Semi-Autonomous Revenue Authorities (SARAs) are, according to the African Tax Administration Forum, “semi‐independent administrative bodies outside the traditional government hierarchy in which all revenue administration is consolidated into one administrative entity.” Unlike traditional central government tax-collecting agencies, SARAs enjoy a high level of administrative autonomy and have been adopted by many developing countries in the hopes of increasing tax revenue and reducing aid dependency. However, it is still unclear whether or not SARAs are as effective as their designers expected them to be. Most studies in academia focus on tax policy and regulation; little attention was paid to the administrative arrangements.
A recent article by Matilde Jeppesen (2021), a political scientist from Aarhus University, examines the effectiveness of SARAs with a cross-country comparison of 48 sub-Saharan African countries. The findings are mixed – adopting SARAs has a short-term positive impact on direct tax revenue (including from income taxes and capital gains taxes), but little to no effects on total tax revenue or indirect tax revenue.
SARAs are, theoretically, advantageous over traditional tax-collecting agencies for several reasons. First, SARAs remove employees from the traditional civil service scheme, avoiding nepotism and attracting more competent workers. Second, SARAs have more autonomy in hiring, firing, and rewarding employees, which incentivizes them to achieve higher performance. Third, high levels of autonomy isolate SARAs from external political interference, improving administrative efficiency and accountability.
Why does it appear that SARAs have failed to reach their full potential in practice? Both the local elites and international donors may bear the blame. In countries that heavily depend on aid, adopting SARAs is sometimes another form of political settlement for the ruling elites to secure aid or avoid opposition. They might agree, legally and superficially, to adopt a SARA. However, behind the façade of the reform, SARAs in these countries experience political interference and underfunding as usual due to lack of monitoring. Donor agencies, on the other hand, influenced by the new public management movement, often hold “efficiency” as the number one principle while overlooking the distinct context of each country. For example, the variance of the structure of each country’s economy, revenue sources, and existing tax policy.
Nevertheless, for many developing countries in the global south, SARAs remain a superior option to traditional governmental agencies if implemented and monitored properly. Autonomous organizations like SARAs are better equipped to mitigate some challenges of collecting direct tax revenue, which is often difficult to collect in developing countries whose economies are dominated by informal sectors and agrarian societies.
SARAs could be a useful tool to improve tax revenue and administrative efficiency if utilized as intended. Meanwhile, more context-sensitive research is needed to help with future adoptions of SARAs.
Read the entire article:
Matilde Jeppesen (2021), What we hoped for and what we achieved: Tax performance of Semi-Autonomous Revenue Authorities in sub-Saharan Africa, Public Administration and Development, https://doi.org/10.1002/pad.1952