Leveraging the potential of taxation for sustainable development in Zambia

Kirsty Scott

13 August 2022

This is an article from the CSC Development Theme: Promoting innovation and entrepreneurship

UK universities are full of development economists, as are US universities, but that research doesn’t always get into the hands of the people who need it, and it’s also not often in a format in which they can use it.

Twivwe Siwale

Commonwealth Alumnus Twivwe Siwale is the Head of Tax for Growth a thematic initiative of the International Growth Centre (IGC), a thinktank directed by the London School of Economics and the University of Oxford, which receives the majority of its funding from the UK Foreign, Commonwealth and Development Office (FCDO). IGC works with policy makers in developing countries to promote inclusive and sustainable growth through research. One of the priority areas of the IGC’s work is state effectiveness, which includes topics ranging from public sector effectiveness to tax capacity.

With 7 years’ previous experience working at the Zambia Revenue Authority (ZRA) across various portfolios from tax inspection to policy and legislation, and 5 years in research and policy analysis, Twivwe has been tasked with developing IGC’s Tax for Growth Programme, which is investigating ways taxation can contribute to economic and development growth in developing countries.

“The idea is if you’re going to fund development you need to mobilise revenues domestically, and tax capacity in many low income countries is weak.”

Establishing a robust tax policy

The programme is currently in the set-up phase, and Twivwe has spent the last year and a half preparing the strategic outline of how the initiative will engage policymakers and provide a unique model for using taxation to fund development growth. With research an integral part of the IGC’s work, Twivwe has collaborated with academics to develop the initiative and consult on and contribute to research in this area.

Understanding the importance of good tax policies and how to implement these is crucial to achieving development aims.

“One of the nuggets we use a lot in the tax space is that the inability to tax is both a symptom and a cause of underdevelopment. If you look at rich countries today, their tax-to-GDP ratios are at 40%, and that allows them to provide the public goods and services that citizens need in order to thrive in their lives.”

Strong taxation policies enable governments to provide core public services, such as education, healthcare, and transport infrastructure. Countries with a low capacity to collect revenue through tax are therefore less able to provide these services, which has a negative impact on their growth and development.

“Taxation is very central to state-building. Weak states or fragile states, one thing that you’ll find missing is that they don’t have a functioning tax system. That’s one of the symptoms, one of the very clear things. And as a state develops, its taxing capacity tends to improve.”

Through taxation, citizens invest directly in the public services designed to support and protect them, and as such Twivwe sees taxation as part of the social contract between the government and state, and its citizens.

“Citizens pay taxes and they have an expectation. They have a bundle of goods that they want from their governments. They want education. They want protection. They want a safe place to raise their families and to essentially thrive. And [because they pay taxes], they have an accountability mechanism, one that they can [use to] vote governments out.”

There are many ways governments can collect taxes and this evolves over time as capacity, opportunities, and demand for services develop. Tax data is a rich resource and can tell you many things about the economy in real-time. Understanding how to use and interpret this data is therefore critical for governments seeking to develop an effective taxation strategy.

During the set-up phase of the Tax for Growth Programme, the IGC was contacted by the Government of Tanzania who were keen to understand how the country’s existing tax systems and data could be used to increase revenue generation and compliance. Through a grant from the FCDO Tanzania, Twivwe assembled a team to assess and enhance their current taxation dashboard to improve how data can be used to inform their taxation policies.

Promoting the benefits of taxation to businesses and consumers

Alongside her work developing the Tax for Growth Programme, Twivwe is a co-project implementor on a value-added tax (VAT) project, working with the Zambia Revenue Authority (ZRA). The project came about following a chance meeting with her fellow project implementor, Brian Dillon, at a conference.

“He [Brian] doesn’t even work in tax. But as we got to talking, we’re like, it would be cool if we could do something together. And he’s done a bit of work in technology, I do tax, and we’re like, why not look at these electronic fiscal devices that are popping up everywhere?”

Together with the ZRA, they have developed a multi-year, multi-pronged project designed to improve VAT collection and increase revenue generation. VAT is clearly stated in customer receipts, but not all sellers in Zambia issue these receipts, meaning it is unclear if they have charged the 18% VAT, or if they have charged it but kept the money for themselves and not collected it on behalf of the government. Sellers who do not charge VAT correctly also have an unfair advantage over competitors through these methods of tax evasion as they can charge lower Vat exclusive prices.

