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SIGTAS: The Key to Modernizing Tax Administration in Mali

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The transparency of Mali's tax administration system has improved steadily and progress in this regard has been dramatic since 1997.

Project background

Mali is reliant on tax collection to fund government activities. Through tax revenues, the Malian government obtains a significant portion of the financial resources it needs to carry out its essential functions (security, diplomacy, law, economy, finance and public safety) and deliver public goods and services (education, healthcare, water, sanitation, etc.).

However, the imbalance between government revenues and expenditures does nothing to foster a robust, autonomous and balanced national accounting system. In addition to discouraging foreign investment, this trend exacerbates Mali's dependence on foreign aid and hinders the integration of its economy into regional and international markets.

A number of factors account for the shortcomings of the tax system currently in place in Mali: an underground economy that remains outside the government's control and whose cash flows are barely or inefficiently accounted for; difficulty raising revenues (sales and other taxes, including income tax) among a mostly illiterate population; a low proportion of educated and employed individuals able to file computerized tax returns; a shortage of data and statistics; a high level of income distribution inequality; high tax rates; and, difficulty obtaining tax contributions from the wealthiest sectors of the population. These issues have a direct bearing on the government's role, as well as on its ability to exercise its legitimacy and carry out its governance and accountability functions.

Mali's situation in the 1990s and 2000s

In the 1990s, Mali's economic situation was characterized by a sizeable budgetary imbalance. National revenues did not cover government expenditures; indeed, external funders were covering much of the state's investment needs. The tax administration system put in place after Mali achieved its independence was obsolete: most processing was done manually at the National Tax Directorate (Direction nationale des impôts; DNI). The DNI, which went on to become the General Tax Directorate (Direction générale des impôts; DGI) in 2002, included an underfunded IT and statistics division (Cellule informatique et statistique; CIS). In short, the DNI's organizational and material situation was woefully inadequate.

In addition, Mali was grappling with major issues of tax fairness and transparency; its tax collection system had many shortcomings. The issue of tax fairness was reflected in the fact that a considerable percentage of taxpayers paid no income taxes at all (due to voluntary or involuntary omission, evasion or corruption, and were therefore not identified) or were not identified, did not contribute and were unconcerned about tax matters. Until 2007, it was estimated that approximately 97% of tax revenues came from approximately 3% of companies operating in Mali, which encouraged formal operators to take shelter in the underground economy. It was estimated that over 75% of companies were not in compliance with their tax obligations. Controls were not being carried out effectively to rectify the situation.

In addition, property taxation had not been brought in, so this potential source went undeveloped (property taxes were implemented only in 2012), thus cutting off access to potentially significant tax contributions. Even after property taxes were launched, the Land Registry Directorate (Direction des domaines et du cadastre [DDC]) was ineffective, had inadequate computer equipment and was unable to carry out its role fully: although the DDC took steps to issue robust application rules, their effectiveness has yet to be demonstrated.

WAEMU and reform announcements

Under the monetary reforms introduced by the West African Economic and Monetary Union (WAEMU), based in particular on free trade and free circulation agreements entered into by countries in the sub-region, Mali was required to make improvements to its tax administration system. The culture of sub-regional cooperation, combined with Mali's growing integration into an increasingly globalized world economy, put pressure on Mali and other countries to comply with certain domestic economic performance standards. In particular, WAEMU introduced a standard according to which the member countries' tax burden (i.e. the relative weight of income tax within the national economy) should be 20% (this figure was 16.3% in 2017 for Mali).

Implementing WAEMU's reforms entailed even bigger challenges for Mali in terms of tax revenues since free trade tends to significantly reduce customs duties. Since the overall global trend towards trade liberalization includes capital and labour flows as well as the creation of free trade zones and a common market, customs duties significantly declined as domestic revenues rose. This means that the pressure on Mali to achieve a better tax balance is even greater.

Against that backdrop, the Malian government undertook to raise more tax revenues in order to reduce its dependence on aid.

The challenge was daunting in light of multiple cases of tax fraud and non-compliance. In addition, the country needed to strengthen its own resources and to modernize its tax collection and internal revenue raising efforts, which were regarded as obsolete and ineffective.

