Tax administration in developing countries : strategies and tools of implementation

Developing nations should adopt less sophisticated taxes (such as taxes on goods and services) to broaden the tax base and use more efficient administrative techniques. This could be achieved through a system of income withholdings (for all components of income) and through computerization. This could simplify withholding and collection by giving each taxpayer a number in a master file. Computers could also facilitate information gathering, cross checking, and audits. At present, potential tax bases are often not exploited because the application of existing laws is not possible. Because of this, administrators face major problems: a large portion of the economy is at a subsistence level and does not keep records. Where records are kept, accounting is not reliable. Taxpayer cooperation is also low for a variety of reasons: shortage of trained officials, a tradition of corruption, and because taxes are not often seen to produce better government services.