The Tax Revenue Appeals Board: grace, hope and wigs

Saturday night in Dar. 

In the first part of the evening, the team worked on our big presentation.  Afterwards, I had Indian food.  (East Africa: good Indian food.)

My brother-in-law John spent the last week in Goma (Eastern Congo) and Kampala (Uganda).  John works for the American Bible Society, so he's coming with a very different perspective.

-- Very different.  You know what gave me a really positive feeling in the last couple of days?  A morning spent at the local Tax Revenue Authority Appeals Board. 

Okay, I suppose I should try to explain that. 

The Tax Revenue Authority (TRA) is Tanzania's tax guys, their IRS plus Customs.  Since Tanzania doesn't have a huge amount of oil or mineral wealth, the TRA generates most state revenue.

Now, in a developing country, the tax guys can be... difficult.  Several kinds of difficult.  They may be corrupt, of course.  Or they may be incompetent.  Or they may be used by politicians to attack their enemies.  Or they may just be too aggressive.  Here in Tanzania, it's mostly that last one; there are some problems with corruption, but the biggest issue is that every quarter the government goes to the TRA and says, we need this much money -- go find it.  This tends to make them stretch the envelope, especially when business is slow and revenue is down.

Now, in your average poor developing country, if the tax guys decide to turn out your pockets, there's not a lot you can do.  Most typically, there's some kind of appeals process, but it's an internal appeal within the tax body.  There's actually a Swahili proverb that covers this: "in the court of the leopard, the goat has no chance."

The alternative is to go to court.  But, again in your average poor developing country, the court system is likely to be a mess -- corrupt, overcrowded, slow and, did I mention? corrupt.  Also, even if you luck out and get an honest judge, and a court date in less than a year, tax cases are so rare that your judge may not be able to make heads or tails of it. 

But not in Tanzania!  Because Tanzania has an Tax Revenue Authority Appeals Board!  Yeah!

-- The Board is a body that hears appeals from the TRA.  It's totally independent -- in a different building, has its own budget and staff.  It's like a court.  A small, specialized court.  Also a British court -- Tanzania was a British colony, yes?  So the Board members wear those awesome wigs, and you call them "my Lords".  

Anyway.  What's great about this -- besides the wigs -- is that after a morning spent at the Board, I was convinced that these guys (1) knew how to do their job, and (2) were trying, in all sincerity, to do it.

Tanzania is a very poor country, so the TRA Board has a very poor office.  Up a couple of flights of narrow, badly lit stairs in an office building in downtown Dar Es Salaam.  Stains on the floor, flickering fluorescent lights, a single ancient, moaning air conditioner.  They haven't been able to print their decisions since 2004.  They can't afford to post them online, either; they don't have a website.  They do keep meticulous records, so you can come and look at their files.  (But you have to go to Dar es Salaam, and walk up those narrow stairs.)  Their law library is a single bookshelf. 

But it's a bookshelf full of well-thumbed books.  These guys take their jobs seriously.  I asked some questions about tax law, and we got into it -- VAT refunds, excise categories, how exemptions are determined, you name it.  Real deep-in-the-weeds stuff.  They knew what they were talking about.  And despite the poor office and low budget, they manage to hear and decide about 80 cases a year.  Of which about half are decided in favor of the TRA, and half against.

(Also: none of them showed any of the classic stigmata of bureaucratic petty corruption.  Do a couple of years in Africa, and you'll start to pick up on this.  Wristwatches, shoes... eh, deserves a post of its own.)

So they're keeping the tax guys honest.  That's an important job anywhere, but doubly so in a developing country where tax often really is theft -- the local tax office is run by the Mayor's cousin, and the Mayor he's building a big new house, type of thing.  But not in Tanzania; or at least, not that much, or that often.  Because if the tax guys screw you over, there's an honest, competent court of appeal.

In a developing country context, that's... exceptional.

(And before anyone asks: yes, the TRA usually obeys the rulings of the Appeals Board.  Even when those rulings go sharply against it.)

