BUJUMBURA, BURUNDI - Before closing his forex bureau in 2006, Pierre Claver Hakizindavyi, a Burundian entrepreneur, had made profit and decided to reinvest it in the company to increase its capital.
As the law requires, he published the decision in the official gazette of the Government, which is signed on by the Head of State. When time to pay taxes came, the taxman mistakenly asked Hakizindavyi to pay taxes on dividends without considering what the law had to say. After a disagreement between the two, Hakizindavyi paid all the taxes and filed a case with the arbitration commission, which he later won and the government was asked to refund him.
Today, he is still demanding for tax refunds and he has asked the tax administration office to conduct final audit of the company but there has not been any response. The company has ceased to operate.
"This explains how procedures in our tax administration system are still hard to beat which is unfair to businesses," says Hakizindavyi, who currently runs Hotel Amahoro, one of the best accommodation facilities in the Burundian capital Bujumbura.
Hakizindavyi not only complains about unfriendly procedures but also many taxes, which increase the burden on few large taxpayers.
He urges the government to reduce tax rates especially on the tourism sector to entice investments and economic growth, as well as increasing tax base in order to share the tax burden between small, medium and large taxpayers.
The challenge facing tax administration in Burundi provide a yardstick to measure how much Burundian Government can achieve in its quest to build a competent tax administration system. The country's tax administration is still seen as corrupt especially at the customs.
Burundi was the last to set up a revenue authority among the five partner states of the East African Community (EAC). Office Burundais des Recettes (OBR), an equivalent of a Revenue Authority in the case of Uganda, Kenya, Tanzania and Rwanda, was only created in the beginning of 2010. The institution mandated to professionalise tax administration, has achieved a lot in two years of its existence but a lot more remain to be done.
"We have several big challenges. We are essentially starting a revenue administration from scratch. We have made huge strides in terms of reform and modernisation and in collecting revenue, but we are not done yet," explains Commissioner General of OBR Mr. Kieran Holmes, who has been with the institution close to eighteen months. In order to build an efficient tax administration, Holmes has focused on increasing OBR's capacity in terms of human resource and IT systems that effectively help in tax and revenue administration.
Beginning 2011, OBR recruited a young and dynamic team of staff to replace staff from the old tax administration. 425 staff were recruited and with financial support from Trade Mark East Africa (TMEA), they received training courtesy of trainers from Uganda, Kenya, Rwanda and Tanzania, where tax administration has improved.
OBR also embarked on modernising tax and revenue administration, which saw two of three Information Technology (IT) systems rolled out to facilitate tax collection and management.
Currently, OBR manages customs revenues using Automated System for Customs Data (ASCUDA++) and it is upgrading to ASCUDA World, which is the latest version with advanced features. The institution also uses Standard Integrated Government Tax Administration System (SIGTAS) to manage domestic taxes. The third system, which is expected to streamline back office operations focusing on areas of finances and human resources management, asset management and procurement, is expected in March this year.
Burundi is also embarking on reviewing some tax laws in order to increase tax compliance to generate more revenue.
According to Mr. Holmes, a new income tax bill that was drafted by the help of the International Monetary Fund (IMF), and new tax procedures law on how OBR and taxpayers interact are in the offing. OBR is also targeting amendments in the Value Added Tax (VAT) law.
"These three laws are in the process of going to the parliamentary system and once enacted, they will dramatically broaden the tax base and increase the scope for revenue," Holmes said in an interview with East African Business Week end of November 2011, adding that this year, OBR seeks to revise even the current excise taxes, something that would also boost revenue collections.
He said OBR is also planning to ease paying taxes by allowing electronic filing which could begin with only the large taxpayers and then with other taxpayers later. Burundi, Holmes said, gets 75-80% of its tax collections from large taxpayers.
By end of November, there were around 500 large taxpayers and the number was increasing according to the Commissioner General. Burundi groups taxpayers into large, small, medium, and micro depending on the size of the turnover. Each taxpayer gets a Tax Identification Number (TIN), which helps, in their dealings with the revenue authority. OBR has also embarked on new taxpayer registration to boost the tax base and revenue.
Although Holmes could not provide the exact number of all taxpayers, he said taxpayers were increasing and tax revenues were growing as well partly because of increased efficiency in tax administration, tax compliance and the Government's war on corruption. In 2011, OBR had targeted BIF500 billion (US$376,226,249)-which was half the national budget- but as of end-November, it had collected BIF434 billion ($326,561,446).
Compared to 2010, revenue had increased by BIF110 billion ($82,769,000), accounting for an increase of 34% in the first eleven months of 2011. Revenue collections have been very instrumental in backing up government expenditure because donor funds were uncertain.
Burundi is also investing in One Stop Border posts with Tanzania and Rwanda to facilitate trade. Recently, it launched a One Border post with Rwanda at Nemba and it is looking forward to doing the same with Tanzania at Kabanga- Kobero border through which 80% of goods that go to Burundi by road pass. Burundi is keen to build an efficient tax administration to ease doing business and to boost economic growth.
"We are moving heavily with capacity building, computer systems, new legislations and new improved procedures and systems," said Mr., Holmes.
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