Main sources of tax revenues:

Canada has been sensitive to Mali's needs in the area of tax policy. Its contribution has taken the form of the internal revenue raising support project (Projet d'appui à la mobilisation des recettes intérieures [PAMORI]). PAMORI soon came to be regarded by the Malian government as one of the keys to achieving its tax reform objectives. At the same time, boosting internal revenues would help to make the country more financially autonomous and improve the management of public finances.

Canadian involvement

Canada's tax administration support began in 1997 with PAMORI (implementation was assigned to a Canadian company, CRC Sogema, now Cowater•Sogema.) PAMORI had a two-fold mandate: (1) putting in place a computerized management tool for collecting tax revenue, known as SIGTAS (système intégré de gestion des impôts et taxes assimilés, or integrated tax and income tax management system); and (2) supporting the tax reforms underway, thanks in part to strengthening the tax system managers' capacities, improving the system's effectiveness and improving operational transparency. These two objectives were complementary and inextricably linked. CRC Sogema already had experience implementing SIGTAS in developing countries that were seeking to increase state revenue control by putting in place an automated system.

The project thus adopted a multi-service approach, including activities designed to strengthen central/regional institutional capacities while reviewing tax policies and the related legislative and regulatory frameworks, restructuring the General Tax Directorate, reviewing the functions affected by computerization, SIGTAS implementation and communications, using results-based management principles and taking into account gender equality.

SIGTAS 3 launch ceremony with (from left): Samaké Mohamed Lamine; Director General of Tax, Sidima Dienta; Mali's Finance Minister, Boubou Cissé; and former Ambassador of Canada to Mali, Marc-André Fredette.

Training was made a central part of the mechanism so that all officers/SIGTAS users would be familiar with the various features and procedures, according to the position held. The trained officers were expected to become more efficient in their work practices, in particular by reducing task completion times.

Starting out with a scheduled five-year duration, PAMORI in its first phase was initially scheduled to end in December 2002. Following the recommendation of an assessment mission, this was extended by three years. Building on the success of PAMORI 1, the Canadian and Malian governments signed a memorandum of understanding in December 2009 to implement a second phase of the project, which began in September 2011 and is slated for completion in 2020.

The project activities were thus funded in two phases. The first was valued at Can$20 million (8.9 billion CFA francs) while the second is valued at Can$18 million (7.2 billion CFA francs). During the first two phases of PAMORI, three versions of SIGTAS were implemented, with the most recent having already been stabilized.

Involvement of other partners

The International Monetary Fund (IMF) is, by far, the most influential partner in Mali's tax sector. This influence is based on the IMF's technical skills and credibility in the eyes of the Malian government and the other technical and financial partners. The IMF encouraged the implementation of the PAMORI project, which is designed to help improve public financial administration. The IMF drew inspiration from the project-related work on Mali's potential ability to establish its own taxation scenarios.

Generally speaking, Canada's partnership with other partners involved in projects touching on public finance (in particular USAID, the EU, the World Bank and the African Development Bank, as well as German and French cooperation) was essential since it facilitated the coordination of various initiatives and resources, avoided overlap and developed complementarity. As regards implementation, PAMORI's partner of choice in Mali is the Ministry of the Economy and Finance, through the General Tax Directorate (the director and his colleagues were the main executive-level managers involved at the operational level).

The project is viewed favourably by various government departments (Tax, Treasury and Customs Directorates). The Malian government was involved in terms of human resource collaboration as well as financial and material contributions.

Under the national budget, funds were earmarked to construct the headquarters of the Major Companies Directorate (a division of the General Tax Directorate), as well as six community tax centres in Bamako.

In addition to assisting with the maintenance and proper functioning of the system, another key commitment of the Malian government is the creation of a special budget line to cover SIGTAS's recurring costs.

Civil society forged a partnership, via a consultation committee, aimed at combatting tax non-compliance. It was also consulted on the review of the Tax Code, the General Tax Directorate's website and the computerization of revenue collection procedures. It will be consulted in the near future in connection with the implementation of "teleprocedures" (remote computerized operations).

