GREAT ZIMBABWE UNIVERSITY

MUNHUMUTAPA SCHOOL OF COMMERCE

Master of Commerce in Professional Accounting and Corporate Governance/Grad
ICSA
Module: Applied Tax Law and Practice
Course Code: MPAC 516
Level: 1:1
Lecturer: Mr Gutu

STUDENT NAME: REG NUMBER

BENIAS CHIKONO M197192

MUDZENGERERE CARLOS M196425

CHIORORO MICHELLE D M222377

MUGWENHI UPENYU M223046

CHAKURUNGAMA TASHINGA M222935

EPAPHRAS CHINYAKUZA M223710

TAFADZWA SHONIWA M222994

EUPHRASIA HLONGWANA M133192

INNOCENT MUNYARADZI CHIPINDU M215169

NYASHA KARANDA M222652

Tax policy is tax administration. Discuss

Tax policy is the decision made by a government regarding which tax to impose, in what
amounts, and on whom whilst tax administration means the verification of a tax return or
claims for credit, rebate, or refund; the investigation, assessment, determination, litigation or
collection of tax liability of any person; the investigation or prosecution of a tax-related crime
or the enforcement of a tax statute. Tax administration and tax policy are closely related. Tax
policy needs to take into consideration tax administration capabilities, while tax
administration may result in actual tax policy differing from formal tax policy.
Tax policy encompasses enacting, governing, implementing, and application of new and
existing tax laws on individuals, entities, and corporations, in areas where tax revenue is
derived or levied, e.g., income tax, estate tax, corporate tax, employment tax, capital gains
tax, and exports/imports tax. In Zimbabwe, ZIMRA is headed by the Commissioner General
who has the responsibility of interpreting and administering the ITA and other tax statutes,
whilst various Acts of parliament concerning Tax policy were enacted as the basis for the
collection of tax. Besides Acts of Parliament, Statutory Instruments passed work the same
way as Acts of Parliament.
Tax policies have significant economic consequences for both a national economy and
particular groups within the economy for example households, firms, and banks. Tax policies
are often designed to stimulate economic growth although economists' opinions differ
significantly about which policies are most effective at fostering growth.
Political and economic factors both affect taxation. Political leaders use tax policy to advance
their objectives by enacting a variety of tax changes, such as lowering (or raising) tax rates,
altering the definition of taxable income, enacting new taxes on particular goods, and so
forth. Certain demographics make considerable political efforts to have their share of taxes
reduced, such as retirees, farmers, and small company owners. Tax laws may contain
provisions that may favour a particular group of taxpayers while inadvertently increasing the
burden placed on others.
According to Gallagher and Rota-Graziosi (2016), Tax administration is an extension of tax
policy. A good tax policy administered poorly is not a good tax policy, a bad tax policy
administered well is still a bad tax policy. Tax design must account for administrative
capacity and how revenue is collected is as important as how much. You can collect a good
tax poorly, but you can’t collect a bad tax well: The best tax policy in the world is worth little
if it cannot be implemented effectively. Tax policy design must take into account the
administrative dimension of taxation. What can be done may, to a considerable extent,
determine what is done in any country.
Tax administration and tax policy might be distinguished by organizational factors as well.
One organization should formulate a tax policy, and another should put it into practice. This
is the accepted global practice. While income is officially collected by different units under
the direct supervision of the ministry of finance or by a semi-autonomous agency, tax policy
is nominally the responsibility of a tax policy unit in the ministry of finance worldwide and
throughout the majority of Africa.
How a tax system is administered affects its yield, its incidence, and its efficiency. Tax
administration is too important to policy outcomes to be neglected by tax policy reformer.”
Bird (2011). An effective tax administration is one that “collects the right amount of tax, at
the right time, and does so at minimal cost to the government and the least burden to
taxpayers.” (USAID, Detailed Guidelines for Improved Tax Administration in Latin America
and the Caribbean, 2013
Effective tax administration motivates companies to register formally, growing the tax base
and raising revenues. An unfair tax administration can damage the tax system and undermine
public trust in the executive branch. The failure of many emerging nations to improve tax
administration while enacting new tax laws has resulted in widespread tax evasion and
decreased tax collections. To promote compliance, rules should also be kept simple and
unambiguous. Complex tax systems are linked to high tax evasion. An efficient and
straightforward tax system may boost employment, investment, and transparency.
Tax design in developing countries is strongly influenced by economic structure. Many
developing countries have a large traditional agricultural sector that is not easily taxed. Many
also have a significant informal or shadow economy that also is largely outside the formal tax
system. The potentially reachable tax base, thus, constitutes a smaller portion of total
economic activity than in developed countries. The size of the untaxed economy is in part a
function of tax policy. For example, the high social insurance tax rates levied in some
transition economies create an incentive for a large informal economy by discouraging
employers from treating many service providers as employees or encouraging the under-
reporting of wage levels. The resulting lower tax revenues often lead governments to raise
tax rates, further exacerbating incentives to evade taxes. Improving tax administration is,
thus, central to the choice of tax structures and to improving taxation in developing and
transitional countries.
Yet improving tax administration alone may not generate the revenues required to balance the
budget or to finance tax policy changes that narrow the tax base through tax concessions or
lower tax rates. Nor is increased revenue always the only goal of improved administration;
sometimes the goal is simply to enhance fairness or transparency in tax collection. Moreover,
since improving administration takes time, any additional revenues may only accrue over
several years. Cutting tax rates or granting additional concessions or tax reliefs in the hope
that improved administration will quickly make up any revenue losses is never a good idea.
Tax design must take into account administrative capacity: The failure to develop good tax
administration and good tax policy together has been a particular problem in some
transitional countries. In Russia, for example, serious problems existed with both the
structure of the VAT and the lack of administrative experience and capacity. A simple
example is that under the initial VAT legislation, no tax liability was due when loans were
made from one business to another. Thus, a buyer would claim to have made a loan that was
never repaid (and was in fact payment for goods) to a supplier and no tax was due. The result
was a significant loss of revenue. A more capable administration would have foiled this
simple evasion technique, but better legislation was also needed.
 How revenues are collected is as important as how much is collected: How a tax system is
administered not only affects its yield (in terms of revenue collected), but also its incidence
