Case Studies

 

TIWB-style audit assistance programmes are relatively recent, limiting the available quantitative data to evaluate their success. However some cases exist and demonstrate the impact of these targeted audit assistance programmes, including:

  • In Country A, a programme of capacity building focused on transfer pricing and provision of assistance on anonymised cases at a cost of approximately USD 15 000. This programme led to an increase in assessed tax revenues to USD 5.83 million in 2012 from USD 3.3 million in 2011 – a 76% increase. This is a rate of return of approximately USD 170 of revenue per USD 1 spent. Country A says the increase was possible only due to the practical assistance provided. This programme of assistance also saw Country A pass revised transfer pricing legislation in line with the international standard, based on the significant advice provided by the expert.
  • In Country B, a medium-term programme of assistance has focused on increasing capacity to enforce rules on transfer pricing. A recent audit of a large multi-national enterprise resulted in increased tax collected of USD 3.9 million.
  • In Country C, a programme of assistance to improve the transfer pricing audit skills of the revenue administration's auditors has led to increased revenues collected. Specifically, in one audit the revenue administration successfully negotiated a transfer pricing adjustment based on the advice provided through the programme. This resulted in additional tax revenue collected of USD 12.9 million.

There has also been evidence of impact from programmes providing tax-focused capacity building assistance, but not necessarily practical audit assistance. Still, this evidence demonstrates broadly that significant returns can be achieved on donor investment in the development of more effective tax systems:

  • In Ethiopia, the UK Department for International Development (DFID), along with other donors, supports the Public Sector Capacity Building Programme, which includes capacity building support to the tax system. An objective is to increase tax revenue by 87% – to 81.1 billion birr in 2013 from 43.3 billion birr in 2010. Every GBP 1 of DFID support to tax system reform is estimated to produce additional revenue of about GBP 20 per annum.
  • USAID support to improve tax collection in El Salvador, worth USD 5.3 million in 2004-10, led to increased revenue of USD 350 million per year.
  • In Burundi, DFID support helped to establish an independent Revenue Authority in July 2010, at a time when the country's tax and customs services (then under the Ministry of Finance) topped the list of East Africa's most corrupt organisations in Transparency International's East African Bribery Index. The programme set out to transform the culture of tax collection. From January to June 2011, revenue collection was 37.4% above the level for the same period the previous year. From July to September 2011, the outturn revenue exceeded the forecast by 14% or GBP 7 million.
  • DFID support to the Rwanda Revenue Authority helped to develop the laws and regulations under which the Authority was established and develop its offices and management systems. The 10-year period of support saw a six fold increase in the taxes collected. In 2010, the Authority's management procedures were awarded ISO 9001 2008 accreditation, making it the first Rwandan institution to attain this standard. The Authority reached a point where it was collecting the full GBP 24 million value of the DFID support programme every three weeks. Its effectiveness has been a major factor in Rwanda's impressive development performance in recent years.

The above examples relate to tax-focused capacity building assistance, but not necessarily assistance providing practical audit assistance.

 

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