South Sudan: Making Tax Work – By Matthew Benson

South Sudan must strengthen its internal infrastructure in order to ensure development in the country

Nothing is certain in life but death and taxes. Needless to say, nowhere is it possible to escape the former; but it’s all too easy to shun taxes in South Sudan.  The system as it presently stands is too complex, difficult to understand, enforce, and comply with.  Meanwhile, abundant oil rents and aid – in combination with an underdeveloped economy – threaten to undermine incentives to tax in the first place.

Though we all may despise paying them and no matter how dry one might find the subject, taxes are important – and arguably central – to state-building efforts, or the arduous process of establishing mutually accountable, legitimate, public institutions.[1] Indeed, beyond bankrolling basic public goods and services, taxes can help forge more accountable, responsive, and representative governments.

Tax and State-Building

Seminal works on the subject argue that taxes, in combination with the largely external threat of war, were the lynchpin to European state consolidation.  This amounts to the “˜fiscal-social contract,’ in which the general public is able to hold ruling elites to account by monitoring state spending and subsequently voting elected officials out of office if they fail to deliver on commitments. [2] Intuitively, the essence of the theory holds true for sub-Saharan Africa and post-conflict countries more broadly – including South Sudan.

That said, ideas around tax and state-building have yet to be translated into effective policy – especially in post-conflict states. A forthcoming review of tax policies in these types of countries reveals taxation to be frequently understood as a solely economic concern, with little or no consideration for historical or state-building roles.[3] Post-conflict state-building challenges are immense and the likelihood of civil war resuming is typically high – especially if natural resources are evident.[4] Put simply, there’s no excuse for not wielding all the tools potentially at our disposal for assisting states transition from war to peace – and these must also include tax reforms.  South Sudan presents a pressing opportunity to buck this trend.

Tax Challenges in South Sudan

It might be a new country, but South Sudan is not starting with a fresh tax system. The system is constructed of a patchy mixture of lingering policies from the Anglo-Egyptian Condominium, subsequently altered by successive regimes in Khartoum and then, in places, rejected or again changed by the SPLA and SPLM during and following the civil war.  Although the topic is understudied in South Sudan, taxation – and especially the act of resisting its payment – can serve as a powerful tactic of rebellion.  It therefore may not come as a surprise that the current system of tax laws is complicatedly recorded in several different legislative documents.  For example, information on Personal Income Taxes is noted in the 2009 Tax Act, details of Corporate Income Tax are included in the 2009 Investment Act, while each of the 10 states implement their own “˜Gevana’ taxes – roughly equivalent to an internal customs duty.[5]

In addition to the confusion caused by the intricate “˜legacy system’, which is also regressive, the following are six tax challenges identified in a forthcoming review of South Sudan’s tax system that are potentially under-examined, or viewed through a strictly economic lens, in current discussions on taxation: oil, aid, an underdeveloped economy, numerous exemptions, establishing a professional cadre of tax administrators and reducing threats to their physical security, and multiple border taxes. [6]


South Sudan’s present budget is approximately 98% dependent on oil revenue. Estimates on reserves vary between reserves lasting another 10, 15, or even 50 years. [7] Now that the country is independent and receives a much larger proportion of oil revenues, its budget is expected to increase in the coming year.  Although the extent of which remains unknown, there’s a bounty of other untapped mineral wealth likely lurking beneath the soil.  It’s a strong possibility that the “˜resource curse’, in which natural resources provide perverse incentives for ruling elites to neglect the needs of their citizenry for personal gain, looms on the horizon.[8]


Despite the stumbling global economy, international donors have committed $719 billion USD in aid to South Sudan for 2011.  Most of this is dedicated to addressing social, humanitarian and infrastructure needs.[9] Although debates in academic and policy circles as to the precise correlates and causation persist[x1] – there is compelling evidence that both abundant aid and natural resource wealth decrease incentives for elites in post-conflict countries to tax their citizenry[x2] .[10]

The Economy

At present, the government is the largest single employer with an estimated 300,000-400,000 individuals on the payroll. The second biggest vocation is cattle herding. [11] Exact statistics are difficult to verify, but the majority of the country’s 8-14 million citizens are subsistence farmers.  Of the small and medium businesses in Juba – where commerce is relatively high – most are owned by citizens of nearby Uganda, Kenya, Ethiopia and Eritrea.  Given these figures, what, or whom, is there to tax in the first place?  And how should one levy tax without harming developing industries?