(who bears the burden of taxation) and its administrative efficiency (the costs of collecting
and paying taxes). The resources used in administering and complying with taxes (or, for that
matter, evading them) are real economic costs. Good tax policy requires keeping such costs
as low as possible while also achieving revenue, growth, and distributional goals as
effectively as possible. Even if the policies are good, the administration that is seen as unfair
and capricious may bring the tax system as a whole into disrepute.
It is difficult to define clear principles for dividing responsibilities between tax policy units
and tax administrations. For example, is a decision to increase resources for auditing tax
returns a policy issue or purely an administrative or managerial matter? It seems at first
glance to be administrative However, if auditing is infrequent or poorly performed and a
significant increase in resources has a good chance of improving compliance and revenue
collection, it is perhaps more of a policy issue.
Tax policy units and tax administrations should cooperate closely. This means that the
specialists in tax policy units should respect the operational knowledge of the senior staff of
tax administrations and that the senior administrative staff should provide the tax policy
specialists with the detailed data needed for policy-relevant analysis.
Tax administrations attempt to collect adequate revenue while keeping tax administration and
compliance costs low and treating taxpayers fairly. The most cost-effective systems are those
that convince the vast majority of taxpayers to meet their tax obligations voluntarily so that
tax officials can concentrate on the small number who do not comply. Features of the tax
administration that encourage compliance include a service-oriented attitude that educates
and assists taxpayers in meeting their obligations, effective audit programs and consistent use
of penalties as strong deterrents to non-compliance, and transparent administration of the tax
laws that are viewed as honest and fair (Okello, 2014).
Facilitating voluntary compliance is job number 1 for the tax administration. This requires
making sure that those who should be in the system are in the system and that they have
access to the services (e.g., call centers), the tools and the information needed to understand
and comply with the rules. If taxpayers are required to register, the registration process
should be as easy as possible, and filing and payment of taxes and other routine procedures
should be consistent and straightforward. This approach rests on treating the taxpayer as a
client to be served and not a thief to be caught.
At the same time, systems must be in place to identify and monitor those who do not register
or comply voluntarily. Tax authorities should adopt an appropriate taxpayer identification
system, applying a unique taxpayer identification number (TIN) for each taxpayer, to
facilitate compliance and enforcement. In the U.S., the Social Security Number serves as the
"TIN" for all individual taxpayers, which among others helps to ensure compliance for both
withholding and payment of income taxes and Social Security and Medicare taxes.
According to African Tax Administration Forum (2017), Successful tax collection depends
on the tax administration’s effective performance of several supporting tasks, including
human resource management (recruitment, training, posting and promotion); internal
vigilance in identifying, controlling and punishing staff misbehaviour, especially corruption;
treasury activities, including managing and accounting for revenue collected; and taxpayer
education and outreach activities. Tax administration and tax policy are closely related. Tax
policy needs to take into consideration tax administration capabilities, while tax
administration may result in actual tax policy differing from formal tax policy. For example,
the declared policy may state that all doctors in private practice must declare their incomes
and pay personal income tax. However, if the tax agency makes little effort to register
doctors, fails to ensure that they routinely file tax returns or never audits suspicious tax
returns, then the actual policy is that doctors’ private practice earnings are not taxed as
personal income. There are also organizational dimensions that distinguish tax administration
and tax policy. The global norm is that the two activities should be organizationally separate:
one agency should set tax policy, and another should implement it. Globally and throughout
most of Africa, tax policy is formally the responsibility of a tax policy unit in the ministry of
finance, while revenue is collected by separate units under the direct control of the ministry
or by a semi-autonomous agency. It is difficult to define clear principles for dividing
responsibilities between tax policy units and tax administrations. For example, is a decision
to increase resources for auditing tax returns a policy issue or purely an administrative or
managerial matter? It seems at first glance to be administrative. But if auditing is rarely or
badly done, and a large increase in resources holds reasonable promise of improving
compliance and revenue collection, then it is arguably more of a policy issue.
Tax policy units and tax administrations should cooperate closely. This means that the
specialists in tax policy units should respect the operational knowledge of the senior staff of
tax administrations and that the senior administrative staff should provide the tax policy
specialists with the detailed data needed for policy-relevant analysis. This cooperation is not
always forthcoming in Africa. Inter-organizational rivalries are sometimes intense,1 and other
factors also colour the relationship in diverse ways. Where there is an imbalance in power
between the two organizations, it tends to favour tax administrations, particularly when they
are organized as a semi-autonomous revenue authority and outside the direct control of the
minister of finance. Twenty years ago many African ministries of finance lacked tax policy
units. While that is no longer true, they tend to be underpowered relative to tax
administrations.
Zimbabwe’s tax policy is defined by the same acts which govern the taxes administration in
Zimbabwe. The specific acts are the Income Tax Act -chapter 23.06, capital gains in the
Capital Gains Tax Act –chapter 23.01, Estate Duty in The Estate Duty Act-chapter 23.04,
VAT Act Chapter 23:12, and the Finance Act Chapter 23:04.
No one is immune to tax. The Finance Act is referred to as the charging act. Rates of tax and
revision thereto are gazetted by the Honourable Finance Minister and stipulated in the
Finance Act. At the end of every year, the Honourable Finance Minister pronounces the
national budget in which new amendments to the acts are made. All amendments to the Acts
are compiled in the Finance Act. Amendments can involve repealing some existing
provisions or additions of new provisions to the statutes.
There are reasons for having a tax policy as shown below,
i. Raising revenue for the government
The major source of income for the state is taxes. Government spending is financed by
taxpayers’ money. A government needs money to provide public goods such as security,
social welfare, and education.
ii. To regulate the economy
The government may use taxation as an instrument to drive the economic objectives of a
country. Fiscal policy, for instance, is employed to control the money supply. Taxation is
used under the fiscal policy to withdraw money from the economy.

