TaxDev delivers tax policy appraisal and costing training in Ethiopia and Ghana

In October 2021, TaxDev researchers delivered a series of workshops with analytical staff from the Ministeries of Finance and Revenue Authorities in Ethiopia and Ghana. Collaboration and skills development are integral aspects of the TaxDev programme, with the objective of supporting staff to further develop their technical skills to improve the use of evidence in tax policymaking. 

In both countries, the workshops focused on the policy appraisal and costing processes, and involved a mixture of theoretical and practical learning utilising manuals and resources developed by TaxDev. 

The policy appraisal and costing approach aims to support the development of a systematic, evidence-based process for assessing, presenting, and communicating new policy measures. One of the key functions of tax policy units is to develop and analyse tax policy proposals and address a series of questions in a structured and rigorous way. What problem does a proposal try to address? Is the evidence that the proposed reform would actually help to tackle the issue identified, and do so more effectively than other policies? Which parts of society would be particularly affected by the proposal - either positively or negatively? And how much revenue would the reform yield or cost? 

Ethiopia

In Ethiopia, Daniel Prinz and David Phillips delivered a number of sessions via video conference from the UK, while Edris Seid led the practical sessions from Ethiopia. Building on the team's experiences of appraising and costing a series of real-world policies in Ethiopia in recent years, the training used two hypothetical policies as case studies: the first looked at raising the top rate of employment income tax from 35% to 40%, and the second examined changing the road maintenance fuel levy to 1% of the price of gasoline and diesel. In the practical session the staff from the Tax Policy Directorate (TPD) and Ministry of Revenues completed their own appraisal and costing of a policy change related to the application of excise duties and VAT on fuel. 

Ghana

In Ghana, Adbul Malik Iddrisu and Ross Warwick led a series of workshops over three days covering EViews - an applied statistical, time-series and modelling software - on day one, and the policy costing and appraisal processes on days two and three. The session on EViews provided a practical introduction to the use of EViews for staff from the Tax Policy Unit (TPU), with an application to methods for forecasting.

The policy costing and appraisal workshops were similar to those which took place in Ethiopia, but used a hypothetical case study which involved raising the top rate of the personal income tax from 30% to 40%. For the practical appraisal exercise, the TPU staff applied the appraisal framework to the example policy of increasing the rate of the National Health Insurance Levy (NHIL) to 3%. The NHIL is collected under VAT, and helps to fund Ghana's National Health Insurance Scheme.

Next steps

The training workshops generated considerable discussion about the potential costs, benefits, and impacts of the hypothetical policies being analysed, and participants commented on the broader relevance of the appraisal and costings approaches to their work. Looking forward, training participants discussed how to apply and implement these processes, with specific mention of their potential value when evaluating proposed measures in advance of budgets.