Analysis of Tax Administration Reform through Tax Performance and Quasi-voluntary Compliance: A Comparative Analysis of Tanzania and Uganda

Abstract

This study attempts to analyze how two decades of tax administration reforms in Tanzania and Uganda have contributed to tax performance and quasi-voluntary tax compliance. The study compares the political economic backgrounds and processes of tax administration reform in the two countries, with a special focus on semi-autonomous revenue authorities, and their outcomes in terms of tax performance and compliance by using qualitative research methods. The primary goal of tax administration reform is to increase tax revenue and compliance, which further contribute to state-building by strengthening state capacity and the state-society relationship. Tax administrations attempt to increase quasi-voluntary compliance by changing strategic and normative factors that affect taxpayers, as they need certain levels of quasi-voluntary compliance to maximize net revenue. Revenue authorities in Tanzania and Uganda set to improve tax revenue and voluntary compliance as their major objectives. Tanzania and Uganda make significant cases for comparative research on the outcome of tax administration reform because of the similarity of their political economic backgrounds, initial successes in tax administration reforms, and the fact that elements of their reforms mirror the situations of other sub-Saharan African countries that also have urgent needs for tax administration reform. However, there has been a lack of research that closely analyzes tax administration reforms in terms of tax performance and quasi-voluntary compliance outcomes in Tanzania and Uganda. This study provides a detailed comparison of the outcomes of tax administration reforms of these two countries to complement existing literature. The study finds out that the tax administrations of Tanzania and Uganda have different outcomes for tax performance and compliance, despite the introduction of similar tax administration reforms. Tanzania generally achieved better outcomes in terms of both tax performance and quasi-voluntary compliance in comparison to Uganda. This is because Tanzanias tax administration was more effective in changing the strategic and normative factors that influence taxpayers in comparison to Uganda. As a result, significant increases in tax revenue and administrative performance in Tanzania have contributed to the strengthening of its state capacity. Improvement in quasi-voluntary compliance has a positive effect on the state-society relationship in Tanzania. Therefore, the different outcomes of tax administration reform in Tanzania and Uganda have the potential to contribute to state-building differently through the development of state capacity and the state-society relationship.