iii. To discourage the consumption of demerit goods

Some goods like tobacco pose health problems to consumers, as such the government would
want to reduce the consumption of such goods by imposing some taxes on such goods. Excise
duties are examples of such taxes.
iv. To control international trade
The government aims to maintain a favourable balance of payments. A healthy balance of
payment is achieved when a country exports more than it imports. Therefore, a country may
seek to reduce imports by imposing taxes on imports (custom duties/ tariffs).
v. To promote economic growth
The reduction of imports does not only achieve a favourable balance of payments. Where
imports are reduced, demand for domestic goods will surge thereby promoting the growth of
local companies which in turn leads to a reduction in unemployment levels.
vi. To prevent dumping of goods
Dumping’ is a term that explains a situation where cheaper substandard goods are produced
in other countries and exported into the country thereby reducing significantly the demand for
local goods. Dumping is a big challenge to the economy as it destroys local industries as their
output becomes uncompetitive. The government may seek to protect local industries by
introducing tariffs to make foreign goods expensive compared to local goods.

Conclusion
The government's goals and objectives are outlined in its tax policy, which serves as a
blueprint or road map. Tax administration, on the other hand, is the means by which these
objectives are carried out. Finally, efficient tax management can alter the dynamic between
the people and the government. In addition to financing public goods and services, taxation
also plays a significant role in the social contract that unites people and their government.
The legitimacy of a government can be determined by how taxes are collected and spent.
People are more likely to follow the law if they believe that the tax system is fair and value
the public services they receive. The degree to which people acknowledge a moral duty to
pay taxes depends on their level of trust in the government. Therefore, it is crucial for
governments to maintain public trust by enhancing their tax administration and tax policies.
REFERENCES
ATAF (African Tax Administration Forum). 2017. African Tax Outlook 2017. Pretoria,
South Africa: African Tax Administration Forum.
Bird, Richard M. (forthcoming), “Administrative dimensions of tax reform” Bulletin for
International Fiscal Documentation
OECD (Organisation for Economic Co-operation and Development). 2017. “Tax
Administration 2017.” Paris: OECD Forum on Tax Administration
Finance Act (Chapter 23:04), 2021, Zimbabwe
Income Tax Act (Chapter 23:06), Zimbabwe
Mark Gallagher and Grégoire Rota-Graziosi prepared these notes to accompany the EU-
funded Training on Domestic Revenue Mobilisation, 2016
Milka Casanegra de Jantscher, 1990, “Administering a VAT,” in M. Gillis, C.S. Shoup, and
G.P. Sicat, eds., Value Added Taxation in Developing Countries, World Bank, p. 179
Partson Nyatanga, 2022 Edition Taxation courses notes, Taxation Zimbabwe