Attempts by the EU to help sub-Saharan African nations increase their rate of tax collection are flawed by a string of weaknesses in implementation, an in-depth study by auditors found yesterday (28 February).
Helping the poorest African states increase their income tax and other tax revenue from extremely low levels is now a key priority within the EU’s overall aid strategy.
But the survey of 15 such projects across sub-Saharan Africa found a variety of deficiencies, both in implementation of the schemes and the initial conditions set on the recipients.
Some 20% of EU development money is channelled through such schemes, with sub-Saharan Africa being the largest recipient. Between 2012 and 2016, some €1.7bn went to sub-Saharan Africa on these projects.
“Domestic revenue mobilisation is a priority for the international development community,” said Daniele Lamarque, responsible for the Court of Auditors report. “But the EU’s support is being undermined by design and implementation weaknesses and challenging local circumstances.”
The poorest countries in the world struggle in particular to raise any tax revenue, due to widespread poverty and illiteracy, bartering, hard-to-reach groups in subsistence agriculture, corruption and weak administration.
The Luxembourg-based Court investigated 15 projects in nine such EU Official Development Assistance (ODA) programmes in Cape Verde, Central African Republic, Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal and Sierra Leone.
Improving so-called “Domestic Revenue Mobilisation” (DRM) has been a key aim of the Commission since 2012.
They looked in particular at the Commission’s initial evaluations of recipient countries, the ‘conditionality’ imposed on agreements, ongoing dialogue with the 15 nations, and eventual evaluation.
But in a damning conclusion, they state, “Implementation weaknesses prevented that potential from being fully exploited.
“We therefore conclude that the Commission has not yet effectively used budget support contracts to support DRM.”
Initial contracts were not always “comprehensively” drawn up, with assessments that “did not cover some essential aspects of fiscal policy and administration”.
There was not also proper evaluation of the “key risks” related to tax exemptions.
In addition, only five of the 15 projects were forced to fulfil specific DRM reforms before the budge support was made available.
The auditors acerbically note; “[this] does not square with the central role supposedly assigned to DRM”.
Because of “difficult country circumstances”, in some places even the planned policy dialogue “did not take place regularly”.
Missing were “fixed priorities, objectives, interlocutors and dates”.
In their 12-page official response to the court’s report, the Commission and the European External Action Service cite problems with the availability of certain data and information in various of the recipient countries in their defence, they admit there are “opportunities for improving DRM”.
They state: “The country context and the political sensitivity, as well as the confidentiality of certain aspects have to be taken into consideration when preparing the policy dialogue and deciding what form it will take.
“EU delegation staff have maintained a policy dialogue in very difficult circumstances of countries in crisis.”