Institute for Development Studies, University of Nairobi

This paper presents information on manufacturers sales taxes in four African countries — Kenya, Tanzania, Zambia and Ghana. Because there are no retail sales taxes in tropical Africa, a comparison is made with the retail sales taxes of two relatively small non-African countries — Barbados and Iceland. Topics discussed in this paper include the coverage of the taxes, the rates, the revenue importance, the numbers of registered firms, the administration and operation of the taxes, inspection and audit programmes and the problem of delinquency. Finally, a number of merits and criticisms of these taxes are pointed out. A number of general conclusions are suggested from the inspection of these six sales taxes. It is found that in a developing country a sales tax can be a very significant revenue source and sales taxes at the manufacturing level can function extremely well. A general problem has been the failure to develop adequate audit programmes, and also the need for simplicity in tax structure and operation has often been overlooked. There are serious dangers in placing sales tax administration under the jurisdiction of customs and excise departments because the personnel in these departments generally lack the accounting knowledge necessary to effectively administer a sales tax. Finally, it appears that the exemption of basic foods from sales tax has effectively lessened possible complaints against the taxes on equity grounds.