An introduction to the basics of taxation and conceptualising tax avoidance/evasion as features of poor economic growth.

1. Tax and Development
– An Introduction
Lyla Latif

2. Objectives
• What are taxes
• What are the different types of taxes
• Why pay them
• Who pays them
BREAK OUT SESSION
• Who designed the tax system
• Where/when is tax not paid
• What does tax avoidance (TA) and tax evasion (TE) mean
• How does TA and TE affect development

3. What are taxes
• Contribution levied on persons,
property, or business for the
support of government
• A compulsory exaction of money
by a public authority for public
purposes enforceable by law
(Matthews v The Chicory
Marketing Board, 1938)
• Raising money for the purposes of
government by means of
contributions from individual
persons (R v Barger, 1908)
• Is an amount of money which is
taken from your earnings to help
towards some of the cost of
services you receive in your
country

4. Direct and Indirect Taxes

5. What is
taxed?

6. Sydney Smith writing about taxes in England
in 1820
• 'Taxes upon every article which enters the mouth, or covers the back,
or is placed under the foot — taxes upon everything which is pleasant
to see, hear, feel, smell, or taste—taxes upon warmth, light, and
locomotion— taxes on everything on earth and the waters under the
earth— on everything that comes from abroad, or is grown at
home—taxes on the raw material—taxes on every fresh value that is
added to it by the industry of man—taxes on the sauce which
pampers man’s appetite, and the drug that restores him to health—
on the ermine which decorates the judge, and the rope which hangs
the criminal—on the poor man’s salt, and the rich man’s spice—on
the brass nails of the coffin, and the ribands of the bride—at bed or
board, couchant or levant, we must pay..' (Edinburgh Review, 1820)

11. Who pays?

13. Group Task
1. List down the different types of taxes that you
are aware of
2. On ‘what’ do you think you pay tax?
3. How much do you think you have paid in tax?
How have you assessed this?
4. Does it matter to you how your government
uses your tax money? Why?
5. Have you ever thought of the fact that you have
been paying taxes, and wondered why?

14. Designing the tax
system

15. Where/when is tax not
paid?

17. Twin issues of
TA and TE
• What does it mean? To avoid and
to evade? Is it the same thing?
• Is it the law that draws the
distinction between the two?

20. Affects the level of economic development

21. Response from Africa
• Over the last 50 years, Africa is estimated to have lost
in excess of $1 trillion in illicit financial flows (IFFs) (Kar
and Cartwright-Smith 2010; Kar and Leblanc 2013).
This sum is roughly equivalent to all of the official
development assistance received by Africa during the
same timeframe. Currently, Africa is estimated to be
losing more than $50 billion annually in IFFs. But these
estimates may well fall short of reality because
accurate data do not exist for all African countries,
and these estimates often exclude some forms of IFFs
that by nature are secret and cannot be properly
estimated, such as proceeds of bribery and trafficking
of drugs, people and firearms. The amount lost
annually by Africa through IFFs is therefore likely to
exceed $50 billion by a significant amount.

22. The nexus between tax and development
• Poverty remains of serious concern in Africa in absolute and relative
terms. The number of people living on less than $1.25 a day in Africa
is estimated to have increased from 290 million in 1990 to 414 million
in 2010 (United Nations, 2013). This is because population growth
outweighs the number of people rising out of poverty. Moreover, GDP
per African was around $2,000 in 2013, which is around one-fifth of
the level worldwide (IMF, 2014). Poverty in Africa is also
multidimensional, in the sense of limited access to education,
healthcare, housing, potable water and sanitation. This situation
puts the loss of more than $50 billion a year in IFFs in better
perspective.

23. Continued
• Tax avoidance and evasion continue:
• Depriving African governments of resources required to achieve structural
transformation, economic development and progressively realise human
rights. The tax evasion and avoidance practices employed by TNCs force
African governments to raise revenue from other sources, including through
regressive taxes, the burden of which falls hardest on the poor.
• IFFs perpetuate and aggravate extreme economic inequality, benefiting the
rich at the expense of the poor. Inequality prevents millions of Africans from
enjoying social and economic rights on a non-discriminatory basis, such as
access to adequate housing and healthcare.
• IFF contributes to the build-up of debt crises since, in the face of missing
revenues, African governments resort to external borrowing. Debt servicing
then reduces the amount of public resources available for development and
achieving equality in Africa. Curbing IFF is thus essential for achieving equality
and financing development in Africa.

24. The End
Reflect on how else tax evasion impacts the world