Building up efficient and fair tax systems – lessons from Zambia

This project analyses administrative tax data in Zambia to provide knowledge for better policy-making with respect to mobilizing public revenue for inclusive economic development.

The project conducts new, policy-relevant research based on the empirical analysis of administrative tax data in partnership with the Zambia Revenue Authority (ZRA) and the Zambia Institute for Policy Analysis and Research (ZIPAR). The research outputs of the programme are intended to assist policy makers as they develop and implement policy tools to improve development prospects in their country. An important additional goal of the project is to develop institutional and individual capacity to use administrative data for ongoing economic research and policy calibration.

Research areas under the collaboration include tax compliance gap estimates, profit shifting and corporate tax avoidance, examining value-added tax (VAT) chains, efficiency and effectiveness of tax policies and taxing of different sectors, such as extractive industries.  The studies primarily use administrative data of ZRA. The data includes information on for example corporate income tax and value added tax returns, and is anonymized and cleaned for research purposes. By these engagements and subsequent research output, the project in Zambia aims to guide policy debates based on actual data while building local research capacity in the country.

This work is part of the UNU-WIDER project Building up efficient and fair taxation. In Zambia the co-operation with ZIPAR covers also tax-benefit microsimulation work done under the SOUTHMOD project. Both projects are part of UNU-WIDER's programme on Domestic Revenue Mobilization (DRM). The DRM programme is financed by the Norwegian development co-operation agency Norad.

Key questions
  • What is the size and extent of tax compliance in Zambia as measured by the tax gap or the effectiveness of specific interventions by the Zambian tax authority?
  • How large is the VAT gap, i.e. the extent of evaded or avoided value-added tax? This will be estimated using a so-called bottom-up approach for measuring tax gaps.
  • How have some recent enforcement interventions, such as the withholding VAT, contributed to tax compliance?