenue Authority (KRA) should focus on property taxes and capital gains taxes to expand the tax base; (2) development partners are needed to direct technical assistance to the informal sector, to aid with transfer pricing, to monitor illicit financial flows, and to properly tax online businesses; (3) greater use of technology is needed to increase efficiency; (4) intervention by the Geospatial Information System is needed to link data on land and property ownership with tax information in the existing database; (5) a pay-for-results model needs to be deployed; (6) need to reduce tax expenditures; and policy reforms to be initiated in the agricultural sector. The policy implications on expenditure are (1) the need for efficient utilization of tax revenues; (2) the need for implementation of digital technologies; (3) the need to revisit an integrated financial management information system (IFMIS) configuration; (4) the need to adhere to long-term planning; and (5) adoption of the GFS 2014 reporting standard. Overall, an independent entity needs to be established that will set budget ceilings, monitor budget implementation, and carry out audits.
Topic:
Governance, Revenue Management, Public Spending, and Mobilization
Political Geography:
Kenya and Africa

2. Senegal: Making Domestic Resource Mobilization Work to Sustain Growth and Improve Service Delivery

Author:
Birahim Bouna Niang and Ahmadoi Aly Mbaye
Publication Date:
01-2020
Content Type:
Commentary and Analysis
Institution:
Center for Global Development (CGD)
Abstract:
Senegal’s recent economic performance is impressive. For the first time, Senegal has achieved a GDP growth rate of more than 6 percent for three consecutive years (2015–2017), and per capita GDP has increased at an annual average of 4.1 percent. In parallel, progress in fiscal revenues has been recorded, with the ratio of average revenues to GDP increasing by 5.7 percentage points between 2000-2002 and 2014-2017, placing Senegal above the regional average of 15 percent. Notwithstanding, the performance of the Senegalese tax system is limited by the country’s narrow tax base, largely attributable to a sizable informal sector. Despite accounting for more than half of GDP, Senegal’s informal sector makes up less than 3 percent of total tax collection. Revenue collection is also limited by the fast-growing array of exemptions, and by tax expenditures. These special dispensations mainly went to multinationals with local branches in Senegal. Tax expenditure more than doubled between 2010 and 2014, from18.4 percent of tax revenues and 3.4 percent of GDP to 40 percent of tax revenues and 7.8 percent of GDP. According to some estimates, the cumulative costs are close to 18 percent of annual GDP. Other factors deterring effective domestic resource mobilization include poor governance and the limited technical capacity of the tax administration, failures of the information system, and weak system transparency. Expenditures are often ineffective, particularly in the education and health sectors. Improving the state of public finances requires reforms to strengthen technical and institutional capacities and to adapt the management framework in view of Senegal’s entry into the hydrocarbon era. This might include setting up a public finance monitoring committee, adopting new budgetary rules consistent with those set by the West African Economic and Monetary Union, building relevant tax administration capacities. On the expenditure front, actions are needed to improve the targeting of support programs for vulnerable groups, and to implement capacity-building programs for government officials in charge of project evaluation, including in the Planning Directorate and in technical ministries. Lastly, a systematic ex ante and ex post evaluation of public investments is needed.
Topic:
Labor Issues, Economic Growth, Services, Mobilization, and Domestic Work
Political Geography:
Africa and Senegal