Africa is missing the mark on taxes
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African economies need urgent action to boost domestic resource mobilisation. This is according to the Organisation for Economic Co-operation and Development’s (OECD) Revenue Statistics in Africa 2019 report, released this week.
The average tax-to-GDP ratio of the 26 countries covered by the report stood at just 17.2% in 2017, the lowest globally. To put this into context, 15% is considered the minimum needed for basic state functioning, never mind meeting financing needs to drive economic development.
The ratio has remained unchanged for three years, while non-tax revenues – primarily from royalties on natural resources – have actually declined, and are below tax revenues in all but three of the 26 countries covered.
The 17.2% figure also masks wide variation. While the Seychelles has a tax-to-GDP ratio of 31.5%, Nigeria – Africa’s biggest economy – sits at the bottom with an abysmal 5.7%.
It goes without saying that this needs to change if rising deficits and soaring debt across the region are to be reined in.
Against this backdrop the International Monetary Fund has rightly called domestic resource mobilisation one of sub-Saharan Africa’s “most pressing” policy challenges.
Meeting this will require sustained political commitment and improved governance to tackle core issues like income taxes and improved value added tax systems. On current evidence, this is in short supply.
This report reflects the views of the author alone, not those of How we made it in Africa.
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