Optimal Taxation In Africa: How Relevant Is Warren Buffet Model?
Volume 2 - Issue 8, August 2018 Edition
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Taxation, Tax rates, Optimality in taxation in Africa, Warren Buffet model.
Initially taxation was not a compulsory levy but a contribution for a common goal to be achieved but now it is a compulsory levy imposed on citizenry for the collective development of the country. Optimal taxation deals with variety of tax rates the government will employ and also what type of taxes should be imposed on the citizenry whether it is income tax or commodity tax. Apart from determining the tax rate by the government and the type of taxes, optimal taxation also deals with the trends of the tax system of the country. Base on the peculiar externalities of a developing continent which makes Warren Buffet model irrelevant in achieving optimal taxation in Africa. Such externalities are corruption, inflation â€œgodfatherizmâ€ .This study emphasized optimality in taxation in Africa through the reduction of tax rate, apart from tax incentive in the tax structures to mitigates tax evasion and tax avoidance. The methodology employed for this study is content analysis, explorative research study from relevant literatures For optimal taxation in Africa especially Nigeria been a developing country tax rate of 30% corporate tax is high, and 7% individual tax, 5% VAT or sales tax. To attract more foreign investors into the economy, Qatar tax rate should be adopted which have 10% tax rate on corporate tax, 0% on income tax which will have a positive effect on both formal and informal sectors of the country. With this system of tax rate small scale industry will be willing to pay their tax with hiding their asset for tax deductibility. 10% on corporate tax will boost more small scale industries and strengthens the profitability of large firms in Nigeria
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