Results

Implementation of SIGTAS and capacity strengthening

PAMORI's first tangible result is the implementation of SIGTAS, which poses a major technical and technological challenge. Since August 2017, the third version of SIGTAS has been in operation within the General Tax Directorate, ensuring computerized management of over 97% of Mali's tax revenues. The General Tax Directorate also developed a computerization plan covering the entire country aimed at implementing SIGTAS in all community tax centres and circles, as well in regional directorates. Since its implementation, thanks to a training program, the number of tax officers using SIGTAS has increased each year, from 50 in 1999 to slightly over 800 in 2015.

Former Ambassador of Canada to Mali, Marc-André Fredette, the PAMORI team and DGI stakeholders.

SIGTAS was put in place along with a training plan for General Tax Directorate staff. Using this software also required a new task organization model, which led to changes in relations between the tax officers and, ultimately, to changes in the organizational culture. A consensus exists within the General Tax Directorate to the effect that the level of tax-related administrative competence improved significantly since the modernization was launched. A team of 20 trainers and 75 “super-users” with a good grasp of the issues at stake, work procedures and SIGTAS was put together to ensure that the training activities would move forward and to ensure close monitoring of SIGTAS users.

According to Abou Bacar Traoré, a tax advisor and former Minister of Finance, implementing SIGTAS is unanimously regarded as the first touch of modernity brought to the General Tax Directorate insofar as it has reduced human involvement in the administrative process. The fact that Canada's aid focused on developing a sense of ownership and involvement among General Tax Directorate staff is appreciated. It is no longer possible to imagine tax administration without SIGTAS.

Tax collection and raising internal revenue

The most visible contribution of PAMORI and SIGTAS may be seen in increased tax collection levels and internal revenue raising.

From 1997 to 2005, Mali's tax revenues rose from 192.5 billion CFA francs (Can$481 million) to 445 billion CFA francs (Can$1.1 billion), or an increase of more than 11% per year. In the same period, the tax burden rose from 13.8% to 15.3%.

Between 2005 and 2016, tax revenues rose from 445 billion CFA francs (Can$1.1 billion) to 772.8 billion CFA francs (Can$1.9 billion), or an overall increase of 73.5%. The tax burden was 16.3% in 2017 and still remains below the WAEMU target (20%).

Building up the state's domestic resources is an alternative not only to external funding but also to financial dependence on technical and financial partners. One of the expected results was that a growing proportion of public investments is now funded by internal resources. Achieving this hinges on good management, all things considered. As a result, Mali's dependence with respect to investment program funding fell from 36% of the national budget in 1997 to 23% in 2004.

Improved transparency

PAMORI also sought to improve tax administration effectiveness and integrity. Effectiveness was meant to be achieved by strengthening human and financial resources, implementing computerized tasks and improving tax performance. Integrity was to be achieved by improving operational transparency and data protection while reducing opportunities for errors and corruption.

The transparency of Mali's tax administration system has improved steadily. Progress in this regard has been dramatic since 1997, due in large part to the implementation of SIGTAS, which Cowater•Sogema adjusted and updated over the years. Access to SIGTAS has considerably reduced fraud and mismanagement risks.

Internally, SIGTAS has reduced delays and slowness in civil servants' work practices, which had led to significant hidden costs. The funds freed up by these efficiencies have been used for more relevant purposes. At the same time, posting procedures on the Intranet has provided consultation from each workstation in real time. When procedures are applied properly, increased effectiveness serves to improve the internal controls within the General Tax Directorate, carried out by the appropriate persons in charge.

In addition, a major contribution of PAMORI and SIGTAS has been the establishment of a data exchange network between certain departments and directorates holding a stake in raising internal revenue. Indeed, SIGTAS facilitates (albeit partially) exchanges of information between the General Customs Directorate (Direction générale de la douane; DGD), the National Treasury and Public Accounting Directorate (Direction nationale du Trésor et de la comptabilité publique; DNTCP), the General Budget Directorate (Direction générale du Budget; DGB), the National Financial Control Directorate (Direction nationale du contrôle financier; DNCF), the General Government Procurement and Public Service Delegations Directorate (Direction générale des Marchés publics et des délégations de services publics; DGMPDSP) and the National Land Registry Directorate (Direction nationale des Domaines et du cadastre; DDC). Data exchanges between DGI's SIGTAS and DGD's information systems, for example, make it possible to crosscheck information on declared customs values and revenues reported to the DGI, which increases processing transparency and thus reduces the risk of fraud. The joint Customs/DGI team uses data exchanges for crosschecking purposes. Significant tax reassessments have been carried out as a result.

