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TAXATION AND REMITTANCES AS SOURCES OF FINANCING SOUTH SUDAN’S DEVELOPMENT

SIMON KUANY

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Introduction The republic of south Sudan achieved its

independence in 2011. though this was a jovial political moment it was ushering a very catastrophic economic phase. This is because the main battle ground of the historic Sudan civil war was fought in the southern region of the country and therefore the south never had a window to breathe economically and had to bear the economic pains that the long lasting war brought with it. So in the eve of independence, the country was in the worst shape imaginable and it had to start from scratch. The good side was that the country was rich in terms of minerals like oil, fisheries and a very fertile agricultural land. Therefore there was hope that the country will do well.

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So the country was at the crossroads; a very bad economic past that needed repairing and a very hopeful future. What was needed the most was a visionary, competent and nationalistic government to trade-off the two. Unfortunately this the government did not do.

According to the plan, the revenues from oil were to be diverted and used to bring up the other economic sectors like agriculture and services; agriculture was important because 83% of south Sudanese live in the villages, infrastructure was crucial because linking the 10 states together was crucial for the present and future economic development. The oil revenues was to be supported by taxes.

Unfortunately this did not happen; oil money was siphoned and none knows where it went and so are the taxes and today South Sudan is almost the same; almost the same number live in the villages, agriculture is still subsistence and not enough to feed the country, the only tarmac road is the 192 Km Juba-Nimule highway which was build by the USAID. The country is in a standstill and as we speak it is about to collapse both politically and economically.

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RETHINKING GOVERNMENT FINANCES

The government of south Sudan relies on oil as it’s major source of financing the country’s development. Oil market has not been very fair to the country in the past two years and the on going conflict has cut the revenues from oil by almost 50% and this has been very devastating to the government.

so when the wells are dry the second and the most important source of revenues for a government is the taxes. Again the government has failed on this end too. The following are the main tax codes of south Sudan;

Personal Income Tax (PIT) is 10% lowest bound and 15% highest bound. Business Tax is 5% lowest bound, 10% middle rate and 15% highest

bound Sales and excise rates are almost between the above. In short the tax rate

are within/below the 15% low income tax rates. the problem is not the tax rate, the problem is how much taxes are being

collected? The tax policy is clear and precise but tax administration, collection and expenditures is not at all clear and so the government has not benefited from taxing its people though the tax collectors/officials have.

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Tax revenue as a percentage of the total spending was 13% in 2012/13 financial year, down from 11% the previous and it has stagnated ever since or increase by a 1-2%. This is a clear indication that south Sudan’s development is not being financed by taxes but by oil revenues and foreign aid because foreign investment has been very minimal due to political instability that has crippled the business environment.

This is expected to go up by only 5 percent in the next 10 years. With a poor country like South Sudan that needs investment in industry and infrastructure so as to achieve its development goals, where will the money come from?

Restructure the entire process of tax collection This is so crucial because at the moment the percentage of the

amount taxes that is collected and that which reaches the government is very minimal. Therefore the government needs to put systems in place, it needs to adopt the use of technology so as to enable efficient and effective collection of taxes from tax payers. Technology will about transparency in a system full of corruption and this can improve the government revenues and therefore reduces its reliant on oil and foreign aid.

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Secondly and most important is that revenues and expenditures should be sync together. If the government’s revenues are less so should its expenditure. salaries (43%), transfers(23%) and operating(22%) are the top expenditures of the government of South Sudan and together they constitute 88% of total expenditures/ budget and only 12% is spent on capital according to 2013-2014. For the same particular year revenues were so low that the government ran a deficit of almost 50%.

It is therefore important for the government to prioritize its expenditure; spend me on economic factors or capital expenditures and spend less on the government and security. If this cannot be done as it hasn’t been done in the previous years, then improve your tax collection to at least fund 50% of your expenditure.

Remittances During the conflict a lot of south Sudanese flee the country and seek refuge in foreign

lands like the United States and Australia among many other countries. Up to date there are about 400,000-600,000 south Sudanese in the western world and they do support their families in South Sudan in one way or another. Assuming that they send 200 dollars a month to their families and assuming 75% of them as working class, then 400,000*200*12 is a whopping 960 million dollars. This is a lot of money, almost the same to 1.2 billion aid that the country received in the same year. The problem though is that most of the families that they support are leaving in neighbouring countries like Kenya and Uganda and these countries have reaped these benefits for too long. The reason being that south Sudan is so scary even for its own citizens. Therefore the government needs to put its house in order and therefore attract this population to come and live in their country so that the remittances can be spent in south Sudan and therefore improves the country and most importantly they can be taxed.

We do know how remittances have contributed to the development of major Asian countries mainly India which collects about 50 billion a year and the Philippines among many others. The same can be replicated in South Sudan.

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The world bank estimate remittances to keep growing at 5% per annum, currently at about 450 billions. The same could be tapped to help finance development in South Sudan.

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Government revenues

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No oil, government is broke, no development

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Time for South Sudan to get its share

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Conclusion South Sudan has to move away from oil, it has to think of life

without oil because it is going down the drain anyways. It has to come back to taxation, streamline the process of tax administration, ensures transparency in collection and reporting.

If this is done then tax as a percentage of GDP will increase and most importantly as a percentage of the total revenues will also increase from the 12% rate in the present.

Simultaneously, the government has to start prioritizing on its expenditures, increase capital expenditure and reduce government expenditure on transfers, security and operations.

It has to streamline its workforce so that the amount spent on salaries can reduce this can be done by bringing up the private sector.

The government too has to tap into its rich chunk of Diaspora and ensures that their remittances are spent in the country and therefore contributes to the general economic development.

This will reduce the reliance on oil and foreign aid.

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Our high-end government cars

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Our roads. WHAT HAPPENED TO SANITY

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