Our Fiji Remittance and Presumptive Taxation Projects

The Fiji Remittance Project

We're excited to bring you the latest updates on the Fiji Remittance Project, a collaborative effort between L-IFT, New York University, Australian National University, and The University of the South Pacific. This project sheds light on the significance of remittances sent from Fijian immigrants in Australia back to Fiji.

The Fiji Remittance Project has been in progress for six months, with the active participation of 29 pairs of individuals, including husband-wife, son-parent, and daughter-parent pairs. These participants play a crucial role in unraveling the dynamics of remittances in the context of Fiji.

The project, in conjunction with the Small Firm Diaries (SFD) study, examines remittances sent by Fijian migrants in Australia to recipients back home and their impact on their home country. It explores the evolving migration patterns and the influence of remittances on labor markets in Fiji.

There are challenges in data collection because the Fijian migrants often work in shifts and are therefore difficult to reach. Nevertheless, our dedicated researchers and committed participants are finding creative ways to bring this project to a success. Interviews are conducted via WhatsApp, Viber, or Messenger, and data is recorded using the respondent version of FINBIT (instead of the Surveyor version, where the respondent themselves cannot change the data). The design includes different tags to identify the type of channel used to send remittances, the brand of that channel, and the intended purpose of the funds.

The Fiji Remittance Project is expected to conclude by the end of October 2023. We anticipate that the insights gathered will provide valuable information about the vital role remittances play in the lives of Fiji's migrant workers.

We want to extend our appreciation to the participants, funding partners, and the research team for their dedicated efforts in this project.

The Presumptive Taxation Project

We're excited to share an ongoing study on taxes that is being done by one of the Senior Researchers from Addis Ababa with support from our Data Lead. This study is about the intriguing dynamics of tax collection in Ethiopia, focusing on the contrast between presumptive and actual taxes. This project delves into the details of tax practices and their impact on small businesses in Ethiopia. One of L-IFT’s field team members is a university lecturer in Ethiopia and she got permission from the FAI to analyze the Ethiopian Small Firm Diaries data regarding taxes.

What is Presumptive Taxation?

Presumptive Taxation is a method used in Ethiopia to assess taxes for small and micro enterprises. These businesses, falling under Category C, earn less than 500,000 ETB (a little above 9,000 USD) annually. Instead of traditional record-keeping, officials from the Ministry of Finance assess their earnings based on observations, and taxes are calculated accordingly.

Motivation for Research

Etsehiwot's motivation to delve into this topic stems from her earlier research on small businesses' taxation fairness. Her work highlighted discrepancies in how these enterprises were taxed. As part of the Small Firm Diaries (SFD) project at L-IFT, which collected data on formalized small and micro enterprises, business owners raised concerns about the accuracy of presumptive taxation, especially as their earnings fluctuated from year to year.

Diverse Perspectives

Business owners' reactions to presumptive taxation vary. Some find the tax too burdensome, while others believe it's fair. Nonetheless, a prevailing sentiment among business owners is that they are being over-taxed.

Research Methodology

The research aims to provide data-driven insights into the fairness of presumptive taxation. Etsehiwot and her team will leverage a full year of income and expense data from the SFD project, supplemented by monthly averages to estimate missing months' earnings. With participants' approval, they'll compare actual taxes to presumptive taxes, uncovering discrepancies and understanding cases of under-taxation.

Additionally, the research explores whether business owners prefer self-recording their finances or relying on presumptive taxation. The choice of record-keeping methods, including modern solutions like the FINBIT mobile financial app, is a focus of interest.

Ensuring Data Accuracy

Recognizing the potential for inaccuracies in self-reported data, a 10% confidence interval will be applied. The research team mitigates this by conducting regular observations and inquiring about businesses on a weekly basis.

The Road Ahead

The ultimate goal of this research is to publish its findings, providing evidence-based insights into the fairness of presumptive taxation. The data collected will be presented to governing bodies, offering a basis for discussing potential policy changes.

While the initial sample size consists of around 140 small businesses, the research serves as a crucial starting point for future, larger-scale projects that can influence tax policies and practices in Ethiopia.

Benefiting Business Owners and Ethiopia

Accurate data on the fairness of presumptive taxation will be invaluable to business owners. It will empower them with the facts they need to support their tax claims and ensure fair taxation. For the Ethiopian government, this data is a vital resource to address the concerns surrounding Category C taxpayers and make informed policy decisions for the future.

Stay tuned for more updates on this research as we journey together towards fairer taxation.