Elizabeth Kariuki

FERDI Conference 2014 – What influences the use of performance measures in tax administrations in

Anglophone Africa

13 June 2014

Elizabeth Kariuki

Scope of paper

Background and contextAn overview of global performance measurement initiativesIn country performance measurement initiativesFactors that influence the adoption of performance measurementAreas for further study

Slide 2

Background and context


ARAs in Anglophone Africa typically adopt a strategic orientation with respect to their management…

Identify goals

Measure performance

Use results

Report results

Perform

Perform


There are numerous uses for performance information. Common purposes includeThe purpose The public manager’s question that the

performance measure can help to answerCharacteristics of performance measures

Evaluate How well is my public agency performing? Outcomes, combined with inputs and with the effects of exogenous factors

Control How can I ensure that my subordinates are doing the right thing?

Inputs that can be regulated

Budget On what programs, people or projects should my agency spend the public’s money?

Efficiency measures (specifically outcomes or outputs divided by inputs)

Motivate How can I motivate line staff, middle managers, non-profit and for-profit collaborators, stakeholders, and citizens to do the things necessary to improve performance?

Almost-real time outputs compared with product targets

Promote How can I convince political superiors, legislators, stakeholders, journalists, and citizens that my agency is doing a good job?

Easily understood aspects of performance about which citizens really care

Celebrate What accomplishments are worthy of the important organizational ritual of celebrating success?

Periodic and significant performance targets that, when achieved provide people with a real sense of personal and collective accomplishment

Learn Why is what working or not working? Disaggregated data that can reveal deviances from the expected

Improve What exactly should who do differently to improve performance?

Inside-the-black box relationships that connect changes in operations to changes in outputs and outcomes

Source: Behn, 2003


In practice, corporate planning and regular monitoring of its implementation appears to be no more than a paper exercise

Mounting challenges

Information overload and/or gaming the numbers

Simplistic, incomplete or too much data

Limited or no analysable data collection

Sources: Kidd and Crandall, 2006; Franceschini et al. 2007

An overview of global performance measurement initiatives

An overview of global performance measurement initiatives

There are three prominent global initiatives to gauge performance of tax administrations

World Bank paying taxes ranking and associated

measures

USAID collecting taxes indicators

IMF’s TADT

In country and pan-African performance measurement initiatives


The results of a survey of ARA executives and interviews with external stakeholders identifies a range of priority indicators, some of which are currently used

External stakeholders Internal stakeholders• Actual revenue compared to forecast revenue (7)• Expansion/contraction of the tax base - no of

registered taxpayers disaggregated by sector/industry and gender and compliance levels (6)

• Results of taxpayer surveys (2)• Tax gap/ growth projections (3)• Average processing turnaround time for tax returns

and refunds (during filing season) (3)• Equity indicators which show the extent to which the

tax system is progressive and pro-poor (5)• Cost of collection (1)• Percentage reduction in error rates (1)• Tax expenditure/ exemptions (2)• Governance/corruption indicators (3)• Measures which indicate the extent to which the ARA

has strengthened its capacity in terms of staffing and ICT (4)

• Statistics on the handling of service queries (1)

• Actual revenue compared to forecast revenue• Voluntary compliance rate • Percentage of taxpayers satisfied with

services/information and tools provided by the ARA

• Percentage uptake in electronic filing• Average processing turnaround time for tax

returns and refunds • Reduction in taxpayer/trader compliance burden• Amount spent for every dollar collected• Percentage increase in accuracy of processing• Time taken to prepare, file and pay various taxes• Global ease of paying taxes ranking• Percentage uptake in electronic filing• Number of cases successfully prosecuted

Source: Kariuki, 2012


The AfDB has also supported several domestic resource mobilisation studies focussing on performance. The studies are based on the following framework

(1) level of economic development and economic structure; (2) societal factors: culture, values, trust and ‘tax morale’; (3) war and taxes:

bureaucratic modernisation as a response to threat; (4) political institutions and tax systems; and (5) taxation and fiscal contract (Brautigam, 2008)

