Mapping Tax Compliance Cost for Businesses in Africa

The fiscal tax burden is often at the center of policy discussions regarding its possible effects on the survival and growth of businesses both in developed and developing countries. However, the extra burden related to compliance in the process of meeting the requirements of the tax law and the revenue authorities are ignored in standard economic theories and policy debates. Tax compliance costs, which sometimes are also considered as hidden costs, are the extra costs incurred by taxpayers besides the actual tax liability in the process of becoming and remaining tax compliant. Studies argue that compliance cost may be larger than the actual taxes paid by businesses. It is more likely for tax compliance costs to be higher in countries with weak institutional set-ups, making the issue of tax compliance cost more relevant for developing countries.

The purpose of this research is to map tax compliance cost for businesses in a number of countries in Sub-Saharan Africa (SSA) and analyzing how and why it varies from country to country and if and why it changes over time. Costs to comply will be measured in two ways in this study. The first one is as an opportunity cost of staff time spent on tasks related to tax compliance such as preparing tax returns and related procedures. The second one is as an incidental cost, which will be captured by financial cost paid by firms as a bribe to tax officials to facilitate their tax return process. The main data set of this study is the Enterprise survey from the World Bank.