Approximately 100,544,691 SDG or $37,565,038 USD was recently lost as a result of tax exemptions in Central Equatoria alone[x3] .  Although politically sensitive, it’s likely that many of these exemptions are economically unjustifiable. There are unverified reports that elected officials have been using the funds to sponsor the construction, and purchase, of personal homes and vehicles. It is also unclear whether construction companies are paying taxes when implementing lucrative infrastructure projects.[12] Fortunately, President Kiir recently announced five accountability and transparency measures, which include a requirement that all public officials publish their income and assets.[13]

Tax Administrator Training and Physical Security

Some tax collectors report having been threatened, beaten, or even arrested after attempting to collect taxes from business owners – particularly if they were high-level fighters during the civil war.  Traders from Kenya and Uganda can be equally dangerous, as they are sometimes armed to ward off bandits.  Due to common interruptions in education during the civil war, many tax collectors and inspectors are too undereducated to carry out their jobs effectively.  A candid interview[x4] revealed that some tax collectors have trouble calculating basic percentages and may stick to a 10% levy on the goods and services they assess despite laws that say otherwise.[14] Both are significant concerns that threaten the legitimacy and effectiveness of the burgeoning cadre of tax administrators. This is important when considering that, in addition to police and military officials, the tax-man (or woman) might be the first contact citizens have with the state.  Upcoming tax structural reforms – most notably the prospective formation of a South Sudan Revenue Authority, similar to those in Uganda and Kenya – will likely tackle some training challenges.[15] Moreover, the education of some tax administrators has been underway in Uganda.[16]

Multiple Border Taxes

This concerns the high number of tax collection tables at border crossing points. Interviews reveal up to 11 different tables, manned by the staff of separate government agencies – including the police, SPLA, and customs – each levying their own tax at the Nimule border checkpoint, the main entry point from Uganda.  Recent efforts have sought to crack down on the high number of tables.[17] Nevertheless, members of the business community report being overtaxed.[18] Justification for the duplication of tax collection efforts is likely attributable to the relative ease with which it is possible to collect border taxes, and the confusion over precise legislative status. There is, perhaps justifiably, a degree of mistrust and misunderstanding between tax officials and the public at large.

Towards State-Building-Oriented Tax Reforms in South Sudan

The potential solutions to these tax challenges are, of course, neither simple nor necessarily tried-and-tested. There’s also some evidence of an emergent national discussion on taxation.  The most obvious of which is the inception of the Fiscal Intergovernmental Task Force, which explicitly seeks to reduce the government’s dependency on oil revenues.[19] Another area for hope is through varying attempts in fiscally decentralised states to shift away from dependence on central government transfers by raising their own revenue.  Northern Bahr el Ghazal, for example, has independently introduced several tax awareness adverts linking taxation to public service delivery.[20]