As regards the Budget Directorate, PAMORI has encouraged widespread use of the national tax identification number, which is now used to crosscheck information on order numbers, packing slip numbers and the payable value added tax (taxe sur la valeur ajoutée; TVA). As a result, processing is quicker and more transparent. The Financial Control Directorate (DCF) can also check whether the tax identification number listed on an invoice was issued by the DGI and can also ensure that the taxpayer paid tax before authorizing a payment.

The DNTCP is the government department in charge of public accounting. Income tax, other taxes and duties collected are pumped back into the Public Treasury. If a taxpayer holds assets in the eyes of the Public Treasury and fails to pay income tax, the DNTCP should be able to detect non-compliance using the tax identification number.

The number of directorates integrated within the tax collection data and information exchange network keeps on expanding and will soon include the National Trade and Competition Directorate (Direction nationale du Commerce et de la concurrence; DNCC). Pooling information considerably improves transparency in terms of internal revenue raising; it also means that more and more companies are choosing to regularize their relations with the national tax office.

Over time, exchanging data between administrative departments will facilitate monitoring of the actual status of taxpayer-related information, so that the managers in charge can make better decisions. For example, tax certificates or tax clearances could be directly generated by SIGTAS, resulting in significant time savings as well as enhanced security for the tax administration system.

Changes in perception and culture

At the outset, implementing SIGTAS raised a number of concerns. This is often the case when mechanisms are implemented that not only create major changes, but also expose irregularities in the administration of public finances or even cases of fraud.

Today, however, there appears to be a consensus as to the relevance of SIGTAS, which has become essential, given its role in significantly reducing fraud risks. The implementation of SIGTAS by the DGI has had positive impacts at various levels and has boosted taxpayers' confidence in the tax administration system.

The gradual "buy-in" of a growing number of companies and individuals reflects a major change in public perception regarding the need to contribute to national economic development by paying taxes. For example, there is a register of taxpayers who have a tax ID number, and their numbers are rising. This could mean that certain economic operators are moving out of the shadows and joining the formal economy, thanks not only to more positive perceptions of the tax administration system but also to the crosschecking of data exchanged by the government departments in charge of public finances.

The increase in tax revenues is also linked to the computerization of tax return processing and to the widespread public perception that, by using computerized management tools, it is harder to avoid paying tax. The system thus reduces the risk of fraud and promotes fairness between taxpayers.

Thanks in particular to SIGTAS and PAMORI, the Malian government is gradually taking steps to enforce its own laws and regulations, in addition to international agreements that it has signed and that require it to comply with certain financial or economic standards.

The success associated with SIGTAS could encourage other technical and financial partners to provide Mali with more support. The country's General Tax Directorate (DGI) is now setting the standard within the WAEMU (West African Economic and Monetary Union). The tax reforms carried out with the support of Cowater•Sogema have become a model for others to follow and have enabled the country to embrace potential collaborations at the sub-regional and even international levels.

Cowater•Sogema is one of the leading Canadian companies involved in public finance, particularly in West Africa. It has implemented SIGTAS in a number of West African countries, including Mali, Burkina Faso, Benin and Senegal. The fact that the same software is used means that collaboration can develop, opening up the prospect of sharing information between the tax departments of WAEMU member countries.

Challenges

Mali went through a serious crisis in 2012 and 2013, which affected the local, regional and national economy and, consequently, reduced the capacity of individuals and companies to pay income tax. This crisis led to the suspension of public development aid, except for emergency aid and direct public aid. Technical support projects were delayed or suspended, while the state's resources fell by 30%. In 2012, the economy experienced negative growth (-1.2%) as opposed to positive growth in 2011 (+4.3%). Consequently, the poverty rate rose from 41.7% in 2011 to 42.7% in 2012.

