Beware the taxman: Tax authorities are the latest tools of repression in Africa
DAYS after she announced her candidacy for president in May, naked photos of Diane Rwigara, a Rwandan political activist, were leaked online. Two months later she was disqualified from the election, held in August, on dubious technical grounds. But she continued to speak out against President Paul Kagame, who has been in charge of Rwanda since 1994. So this month the government tried a new tactic, detaining Ms Rwigara—and her mother and sister—for alleged tax evasion. She has since been charged with “offences against state security”.
Ms Rwigara’s experience is hardly unique. These days many governments that want to cow their critics are as likely to use the taxman as the secret police. Such tactics are not confined to Africa. The Russian and Chinese governments often use complicated tax rules to intimidate or punish dissidents. Nor are they entirely new. Daniel arap Moi, Kenya’s dictator until 2002, turned his tax collectors into scourges of the opposition. But politically motivated arrests on tax-related charges seem to be increasing in Africa.
Take Zambia, where most of the media favoured Edgar Lungu, the president, in the election last year. A punchy tabloid called the Post stood apart—until the Zambia Revenue Authority shut it down, saying it owed some $6m in unpaid taxes. In April, although the Post was still appealing the decision, the taxman auctioned the paper’s assets. Similarly, in Kenya, two NGOs that mulled challenging the results of the election last month were temporarily shut down over alleged tax improprieties. Their offices were raided by police and revenue officials. The results of the presidential poll were nevertheless annulled by the supreme court.
“This kind of heavy-handed thing used to happen in Kenya in the 1990s, so it’s just a return to targeted oppression,” says John Githongo, the director of AfriCOG, one of the targeted NGOs. “The moment you associate with the opposition you find yourself under audit.” (Mr Githongo is a former correspondent for The Economist.) In the Democratic Republic of Congo, where the authorities rarely collect taxes from small businesses, Martin Fayulu of the opposition Rassemblement alliance says that a hotel he owns has been repeatedly shut down over allegedly unpaid taxes.
African tax authorities have got better at collection—and not just from government critics. In the 1990s, under pressure from donors and the IMF, many countries established autonomous revenue authorities. Electronic payment is now common. According to data from the UN, between 1992 and 2012 taxes generated across the continent from sources other than natural resources increased from 12% to 15% of GDP.
But the expectation of higher revenues could be exacerbating the problem. In Kenya, as the economy slows, the revenue authority is “under a lot of pressure to collect almost unattainable amounts”, says Nikhil Hira of Deloitte Kenya, a consultancy. The taxman’s job is made harder by the fact that businesses owned by leading politicians and their cronies seem to pay no tax at all in many countries.
The politicisation of taxes is undermining trust in the collectors. “There is still a very widespread perception that taxpaying is corrupt and arbitrary,” says Mick Moore of the Institute of Development Studies, a British research outfit. In the long run, conspicuously vindictive tax raids will make it harder for governments to raise revenue.
Source: The Economist