A potential method of tackling the “˜resource curse’ is to increase budgetary transparency through a combination of measures to enhance fiscal obedience.  This includes the adoption of a stabilisation fund and an Extractive Industries Transparency Initiative (EITI) to increase oil revenue transparency.[21] Building on the idea of a stabilisation fund is that of cash transfers to individual citizens from oil wealth. According to the most vocal of proposals applicable to other oil rich countries, eligible citizens or households could be identified through biometric identification. Taxes on a percentage of the amount disbursed could subsequently be levied on recipients as a way of introducing the idea and importance of taxation into the population at large.[22] Although biometric identification raises substantial security and privacy concerns, and it is not clear how and why elites would risk losing their grip on natural resource rents by adopting such a scheme, the approach holds some promise.  More locally, participatory budgeting initiatives serve as “˜bottom-up’ ways to assist citizens in becoming more engaged with the democratic process while also monitoring public spending on essential public services.  Moreover, evidence from other post-conflict countries shows that fiscal transparency across ethnically divided states can lead to peace-building gains.[23] Examples include initiatives such as Participatory Expenditure Tracking Surveys (PETS) for the health and education sectors along with “˜Right to Information Campaigns’, both of which have yet to be introduced, as well as increasing the number of Constituency Development Funds.[24]

Another eligible post-conflict tax reform includes a focus on urban, rather than rural, taxation.  Evidence from other countries reveals that land taxation is frequently neglected for fear of sparking local conflict.  However, there are some indications that a measure of debate over land tax might lead to healthy disruptions in entrenched interest groups[25].  It might also be one of the few areas where progressive taxation[x5] can be introduced.[26] From a practical standpoint, maps tend to be more readily available, and less contested, in urban areas.  Although many small and medium businesses might be owned by citizens of neighbouring countries, another proposal is to shift away from presumptive taxation and “˜formalise’ this typically hard-to-tax sector through streamlined accounting and tax incentives to shift away from presumptive taxation.[27] The point of both reforms isn’t to necessarily raise enormous amounts of revenue – it is instead to increase the proportion of the citizenry engaging with the state over public decision-making.[28]

Taming the negative externalities of aid by taxing it is likely to be the most controversial proposal (primarily among South Sudan’s booming expatriate community).  There are fears that tax exemptions on aid and the services agencies use sends a negative message that national and international staff working for aid agencies – which are frequently coveted jobs in post-conflict countries – are somehow above the law.  Discussions around the taxation of aid have previously taken place in East Timor and Afghanistan.  However, they were rejected in both countries on the premise that the UN Convention on Privileges and Immunities accords the UN and international aid agencies with diplomatic exemptions.[29]

These are just a few preliminary findings from a primarily external study of taxation and state-building in South Sudan.  The real discussion and research undoubtedly needs to take place within the country – and not just among members of government-sponsored task forces and tax administrators in decentralised states.  The first and most vital step forward is to begin provoking discussions around who and what to tax among the majority of South Sudan’s citizenry.  Unfortunately, however, the window for reform might be fast closing as South Sudan becomes increasingly preoccupied with quarrels with the northern Republic of Sudan over oil-sharing, debt-sharing, currency, and border disputes. All the while, the risk of internal conflict simmers. Although these concerns are of course critical, there is still no excuse for neglecting the potentially critical governance gains to be earned through effective taxation in combination with revenue transparency and participatory budgeting.

[1] IDS (2010) An Upside Down View of Governance. Brighton: Institute of Development Studies.

[2] Tilly, C. (1990) Coercion Capital and European States: AD 990-1990. Cambridge, MA: Blackwell.; Bräutigam, D. (2008) “˜Introduction: Taxation and State-Building in Developing Countries’.  In: Fjeldstad, O-H., Moore, M. (eds) Taxation and State-Building in Developing Countries. Cambridge: Cambridge University Press.; Prichard, W. (2010b) “˜Taxation and Statebuilding: Towards a Governance Focused Tax Reform Agenda’. Institute of Development Studies, Brighton. Working Paper No 341.; Thies, C. (2004) “˜State Building, Interstate and Intrastate Rivalry: A Study of Post-Colonial Developing Country Extractive Efforts, 1975-2000′. International Studies Quarterly, Vol. 48, No 1 : pp. 53-72.

[3] Prichard, W., Benson, M., Milicic, N. and van den Boogaard, V. (Forthcoming) “˜Building Effective Tax Systems in Post-Conflict States: Questions, Challenges, and Trends.’ Working Paper. International Centre for Tax and Development (ICTD).