Implementing the new sales and income tax administration mechanism resulted in significant organizational changes. Successfully managing the introduction of the information system required new organizational behaviours and work habits, which posed a daunting challenge. The work teams' concerns were taken into account within a comprehensive change management strategy focused on communication, skills development, work reorganization and project steering support, in addition to technical involvement associated with SIGTAS. A steering committee and a change management unit were created in 2016.

Nevertheless, the major challenge has to do with the system's long-term viability. In this regard, one key to success is to ensure that the managers concerned effectively "own" the innovation since the departure of certain key employees within the IT team could jeopardize SIGTAS and how it functions. This risk is compounded by the fact that the cutting-edge skills of these IT specialists mean that they are in high demand in the private sector and among aid agencies in Bamako. The long-term viability of SIGTAS still depends to a great extent on retaining these specialized human resources.

One of PAMORI's objectives was to involve civil society in a "debate" on public finances with a view to convincing the public that they should pay taxes. The idea was also to explain to rural populations that because they had benefited from massive investments in productive infrastructure (particularly in the Office du Niger and Mali Sud regions) over the past 25 years, the time had come to pay income tax. Unfortunately, this result has yet to be achieved; no doubt the objective was overly ambitious.

Gender equality

It should be noted that, thus far in Mali, neither the country's domestic legislation nor the requirements associated with international legal instruments have been enough to put an end to the predominance of customary law over modern law. With Canada's Feminist International Assistance Policy, gender equality and greater autonomy for woman and girls in Mali are major issues in the area of cooperation. The recruitment of a gender equality specialist is under consideration with a view to expanding PAMORI's toolkit.

The public finance sector is dominated by an active and masculine workforce that is reluctant to bring in measures specifically aimed at promoting gender equality. However, the gradual integration of woman into this sector is helping to change perceptions and to overcome prejudices about their ability to be fully involved in the economy. The specific strengthening of woman and girls in terms of leadership and within their areas of expertise will serve to improve tax revenues.

According to a recent Cowater•Sogema publication, three women have had a specific impact on the success of the DGI and the achievement of its revenue objectives. "Each of these women: Assanatou Bouaré Sow, head of the organization and methods division; Bérou Dicko, auditor, research and audit division; and Zaliatou Diarra Coulibaly, head of the communications division, have overcome personal as well as professional challenges and are now recognized as leaders within their organization."

PAMORI played a key role in promoting these women within the DGT and in the SIGTAS management process. Zaliatou Diarra Coulibaly and Assanatou Bouaré Sow both completed a post-secondary program specializing in public administration with the support of PAMORI, while Bérou Dicko took part in training on the SIGTAS software upgrade, followed by advanced training for SIGTAS super-users and trainers. She has become a key "go-to person" for questions on SIGTAS 3.

Lessons learned

With some 20 years of involvement in tax reform implementation in Mali, PAMORI has learned many lessons that have been of great use at each step of the way.

As the first cross-cutting lesson, experience shows just how modernizing a tax administration system (and no doubt any other type of administrative system) takes time. Despite impressive results, enhancing the administration of public finances with a view to complying with international standards can only be done gradually. A change of this magnitude depends on gradual changes to people's perceptions and the strengthening of management tools.

Advisor adaptability is an important factor in implementing any type of reform: without the "buy-in" of the officials tasked with carrying out the transformation, these efforts are bound to fail. The sense of ownership among the stakeholders concerned thus warrants a good deal of attention; it also requires good listening skills and a degree of flexibility when it comes to selecting the right strategy. However, adapting the way we do things and the approach we take should not have a negative impact on the final result, despite resistance to change.
Managing sales and income tax collection involves the entire population: individuals as well as companies. For citizens to carry out their responsibilities as community members by their paying taxes requires a heightened awareness of their role as citizens and their participation in the sound governance of their country. People who pay their taxes will be more likely to honour their other civic commitments

Sources

We would like to sincerely thank the following for their assistance in creating this impact story:

The Impact Stories series of Canadian aid in Mali was produced by the Field Support Services Project (FSSP) and in collaborationwith the above-mentioned stakeholders.

Rue Sotuba/ACI, rond-point de l’ancienne chaussée
Bamako, Mali
Tel.: +223 44 90 44 45
Email: info@psat-mali.org
Note: The FSSP received funding from the Government of Canada.

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