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New tax research collaboration and additional SOUTHMOD model for Rwanda

UNU-WIDER has signed a memorandum of understanding (MoU) with the Rwanda Revenue Authority (RRA) to conduct research using national administrative tax data and develop a tax-benefit microsimulation model for Rwanda. The aim of the collaboration is to provide tools for researchers and policy makers to improve the tax and social protection system in Rwanda.

The research work using administrative tax data will be done in collaboration with the RRA, International Centre for Tax and Development (ICTD), and University of Copenhagen (UCPH). The microsimulation model for Rwanda will be developed in collaboration with RRA and Southern African Social Policy Research Insights (SASPRI). The collaborative research project will run until the end of 2023.

'UNU-WIDER and RRA consider the programme as a promising opportunity for fruitful collaboration in light of significant complementarities in our respective expertise and skills', says Denis Mukama, RRA Assistant Commissioner for research planning and statistics.

‘We are very pleased and excited of this new collaboration, which will provide deeper academic and empirical understanding of tax administration issues and advice for policy-making. The project will also provide an avenue for increased operational and institutional capacity’, explains Jukka Pirttilä, UNU-WIDER Non-Resident Senior Research Fellow.

Co-creation is the key

UNU-WIDER already has experience in working with several tax authorities in Africa and the developing world.

‘The key for a successful collaboration will be co-creation: research topics and questions have been designed in collaboration. The data work will be done jointly with local experts. UNU-WIDER researchers and the wider academic community will gain new research knowledge, which in turn helps us work towards the sustainable development goals, together with decision makers and other stakeholders’, Pirttilä continues.

'Rwanda, like other developing countries, has been building up its social protection system. Equally, mobilizing increasingly domestic tax revenues to finance public expenditure is key for sustainable development. The COVID-19 pandemic makes this twin challenge ever more pressing. In this process, understanding the system-wide impacts of different policy choices is critically important, and tax-benefit microsimulation models are well suited for this purpose', explains Pia Rattenhuber, UNU-WIDER Research Fellow.

Data and tools for development

Tax and customs authorities collect a large amount of data on individuals and firms that can be used for generating policy-relevant research. The data can be made securely available to researchers at a reasonable cost, and it is especially useful for a reliable analysis of the impacts of the tax system on the economy. The research collaboration will help RRA in implementing tax reforms and improving the administrative processes.

Potential tax administrative data research topics under the collaboration will include analysing the impact of advisory visits and taxpayer education campaigns on tax compliance. Other planned activities include providing technical training for revenue authority staff.

Developing a tax and benefit microsimulation model for Rwanda will help to explore ways in which national development goals could be achieved in a cost-effective manner, and to assess the distributional effects of more comprehensive social security arrangements. Once the model has been launched, the collaborating institutions aim to provide a training course for potential users of the model in Rwandan government agencies and academia.

This new co-operation is part of the UNU-WIDER projects Building up efficient and fair taxation and SOUTHMOD. Both projects are part of UNU-WIDER's programme on Domestic Revenue Mobilization (DRM). The DRM programme is financed by the Norwegian development co-operation agency Norad.

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