Reforms •Reform sequencing•Implementation

Performance Level

Efficiency

Effectiveness Equity

Tax system LawPolicyAdministration

Political economy


The AfDB’s 2011 flagship report applies some of the KPIs identified by internal and external stakeholders

Level of revenues• Focus on

taxes, measured primarily by the tax ratio (e.g. tax to GDP)

Efficiency• Cost of

collection• USAID and

Paying taxes indicators

• Tax expenditures

Equity• Distribution of

the tax burden • Dimensions of

progressivity

Effectiveness• Measures of

taxpayer satisfaction

• Tax gap• Tax effort

Source: AfDB, 2011



The AfDB led initiative has motivated an ATAF proposal to benchmark country tax systems in 37 ARAs

Policy result area Specific criteria A, P and L

A. Creating an enabling political environment

A fiscal contract forged PTax morale engendered P & ARA accorded political and institutional autonomy PRAs held to performance targets A

B. Development policy objectives and tax policy regime nexus

Tax exemptions and incentives rationalised P & LEffective fiscal decentralisation and tax revenue generation policies P

C. Robust tax policy and legislative frameworkLegislative provisions up-to-date and fully implemented P, L & A

Tax policies comprehensive and harmonised P

Effective tax policies and legislative provisions P & L

D. Ensuring efficiency, effectiveness and accountability of ARA

RA accorded managerial autonomy P & LOrganisational culture transformed AStrong organisational capacity AICT effectively applied ACompliance management AEnforcement A

Operation research capacity enhanced and more efficient A

E. Developing a national information sharing infrastructure to widen the tax base

National ID system in place AAn effective TIN system AA large banked population PThird party information fully exploited A

Policy (P) or Legislation (L) or Administration (A)

Factors that influence the adoption of performance measurement


The use priority KPIs varies across ARAs. Research in Kenya, South Africa and Tanzania identified eight factors influencing adoption

A= Pragmatism is a dominant political economy driver in setting performance

measures

C=Target setting is a chief feature of performance measurement

B= Good practices influence the choice of outcome KPIs

D= Policy and legislative requirements make a significant difference to the performance

measurement regime

E= The structure of the revenue base influences the choice of KPIs

F= A performance culture has a bearing on the selection of KPIs

G=Priority information demanded by external stakeholders impacts the choice of

performance measures

H= Data collection cost and quality are taken into account in selecting KPIs



Three of these factors are more dominant in ARA with a well developed performance measurement regime

E= The structure of the revenue base influences the choice of KPIs

F= A performance culture has a bearing on the selection of KPIs

H= Data collection cost and quality are taken into account in selecting

KPIs



In addition, a 2014 study confirms the view that some performance measures can not be gauged in isolation of the tax system

Source: Kariuki et al., 2014

Level of horizontal equity

Level of vertical equity

Number (%) of administrative general rulings conceived collectively with civil society>

Tax expenditure/ exemptions

Tax system – policy, law and administration


ARAs in Anglophone Africa can also draw on recent relevant research on this subject from the global scene…

Kroll, 2014The use of performance measures and information is influenced by ownership of the

data, “a preference for a creative cognitive learning style, and a distinct” public service motivation

Hammerschmid et al., 2013

“Implementation of performance management instruments, such as strategic planning, management by objectives, performance contracts and performance

related pay, are major influencing factors on the use of performance information”

Angiola and Bianchi., 2013

Underscore the need for : competencies in effective information use; learning forums to promote widespread reviews performance data; benchmarking to

encourage the adaptation of best practices; and demands for accountability by external stakeholders

Nõmm and Randma-Liiv , 2012

(1) Use of the same measures over time; (2) strong analytical skills; (3) strong management capacity and political oversight; and (4) adopt practices from foreign

countries with caution

Areas for further study

Areas for further study

There is benefit in extending the research on the factors that influence the adoption of performance measures in ARAs in Anglophone Africa to cover more cases and factors

1. At least 15 ARAs

2. Incentives as a

motivating factor

3. Degree of autonomy

Elizabeth Kariuki

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