[4] Collier, P. (2006) “˜Post-Conflict Economic Recovery’. International Peace Academy, New York. Research Paper.; Collier, P. (2007) “˜Post-Conflict Recovery: How Should Policies be Distinctive?’ Centre for the Study of African Economies, Department of Economics, Oxford University, Oxford. Research Paper.

[5] Wooster, J., and Hutchins, B. (2010) “˜Post-Referendum Fiscal Arrangements in Southern Sudan’. United States Agency for International Development (USAID), Strengthening Institutional Structures in Southern Sudan Project, Juba.: pp. 7-8.

[6] Benson, M. (Forthcoming) “˜Tax & State-Building in South Sudan: Preliminary Findings, Research Questions & Political Economy Considerations.” Working Paper. International Centre for Tax and Development (ICTD).

[7] Africa Confidential. (2011) The Scramble for the South. Africa Confidential, 1 April.

[8] Ross, M. (1999) “˜The Political Economy of the Resource Curse’, World Politics, Vol. 51 : pp. 297-322.; Collier, P. (2006) “˜Post-Conflict Economic Recovery’. International Peace Academy, New York. Research Paper.

[9] Save the Children (2011) “Post-Independence Agenda for Action.” Briefing Paper.

[10] Boyce, J.K. and Forman, S. (2010) “˜Financing Peace: International and National Resources for Postconflict Countries and Fragile States’. World Bank, Washington, D.C. World Development Report 2011 Background Paper.

[11] Mach Jok, A. and Kenyi, J. (2011) Revenue Challenges Ahead: Southern Sudan. Presentation to OECD Task Force on Tax and Development, Paris: 11-12 April.

[12] Research Interview. April 2011.

[13] Economist Intelligence Unit. (2011) Sudan Country Report. October.

[14] Research Interview. April 2011.

[15] Research Interview. April 2011.

[16] Sudan Catholic Radio Network (2011) South Sudan Revenue Officials Graduate in Uganda, 6 September.

[17] Economist Intelligence Unit. (2011) Sudan Country Report. October.

[18] Research Interview. April 2011.

[19] Sudan Tribune (2011) “˜GOSS and State Taxation Officials Meet to Discuss How to Make Revenue More Equitable and Efficient.” Sudan Tribune. 1 April.

[20] Research Interview. April 2011.

[21] Bagattini, G.Y. (2011) “˜The Political Economy of Stabilisation Funds: Measuring their Success in Resource Dependent Countries.” Institute of Development Studies, Brighton. Working Paper.

[22] Gelb, A. and Majerowicz, S. (2011) “˜Oil for Uganda – or Ugandans?: Can Cash Transfers Prevent the Resource Curse?’. Center for Global Development, Washington, D.C. Working Paper 261.; West, J. (2011) “˜Iraq’s Last Window: Diffusing the Risks of a Petro-State’. Center for Global Development, Washington D.C. Working Paper 266.

[23] Gupta, S., Tareq, S., Clements, B., Segura-Ubiergo, A., Bhattacharya, R. and Mattina, T. (2005) “˜Rebuilding Fiscal Institutions in Postconflict Countries’. International Monetary Fund, Washington, D.C. Occasional Paper 247.

[24] Galtung, F. and Tisne, M. (2009) “˜A New Approach to Postwar Reconstruction’, Journal of Democracy, Vol. 20, No 4 : p. 93-107.   Gaventa, J. (2006) “˜Triumph, Deficit or Contestation?: Deepening the “˜Deepening Democracy’ Debate’. Institute of Development Studies, Brighton. Working Paper 264.; Sundet, G. (2008) “˜Following the Money: Do Public Expenditure Tracking Surveys Matter?’. Chr. Michelsen Institute, Bergen. U4 Anti-Corruption Resource Centre Issue 2008:4. Reinikka, R. & Svensson, J. (2006) Using Micro-Surveys to Measure and Explain Corruption. World Development, 34(2) pp. 359-370.

