of ZK10,OOO was defined as a minimum taxable for the informal sector operators.
147. In order to encourage tax compliance, improve administrative efficiency and attract investment, other African countries have attempted to reduce marginal tax rates, and broaden the tax base. In Botswana tax changes were designed to establish a better balance between direct and indirect taxation in order to attract foreign investment. Company income tax was decreased to 25 per cent from 30 per cent, while the top marginal rate for individual income tax was reduced to 35 per cent. In Zambia, taxes were kept at the 1993 rates in order to make more resources available to the private sector.
This, together with the abolition of exchange controls, land reform and the privatization of parastatals, are expected to enhance the free market system. AlgeriaIs emphasis was to improve tax collection following a series of reductions in tax rates in previous years, including lowering the income tax ceiling from 70 per cent to 50 per cent while reducing minimum corporate tax from 42 per cent to 38 per cent and cutting VAT rates from 21 per cent to 13 per cent.
148. Indirect taxation, especially customs duties, remains the most problematic area in tax revenue collection. For example in Ghana, collection performance in respect of taxes on domestic goods and services in 1993 was 75 per cent of the projected target, while import duties exceeded their target by 16 per cent. As in previous years, revenue from export taxes were only 69.7 per cent of the target. In order to minimize if not eliminate the incidence of these malpractices in the administration of customs and excise duties, several African countries took measures to reduce discretionary powers of officials by narrowing the spread between duty rates. In Ghana, import duties on all goods imported under exemption and concessionary rates were now fixed at a flat rate of 10 per cent in 1994 while those classified as standard and luxury goods were increased to 25 per cent. The sales tax rates classified as concessionary and standard have been unified and fixed at 15 per cent whilst those for luxury goods remained at 35 per cent. The Ghanian government also decided to increase the petroleum tax by 6 per cent.
The impact of these reforms on the 1994 revenue initially showed a significant improvement over the previous year, although there was an overall shortfall of 14 per cent in revenue targets. Taxes on domestic goods were 1 per cent higher than the budget target while taxes on foreign trade showed a 28 per cent shortfall.
149. In Swaziland, revenue estimates for sales taxes increased from E105 million in 1992/93 to E122 million in 1993/1994, an increase of 16.2 per cent. Although collections show that the target was achieved, this was mainly due to inflation. In Kenya, the government lost revenue as a result of the removal of the 25 per cent surcharge temporarily levied on imports in September 1993. This temporary 25 per cent increase on all customs duties was introduced to fight inflation, but the duty rate on all capital equipment and spare parts was lowered from 20 to 15 per cent.
150. Some countries such as Zambia endeavoured to make adjustments in their international trade taxes, by lowering customs and import duties, while tightening controls to minimize the level of evasion
and smuggling. Additionally, efforts to minimize tax evasion and avoidance, through effective enforcement of existing rules and implementation of new ones were also prevalent in 1994 in these and other countries. Alongside the new tax policy, efforts were being made in uganda to improve the low compliance rate by improving tax administration. In Egypt, a new unified tax was introduced which would simplify the tax procedures, while in Tanzania, a decision was made to pUblish the names of delinquent companies and individual tax payers to improve compliance.
151. The CFA zone countries continued their process of adjustment with some realignment of their tax structure. Cameroon revived export taxes on agro-industrial products to make up for the 17.0 per cent fall in revenues from import duties. Cocoa, coffee and cotton are now taxed at 15 per cent while timber and logs export duties are charged at 28 per cent. These new taxes are to be levied for only one year, in the first instance. Sales tax, previously assessed only on private business was extended in coverage to include public enterprises, with a 15 per cent rate across the board. In Chad, the reduction of imports of consumer goods as a result of devaluation had a negative impact on revenue.
2. Recurrent Expenditures
152. For developing Africa as a whole, there was a slight increase in total expenditure of about 1.7 per cent in 1994. Table 3 shows the distribution of the growth rates of recurrent expenditure in African countries over the 1990-1994 period. Although, the number of countries in which expenditure declined was much smaller than in 1993 (23 as against 6), the rate of growth was less than 10 per cent in 15 countries compared to 5 in 1994. The number of countries recording expenditure increases of over 30 per cent declined from 10 to 4 only during the same period.
Table III.3
Country distribution according to growth rates of expenditure, 1990-1994
153. Emphasis was placed on improving expenditure discipline in several African countries. One of the major goals was to contain the growth of non-debt service recurrent expenditure of which the wage bill was certainly a sizeable component. Curtailment of publ i.c sector wage bill was generally addressed through reduction in salaries, retrenchments and early retirement programmes, but the specific modalities took different forms in different countries.
In Kenya, Uganda, Congo, Cameroon and the United RepUblic
or
Tanzania, there were sizable reductions in the pUblic sector workforce, but salary increases were made to compensate the retained civil servants for the effect of inflation. Following the devaluation of the CFA franc most of the CFA-zone countries increased wages and salaries. In Burkina Faso, Senegal, and Cote d'Ivoire the
increases averaged about 16 per cent.
154. Despite the severe constraint on recurrent expenditures, substantial allocationB were made for repair and maintenance of the physical infrastructure. In Kenya, attention was given particularly to the road network including the upgrading and improvement of rural access roads which will facilitate the marketing of the agricultural and livestock product. In Ghana, outlays for repairs, maintenance and renewals of physical infrastructure were increased by 25.7 per cent in 1993/1994.
155. Education and culture, defence, and health claimed a substantial proportion of government expenditure. In Zimbabwe, the allocation to education and culture represented about 35.7 per cent of total recurrent expenditure. The defence vote was increased by 10.1 per cent; and health and child welfare by 16.1 per cent. The latter increase went some way towards meeting government's objective of providing improved health standards for all despite rising costs.
In Ghana, the education and health sectors had larger allocations of total recurrent expenditure 50.4 per cent and 19 per cent respectively -- in 1994. These allocations were meant to enable the education sector to provide more textbooks and other accessories, and the health sector to accelerate the rehabilitation of health facilities and to provide adequate drugs and dressings.
156. The rationalization of expenditure focused on reducing the size of the pUblic enterprise sector and its wage bill through the accelerated privatization of public enterprises and improved administration and financial accountability for those remaining under government control. The Central African Republic seized the opportunity of devaluation to reform the public enterprise sector and institute a new civil service statute.
157. Expenditures on defence were increased in many African countries to maintain peace, order and security. Ghana's defence expenditure which waB about 19 per cent of total recurrent expenditures increased by 3.5 per cent this year because of its participation in the West African peace efforts in Liberia. In Guinea, the defence sector received the second highest vote, (about 11.3 per cent of the total expenditures), after the education sector.
158. Finally, in order to mitigate the social impact of the structural adjustment programmes, and deal in particular with the plight of the disadvantaged and poor segments of the population, a major portion of the budget in the reforming countries was devoted to the social welfare s,ector. In Kenya, for instance, provisions were made to support the poorest segment of the population and food assistance was provided to drought affected people and to refugees sheltered in Kenya. These programmes include bursaries to poor parents to pay school fees in secondary schools, increased supply of drugs and other materials for health services in rural areas, site and service improvements of housing for the urban poor, rural industries and employment generation programmes for the development of Jua Kali enterprises. In Zimbabwe, a Z$ 100 million social welfare and development fund was created, with an additional Z$60 million for drought relief and Z$ 20 million for tillage in the communal areas.