"And it has proved extremely valuable in increasing compliance by enterprises operating across one or more countries in the region."
She was speaking at a seminar titled Pulling Ourselves Up: Taxation, State-Building, and Away from Aid organized by the Institute of Policy Studies together with the International Centre for Tax and Development ICTD in UK.
Cross Border
In 2008, tax authorities of 28 African countries came together to form the African Tax Administrators Forum (ATAF), to promote and cooperation among African tax offices and other stakeholders to improve effectiveness of taxation and tax law.
Though relatively new, in May this year, the ATAF coordinated an investigation of the multinational brewery giant SAB Miller by tax authorities in five African countries.
The cooperation through the ATAF enabled this groundbreaking joint audit of the company's transfer pricing strategies in South Africa, Ghana, Zambia, Tanzania and Mauritius. SAB Miller was found to be avoiding millions of pounds of taxes in Africa every year.Experts believe South Asia was well placed for cooperation.
"In South Asia, a number of countries share similar basic laws, institutions, and frameworks – I’m somewhat surprised to find very little cooperation on tax matters in this region," Mick Moore, chief executive of the ICTD (UK) said.
A Sri Lankan revenue official said the island was already a part of the Commonwealth Association of Tax Administrators (CATA), and had hosted its Annual Conference in Colombo recently.
But multi-country networks like CATA, that meet annually are not specifically oriented to South Asian conditions.
Regional Investment
Anushka Wijesinha, a research economist at IPS, said greater regional cooperation on tax was becoming more important amid growing in South Asian nations.
"Large Indian firms are investing and operating in Sri Lanka and Sri Lankan firms are operating in India and Bangladesh for example," Wijesinha said.
"More transnational companies are likely to locate in post-war Sri Lanka, and also to take advantage of bilateral trade treaties with India and Pakistan."
Meanwhile, several of the African tax experts observed that without a unified tax authority – merging Inland Revenue, Customs and Excise offices – cooperation is much more difficult.
Sri Lanka attempted to introduce a unified revenue authority in 2001, but faced opposition from trade unions.
Aiden Keanly of the South Africa Revenue Service said that ATAF has also strengthened used information technology to increase cooperation.
"Effective taxation is about information, and IT enables processing information more effectively. Good tax administrations are highly geared up with IT," Keanly said.
Cooperation in Africa via the ATAF has enabled better usage of IT, by adapting software and hardware coming from outside the region to African circumstances.
Taxation
Analysts say expanding taxation should be viewed with great caution especially in countries where civil society is not active in checking to what use rulers put money for. Modern, complex, taxation systems were imported to Asia from the West.
About two centuries ago governments were small and they could not extract coercive taxes from citizens with the same efficiency as now.
In addition to not having information technology, Kings also did not have large standing armies, and lacked the police power of modern nation states to force citizens to pay taxes - especially new ones - they did not accept as reasonable.
Taxes imposed without consultation resulted in revolt. The Magna Carta in Britain was a largely a result of a series of taxes imposed on Barons by King John without consultation.
But nation-states, with or without parliamentary approval, then started to impose taxes with increasing frequency. Critics have pointed out that in Sri Lanka today taxes are imposed by the state while citizens are sleeping by midnight gazette, sometimes to satisfy rich domestic industrialists.
Evolution
Historically, taxes on international trade - especially export taxes - were some of the most practical to impose.
Income tax was virtually impossible without accounting systems and records to track revenue and expenditure flows. Income taxes were first imposed as emergency and temporary measures to fund war. Britain started income tax at 0.08 percent in 1798 to fight Napoleon, with a cap at 10 percent.
The US started income tax at 3.0 percent to pay for a civil war. Ironically when Federal income tax was imposed in 1913 it was in exchange for lower trade tariffs.
Rulers in many nation-states later increased both income taxes and tariffs, expanded the state and made it easier to fight bigger and more destructive wars, kill more people, eventually leading to two world wars.
Taxation also became increasingly progressive, even though state services enjoyed by citizens did not vary greatly.
Rulers progressively made citizens believe that taxation was a right of the state and income re-distribution to buy votes was a right of the rulers.
Taxation, which was to defray the cost of providing rule of law, defence and services that citizens could not provide for themselves became a coercive tool to 'equate income'.
In the United State for example the top 10 percent of income earners now pay 70 percent of all personal income tax. The top one percent pays more than 36 percent.
Update II
