Reforming the non-oil tax system in Angola - mission impossible?

Angola is currently implementing a tax reform. The purpose of this paper is to take stock of the tax reform, with a focus on achievements and political and institutional constraints facing the reform efforts. The tax reform project was launched in 2010 with significant resources being invested in moving the agenda forward. The paper argues that five years later the reform seems to have lost momentum and the quality of the measures introduced and the way they are being implemented receive criticism from many sides. Reforming the utterly outdated tax system was always going to be a daunting challenge, but a number of factors initially indicated that the reform stood a good chance to be successful. A few substantial achievements have been made on the administrative and legal front and, although falling short of the very optimistic projections, revenue collection has improved gradually over the past few years.

In spite of the rhetoric of modern tax reform characterised by simplification, participation and predictability, the actual reform process appears unfocused, indecisive and non-transparent. A number of key measures have been delayed significantly and some changes have been rather piecemeal such as the reduction of the corporate income tax rate and inability to revise the numerous brackets in the personal income tax. Moreover, there is no progress on dentifying how the tax reform can be aligned with the decentralisation agenda. Progress reports on the reform are classified for ‘restricted use’. Draft legislation is not systematically shared for consultations with key stakeholders. Most of the ‘outreach’ is in the form of one-way communication. The paper argues that the reform effort, which in many instances appears genuine, seems to have clashed with the reality of the political economy of Angola as well as closed-circle approaches to policymaking. There are indications that the policy agenda is again being driven by high oil-prices and dissatisfaction with the level of GDP growth and public expenditure with little attention being paid to the challenges this created about five years ago, and which led to the launch of the tax reform.