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Angola Should Raise Tax Rate on Wealthy, Research Institute Says

Angola could increase government revenue and simplify collection by raising rates for the wealthiest earners and limiting the number of income-tax brackets, the Christian Michelsen Institute said.

Africa’s second-largest crude producer raised $1.4 billion last year in personal income taxes, the fourth largest source of non-oil revenue, from $1.2 billion in 2012, the Bergen, Norway-based development research group said June 6, citing government data. The southwest African nation is updating a decades-old tax system to broaden collection, increase revenue and streamline procedures as it recovers from a 27-year civil war that ended in 2002.

“The reform under way should hike percentages on people who make more than most, strip out half the income bands that complicate collection and increase basic exemptions,” Odd-Helge Fjeldstad, an economist at the institute and co-author of the report, said yesterday in an e-mailed response to questions. “This would make the system more fair, progressive, simple and transparent in line with the government’s stated goals.”

While crude taxes account for about 80 percent of state revenue, the member of the Organization of Petroleum Exporting Countries is forecast to increase its non-oil economy by 6.4 percent this year, up from 5.8 percent in 2013, according to the International Monetary Fund.

Reorganization of the personal-income tax system began in 2011 led by a government committee dominated by the Popular Movement for the Liberation of Angola, which has ruled the country since independence from colonial ruler Portugal in 1975.

Gilberto Luther, the deputy director of the tax-updating project known as PERT, didn’t immediately reply to an e-mail seeking comment late yesterday.

Tax Brackets

Tax-reform proposals before the committee include the creation of 14 income bands that widen as earnings increase. The draft legislation also calls for steeper rate increases in lower-income brackets, contributing to unfairness, while the highest earners would pay almost the equivalent of a 17 percent flat tax, the institute said.

The draft includes proposals to tax teachers and nurses, while exempting police officers and people more than 60 years old, the CMI said.

The system under discussion would charge a fixed tax rate according to income levels, and levy charges on subsequent earnings.

To contact the reporter on this story: Colin McClelland in Lubango at cmcclelland1@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net Sarah McGregor, Karl Maier

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