[25] Carnahan, M. (2007) “˜Options for Revenue Generation in Post-Conflict Environments’. Political Economy Research Institute, University of Massachusetts Amherst, Amherst and Center on International Cooperation, New York University, New York. Public Finance in Post-Conflict Environments Policy Paper.

[26] Di John, J. (2008) “˜Taxation, Resource Mobilisation, and Productive Capacity-Building in LDCs’. UN Conference on Trade and Development (UNCTAD), Geneva. Background Paper No 5 for the Least Developed Countries Report 2009: The State and Development Governance.

[27] Joshi, A. and Ayee, J. (2008) Associational Taxation. In: Brautigam, D., Fjeldstad, O., and Moore, M. (eds.) Taxation and State-Building in Developing Countries: Capacity and Consent. Cambridge, Cambridge University Press.;

[28] Keen, M. (2011) “˜Taxation and Development – Again.’ Unpublished Working Paper.

[29] Boyce, J.K. and O’Donnell, M. (2007) Peace and the Public Purse Economic Policies for Postwar Statebuilding. London: Lynne Rienner Publishers.; Therkildsen, O. (2008) “˜Taxation and State-Building with a (More) Human Face’. Danish Institute for International Studies, Copenhagen. Policy Brief.

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3 thoughts on “South Sudan: Making Tax Work – By Matthew Benson

  1. Pingback: Making Tax Work in South Sudan « PaanLuel Wël: South Sudanese Blogger.

  2. I never thought taxation could play such a big role in post-conflict state-building.
    It is important to diversify revenue sources for the government. And like you say, taxation is an important ground for citizens to demand accountability from the ruling elite.
    But one point though: you say Kenyan and Ugandan traders are sometimes armed and chase away tax collectors? This is not true. I am a Kenyan who has lived and worked in South Sudan since 2006. If anything, East African traders are the only ones who comply with the complex tax regimes. They pay taxes at every border; be it from Uganda into CES, or entering into Juba and even when entering any other state in South Sudan. They get harassed right, left and center by numerous security outfits, each claiming to represent the government.
    South Sudan desperately needs to enforce a transparent, easy to understand and simplified tax regimes.

  3. Fascinating piece. I don’t have expertise in the technical aspects of taxation systems, but let me offer two comments:

    1) You hint at – but don’t fully delve into – the informalization of tax collection. I would guess that in South Sudan, as in other African nations, tax law only goes so far. The way that laws are implemented by tax collectors and members of the bureaucracy (and by the citizens they interact with) will also shape the kind of relationship that emerges between citizens and state representatives. Often this implementation bears only passing resemblance to the laws, and has more to do with power dynamics with historical (and indeed cultural) roots. Although by definition not recorded, those who participate tend to know the informal rules very well. Giorgio Blundo and colleagues have done fascinating work on the informalization of service delivery in West African nations (see ‘Everyday Corruption and the State: Citizens and public officials in Africa’ by Blundo and de Sardan).

    2) The challenges of connecting taxation, citizenship, and decentralization apply beyond post-conflict settings. Senegal, the context I’m familiar with, has been stable and formally democratic for 50 years. In the ’90s, the legislature passed far-reaching decentralization reforms handing powers to elected local government, including fiscal responsibility through taxation. But far from improving collection rates, decentralization has seen rates plummet in rural districts. Few households pay their taxes, because they see councils as holding little downward accountability and even less real power. Unable to rely on citizens’ taxes, councils may have less incentive to be accountable. Kristine Juul has studied how tax capture rates plummeted and non-state institutions took on the role of political representation in Senegal (Development and Change 37(4), 2006). Dennis Galvan has a fascinating story about the reasons rural residents feel ‘traditional’ institutions are more accountable than local government (‘The State Must Be Our Master of Fire: How peasants craft culturally sustainable development in Senegal,’ 2004).

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