Is the Board a fluke?  I don't think so.  Tanzania's civil service seems to be punching above its weight, a little.  There are all kinds of problems, of course.  But for a country that's roughly as poor as Haiti, things work surprisingly well.

And here we strike close to the heart of the mystery:  why do things work in some places, and not others?  Many poor countries don't have a Tax Appeals Board, because at the end of the day nobody in power cares that much whether the tax guys are doing their job right (as long as enough money keeps coming in, of course).  In other places, there's a Board, but it's purely for show -- it's run by incompetents, or never gets around to hearing any cases, or just exists as a way for political appointees to collect bribes.

When things are screwed up in developing countries, it's often very easy to say how and why.  So, for instance, in the Congo you can go all the way back to King Leopold.  The Belgians ruled first by terror and murder, later more gently but still utterly selfish and interested only in profit.  This made the rise of Mobutu, or someone very like him, almost inevitable.  This in turn meant that, Mobutu falling -- and he would eventually fall, if only by the passage of time -- chaos would follow.  The Congo of 2010 follows naturally and logically from the Congo of 1960, which in turn was a reasonable outcome of the Congo of 1900.

When things go right, on the other hand... well, sometimes you can point to good policies, economic incentives, the right decisions made.  I can spend a happy hour rattling on about the successful development strategies of late 20th century Singapore, or late 19th century Japan.  Love that stuff.

But still: boil that stuff away, and sometimes you're left with a residue that's hard to explain.  Cultural attitudes, people say, but that's a fairly broad label.  My brother-in-law John might call it grace.  That's problematic in a different sort of way.  Still: the politicians establish the appeals board to keep the tax guys honest: but why should they care?  The board members and their staff work hard: why?  They try to decide fairly, and don't take bribes: why not? 

A virtuous system can help people be virtuous; when all my neighbors shovel their sidewalks, I will too.  But how does it start?  What keeps those guys honest?  the economic incentives don't really point in that direction.  Professional pride?  I'm sure that's part of it -- the legal community here is small, and everyone knows who's competent and who's crooked. The wigs?  (In all seriousness: I think the wigs are part of it.)  Religion?  Tanzania's a pretty religious country -- mixed Catholic, Protestant, and Muslim.  On the other hand, so is Congo, and any number of other places.

Anyway, point being: one tries to be cool and objective in these assessments.  But I walked out of the Board offices and down those narrow stairs feeling really hopeful about Tanzania. 

(So, next post: war and pestilence.)

Comments

[Bernard Guerrero]

"The wigs? (In all seriousness: I think the wigs are part of it.)"

The effect of Ritual?

[Barry Cotter]

How do they keep a record of past decisions for purposes of precedent if they haven't been able to print since 2004? An ancient computer with no back up?

Any idea how much it'd cost to fix their printing problem, or enable them to set up a website and put their rulings on it, because I'm guessing that doing that would be one of the very, very highest RoI charity things I could do if it was possible.

[Nich Hills]

A Tax Revenue Appeals Board or a Taxation Board of Review can indeed by a good thing. We used to have them in my country too, until they were absorbed into the Administrative Appeals Tribunal system. Even now, there are still Members and Deputy Presidents of the AAT with tax review expertise.

Boards make a good middle layer between in-house reviews by the Revenue Authority and court hearings. In my country a court cannot overturn an AAT ruling on a question of fact, only a question of law.

Doug wrote, "...the biggest issue is that every quarter the government goes to the TRA and says, we need this much money..."

This can be an issue, even outside third-world countries. The solution is to have a *really* good revenue analysis team who can accurately forecast revenue collections with (a) the current policy/laws settings in place and (b) for a range of changed policy/law scenarios. Such a revenue forecasting dashboard allows you to play with other options too - settle disputed case now on terms favourable to the taxpayer forquick revenue now versus let the cases run their course with the Appeals Board.

[Of course a good revenue analysis dashboard requires good databases, computers and IT staff. One or more of which may not be available to the TRA.]

The Appeal Board seems to be a fine adaption of a British civil service trope. Go Tanzania! Go Doug!

[King]

The wigs is a lie, and TRA have nice offices,watch man don't pass bad impression about my country £%"$*%"(("(