Credit card reading machineOne solution is to introduce electronic fiscal devices (EFDs) which report real-time data on seller transactions to monitor VAT collection. There is, however, no guarantee that sellers will use EFDs even if they have them. A possible solution identified by Twivwe and Brian, and which has been successful in Brazil and Rwanda, is to adopt a consumer incentive scheme. Through this scheme, consumers are incentivised to only shop with sellers who use EFDs in order that they can use their sales receipts to enter into a national lottery and win prizes.

The ZRA were keen to pilot this scheme and rolled out devices amongst sellers. On analysing the data received from the EFDs, Twivwe and Brian discovered that tax revenue decreased following implementation. After investigating further,  they found that the devices procured were low quality, and were not supplied to all sellers. Additionally and some sellers reported that the EFDs were difficult to use and not compatible with existing accounting systems.

“From the pilot it became very clear to us that a consumer incentive scheme would not be a good idea for Zambia. There were not enough machines out there. There were just so many things that made the Brazilian case doable, and not doable in Zambia.”

Following the results from the pilot, Twivwe and Brian are devising a new incentives scheme targeting small firms, such as market grocers, who typically buy in bulk from VAT-registered suppliers but rarely provide consumer receipts. The new scheme would see firms enter their consumer receipts into a lottery with prizes awarded to support business growth.

Woman using electronic fiscal device


Twivwe stresses this is a multi-year project which will see different projects and approaches piloted to identify what works best for the ZRA, consumers, and sellers. One of the main things Twivwe is keen to see as an output of the project is the introduction of a reiterative learning culture amongst staff at the ZRA and a new way of interpretating tax data.

“Once you have access to the data, you can see firm behaviour in the data, in a way that the Revenue Authority might not be thinking about it. For instance, you can see firm networks. You can see that Firm A trades with Firm B, and because Firm C is not VAT-registered, Firm B never trades with them. So, how do you help with firm growth? Maybe that’s an incentive for Firm C to register, because Firm B doesn’t trade with them.”

A better approach to implementing development projects

Following her years working at the ZRA and as IGC’s Country Economist for Zambia, Twivwe also leads the IGC’s Zambia mining portfolio and is a member of Zambia’s Mining Technical Working Group. The Zambian government recently completed a draft Mineral Resources Development Policy which Twivwe and a team of experts reviewed.

This is an important opportunity for Twivwe and the IGC to feed into research and evidence from policymakers, industry, and academics to support the sustainable development of a key area of Zambia’s economy. Through the IGC’s model of bringing together policy stakeholders and researchers, Twivwe hopes to bridge the gap between research and theory, implementation, and evaluation and move away from consultancy models.

“What we’ve found with our work is that there’s a current model of development in many countries where it’s a consultancy model. You come to a policymaker and you say, here’s the research, we’ve done it, go and implement it. And in our experience, that just doesn’t work. You need to co-generate knowledge. You need to start at the very beginning.”

Twivwe believes that by implementing a model where researchers and policy makers are encouraged to discuss ideas and challenges to develop policies and interventions that all stakeholders have contributed to will lead to more successful projects and save money in the long-run.

Creating opportunities for tax research collaboration

Twivwe is currently organising an IGC tax conference to launch the tax for Growth Initiative, and the keynote will be given by the Chief Economist and Director for Economics and Evaluation Directorate at the UK Foreign, Commonwealth and Development Office, Professor Adnan Khan. She hopes the conference will provide a platform for policymakers to share and discuss ideas and challenges around taxation and identify common areas for development and potential solutions.

“We try to be demand-led, so we try to have the demands come from the government, but that doesn’t mean that we’re sitting somewhere, waiting for them to come to us. Sometimes you have to cultivate that demand. You have to create it. We hold events, invite policymakers. We invite researchers who’ve done work in other places, and we’re like, look at this.”

Thinking back to her time studying at the University of York, Twivwe has fond memories. Through her Master’s studies she was able to apply her knowledge of health economics gained during her undergraduate studies to public economics, looking at health through the lens of public sector provision. She feels these studies have been integral to her professional development.

“I wouldn’t be here if I hadn’t gotten a Commonwealth Scholarship, so yes, I’m glad, and I think it’s been a great experience. And to be honest, it’s totally a gamechanger. I did say in the short run it was hard to find work, but once you get in, the opportunities are vast, and you can work anywhere in the world.”

Twivwe Siwale is a 2014 Commonwealth Scholar from Zambia. She completed an MSc in Public Economics at the University of York.