Introduction

Corruption is an existential threat to a country. It denies the country the necessary resources to protect the integrity of the state and to invest in the needed infrastructure required to grow the economy. A government can attempt to close the resource gap by borrowing but borrowing limits are often quickly reached.

The informal sector is a big factor affecting the growth in tax revenues as it can often constitute around 50% of the total economy. No country can hope to maximise its Tax-to-GDP ratio if half of its economy is outside the tax net.

Effectively addressing corruption and formalizing the informal economy will provide the resources to generate both public and private investment and create a strong middle class of investors. Some of the additional revenues produced from this strategy will be made available to finance lower tax rates thereby growing the retained earnings of businesses and facilitating additional investment.

Leadership and Commitment

• Presidential Champion: The top political leadership should visibly lead this strategy, demonstrating unwavering commitment to fighting corruption and building an inclusive formal economy.

• Dedicated Task Force: A task force directly under the Prime Minister’s or President's Office should be established to coordinate and drive implementation, ensuring clear goals, timelines, and adequate resources.

• Public Commitment: All the top political leadership must publicly support this strategy, highlighting the benefits of a corruption-free, formalized economy for the people.

Key Strategic Pillars

1. Institutional Reform and Capacity Building:

• Independent Anti-Corruption Commission: Establish a robust anti-corruption body with investigative and prosecutorial powers covering all government sectors, including the revenue administration.

• Strengthened Oversight: Empower parliamentary oversight committees to scrutinize government spending and implementation of the strategy.

• Further Professionalize the revenue administration and the public services: Invest in comprehensive training and capacity building on ethics, corruption prevention, and service delivery.

• Set up an Integrity Drive within the revenue administration.

• Review and Reform Legislation: Review and address laws that enable corruption or hinder formalization, promoting transparency and clear rules.

2. Systemic Improvements and Streamlining:

• Centralized Registration: Establish or strengthen the One-Stop Centres (often within the Investment Authority) so as to implement a one-stop-shop more effectively for registration, simplifying and reducing the cost of formalizing businesses.

• E-Governance: Implement robust digital platforms for tax filing, registration, and service delivery to minimize opportunities for corruption. This will require investment in a electronic tax administration system as well as substantial investment in hardware and back-up systems. It may be possible to access development partner support for this considerable investment.

• Reduced Red Tape: Streamline overall bureaucratic processes, removing unnecessary delays and potential for bribery.

3. Transparency and Accountability:

• Open Data: Regularly publish accessible data on revenue collection, government spending, and anti-corruption efforts.

• Public Access to Information: Facilitate citizen scrutiny and participation in holding institutions accountable.

• Whistle-blower Protections: Strengthen mechanisms for reporting corruption with safeguards for those who come forward.

4. Proactive Taxpayer Education and Engagement:

• Simplified Information: Provide clear, accessible information about the tax system, procedures, and the benefits of formalizing.

• Targeted Outreach: Utilize various channels (workshops, media, etc.) to reach informal businesses tailored to different sectors.

• Link Tax Benefits to Public Services: Highlight the link between taxes and development, showing how formalization builds better roads, schools, etc.

5. Public Awareness and Participation:

• Targeted Campaigns: Launch campaigns showcasing the dangers of corruption and benefits of a formalized, inclusive economy.

• Citizen Reporting: Implement user-friendly reporting mechanisms and partnerships with civil society for citizen oversight.

• Celebrate Successes: Highlight cases where corruption was addressed and businesses benefited from formalization, building trust.

6. Formalization Incentives:

• Graduated Approach: Offer initial tax breaks or simplified compliance for newly formalized businesses, especially small-scale enterprises.

• Link Benefits to Formal Status: Tie benefits like access to finance, business training, and government contracts to formal tax registration status.

• Sector-Specific Strategies: Understand unique challenges in different sectors (agriculture, manufacturing, etc.) and tailor formalization incentives.

7. Continuous Monitoring and Evaluation:

• Data-Driven Approach: Use data from the revenue administration and other systems to track formalization progress and identify areas for improvement.

• Independent Assessment: Regularly engage external evaluators to assess strategy impact and recommend adjustments.

• Adaptability: Maintain flexibility to adapt to evolving needs, feedback on what works, and what doesn't.

Leadership is Key:

The success of this strategy hinges on continuous, unwavering leadership from the top political leadership. It requires consistent messaging, holding officials accountable, and celebrating progress to maintain public trust and momentum towards a corruption-free, formalized economy.