Burundi sets the bar with thorough tax system - CNBC Africa

Burundi sets the bar with thorough tax system

East Africa

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Taxes. PHOTO: Getty Images

“[Tax] revenue has gone from 301 billion to 560 billion Burundian francs last year, an 86 per cent sustainable increase in revenues, and we achieved that by applying best practices to tax administration. It is absolutely vital to have the strong political support, and we have that from the president, and the first and second vice presidents,” Kieran Holmes, the commissioner general at the Burundi Revenue Authority, told CNBC Africa.

Holmes added that the Authority should be able to double this again in the next five years, indicating a system that is independently sustainable.

Holmes however added that public figures, politicians and government officials, have been known to dodge the tax system, which in turn discourages the everyman from committing to pay their taxes. Tax evasion is however not new to the globe.

“My advice to all the governments where I’ve worked is the higher paid officials in every state must be in the tax net and paying their taxes. We had this problem in Burundi, which we solved but it took a bit of political will,” Holmes explained.

Tax evasion is however widespread in not only the continent but elsewhere, and stretches from businesses, public figures to government officials.

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Many fragile states in the continent only collect roughly 14 per cent of their GDP in tax revenues, which, according to Holmes, should be much higher and from 20 per cent upward. This is as a result of tax evasion and inefficient collection.

“It must be pointed out that Africa is a net creditor to the rest of the world, so if you take the inflows into Africa like Foreign Direct Investment and aid, the outflows are significantly higher. The outflows into tax havens, bank accounts for funds, are secreted away, is much higher, about 1.4 trillion over the last 30 years. Africa is actually financing development in the rest of the world because of this unequal way of collecting revenues that exist at the moment,” said Holmes.

The Burundi Revenue Authority also focuses on establishing a proper legislative base, which includes bringing in more tax payers but also more kinds of income.

“In Africa, and in a lot of countries, they forget about taxing non-resident, but non-residents who are, let’s say, in for the exploitation of natural resources, they have a tax obligation as well and quite often this one is forgotten. We have to broaden the base to bring into charge things like dividends, interest, royalties, management fees, all kinds of payments,” said Holmes. 

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