Presentation by Daisy Ogembo, PhD Candidate from Oxford University, at the 7th annual ICTD meeting in Kigali on February 7th 2019

1. TAXATION OF
PROFESSIONALS
IN AFRICA
A R E R E G U L ATO R S & P R O F E S S I O N A L
A S S O C I AT I O N S A N U N TA P P E D R E S O U R C E ?
Daisy Ogembo: University of Oxford

2. B A C K G R O U N D TA X I N G T H E
‘ H A R D - TO - TA X ’

3. THE HARD-TO-TAX?
Farmers, SMEs, &
professionals
(Jantscher & Tanzi
1987, Musgrave
1990, Tadesse &
Taube 1996, Alm,
Martinez-Vazquez &
Schneider 2004)
01
Informal or formal
sector?
02
Why
professionals?
03

4. INFORMAL OR
FORMAL
SECTOR?
Credits: Schneider & Enste, Joshi et al, and Martin Hearson

5. WHY PROFESSIONALS?
HTT = Farmers + SMEs
+ Professionals
• Gap in tax evasion literature
• Gap in policy decisions and
administrative effort targeting the
‘informal sector’
• Scope for high earnings, scope for
evasion when self-employed and
dealing in cash, potential for damage
to the overall tax system (Keen 212)
Gap in the
literature
Image Credits: Martin Hearson

6. SIGNIFICANCE
• Rapid changes in development funding, need to harness domestic
resources, growing socio-economic needs (Carnahan 2015)
• High number of HTT (Chen 2001, Woodruff 2013)
• Failure, reluctance or inaction to tackle evasion by HTT
professionals= adverse implications for overall tax system: equity
(Bahl 2005, Bird & Wallace 2005, Musgrave 1990, Terkper 2003) and
tax morale (Frey & Torgler 2007).

7. T H E C A S E S T U D Y
TA X
C O M P L I A N C E
AT T I T U D E S
A M O N G
D E N T I S T S &
L AW Y E R S I N
K E N YA

8. RESEARCH METHODS
• Goal: In line with the theoretical
underpinnings of qualitative research-
not to generalise findings to whole
population, but to build deep, rich,
and thick narratives and analysis
regarding perceptions, attitudes, and
patterns of thought of respondents
(Rogers and Oats 2012).
• 31 respondents: 22 taxpayers, 5
government officials and 4 experts;
• Geographical location-Nairobi;
• Why dentists and lawyers?
• Snowball/referral sampling (Browne
2005).
• Thematic analysis

9. FINDINGS
MAJOR THEMES: Taxpayer visibility
Perceptions of
Consequences of
Evasion
Low Levels of
Financial and Tax
Literacy
Regulatory Failures
Government Service
Delivery &
Corruption
The Influence of
Peer Perception
MINOR THEMES:
Collaborative Tax
Evasion
Unfairness
The Unintended
Effects of a Court of
Appeal Order
Public Perception of
the Revenue
Authority
Formalisation &
Firm Growth
Legal Form

10. R E G U L AT O R Y
FA I L U R E S
W H AT D O W E
K N O W ?

11. CASE STUDY DATA
LAWYERS
• Law Society of Kenya;
• Undercutting: Rule 4 of the Code of Ethics and
Conduct for Advocates & Rule 3 of the Advocates
(Practice) Rules;
• Abuse of confidentiality rules, fiduciary duty, &
client account rules: Rules 5 and 7 of the Code of
Ethics, Advocates Act & subsidiary legislation, Rule
of the Advocates (Accountants) Rules;
• Rule 3 of the Advocates (Accountant’s Certificate
Rules).

12. CASE STUDY DATA
DENTISTS
• Medical Practitioners and Dentists Board;
• Inefficient, only interested in collecting members’ fees, and does nothing for the
members;
• Does not require or, at a minimum, encourage proper record keeping, financial
management, and tax compliance among medics;
• Board should play a role v Board unable out to carry core mandate;
• Dental ethics courses should incorporate lessons on tax compliance and financial
management;
• No rules to guide members (cf. LSK)

13. CASE STUDY DATA
GENERAL OBSERVATIONS
• Does tax evasion amount to professional
misconduct?
• Case study suggests regulators/associations do not
think so;
• LSK rules robust but not adequately enforced; tax
evasion not explicitly & adequately addressed in
rules;
• Failure by other associations and regulators starker:
E.g., Constitution and bylaws of Architectural
Association of Kenya incorporating Architects,
Quantity Surveyors, Town Planners, Engineers,
Landscape Architects, Environmental Design
Consultants and Construction Project Managers

14. OTHER JURISDICTIONS
• Does tax evasion amount to professional
misconduct?
• Test: whether the offences touch on the taxpayer’s
professionalism thereby warranting suspension or
dismissal.
• Australia Bar Associations case
• England: GP engaged in tax fraud
• Law Society of Ireland v Carroll and another [2009]
IESC 41
• U.K. Bar Standards Board and Solicitors Disciplinary
Tribunal

15. C O N C L U S I O N
W H AT D O W E
L E A R N A N D
W H AT I S L E F T TO
D I S C O V E R ?

16. UTILISING REGULATORS/ASSOCIATIONS
IN TAX COMPLIANCE
• What role should regulators play?
• Extent of mandate? Radical or moderate?
• Members reactions, especially associations;
• Incentive for collaboration in tax compliance?
• Proper checks and balances to avoid abuse

17. UTILISING
REGULATORS/ASSOCIATIONS
IN TAX COMPLIANCE
Selling the Idea
• Failure, by professionals, to keep proper financial
records and comply with tax legislation has severe
ramifications for the integrity of a profession;
• ‘Professional’ rather than ‘private’ problem
2018);
• Enhancing role through legislation and other
channels of collaboration;
• Roles in identifying tax payers, educating taxpayers,
facilitating compliance, enforcement of the law