The 16 African countries in
the OECD study have seen their average tax-to-GDP ratio
rise by five percentage points, from 14.9% in 2000 to 19.1% in
2015. While Latin American and Caribbean countries have seen a
similar acceleration with a 4.9 percentage point average to
22.8% in 2015, OECD countries with largely mature tax regimes
have only seen a sluggish increase of 0.3 percentage points
over the same time period, to 34.3% in 2015.
Some of the African countries featured in
the report, such as Morocco, South Africa and Tunisia, come
close to the OECD average with 26.1%, 29% and 30.3%
While many African countries are still
heavily reliant on commodities, economic trends and population
growth in East Africa in particular have created a solid
The rise of tax revenue from goods and
services is a consequence, as are increasingly empowered and
sophisticated tax administrations in Africa.
According to the OECD report on revenue
statistics in Africa, the main sources of increased tax revenue
are taxes on personal income, profits and consumption. The
report attributes this shift to the tax reforms passed by
African governments to strengthen fiscal institutions and
implement new measures such as VAT and income tax.
Taxes on goods and services (including
VAT) made up an average of 57.2% of tax revenue in the 16
African countries, with VAT contributing 31.5% on average and
profits and income amounting to some 32.4% of total tax
revenue. South Africa in particular saw an increase of 0.7
percentage points in personal income tax, while Cabo
Verde’s VAT and corporate income tax revenue
spiked following an administrative restructuring in 2014.
“VAT is advocated by many international
organisations as a good tax because it is the type of tax that
you can implement without too many knock-on effects for
investment,” Alexandra Readhead, international tax and
extractive industries consultant, told International Tax
Review. “It’s easy to put into place for this
“Domestic consumption is growing
significantly in many African countries,” Readhead said. “You
have a growing population with more income to spend, so it
makes sense to apply VAT because you have more people with
personal wealth and the same is true about income tax.”
Many of the economies featured in the
report are still heavily centred on natural resources, in
particular mining, such as the Democratic Republic of Congo,
Senegal, South Africa and Swaziland.
“It was the fall in commodity prices which
pushed African governments to seek out ways to reduce the
impact of shifts in commodity prices,” Readhead said.
“They had to start thinking about how to
protect themselves in the future. But also because they have a
growing middle-class who are not paying enough in taxes. That
is starting to change.”
Some worry that, should commodity prices
for oil and metals and minerals return to past heights, the
progress on developing strong tax systems could be set back.
“People have short memories and once prices pick up
it’s possible they will go back to their old
ways,” Readhead said. “This means they might stop focusing on
improving tax collection and fall back on the revenue from
At the same time, there are concerns that
the dependency on extractive industries can hold back tax
investments can be deducted from taxable profit on an annual
basis, there is only limited tax paid to African governments in
that period,” the director of Southern Africa Resource Watch
(SARW) Claude Kabemba
wrote in South
African newspaper The Daily Maverick.
optimisation of revenue accruing from mineral resource
extraction will not occur with current fiscal regimes which
encourage tax evasion and avoidance,” he wrote.
Another concern for lack of growth in
expanding tax collection is the propensity for corruption.
“In most African countries,
political leaders give to themselves the right of ownership of
their countries’ resources by dint of being in
leadership,” wrote Kabemba.
companies are often too happy to enter into deals that protect
them from paying taxes, for human rights abuses and
environmental destruction, if only they can pay kickbacks to
political leaders,” Kabemba wrote. “
Most mining contract clauses prevent revision of the fiscal
regime for at least 15 to 20 years.”
The development of a stable tax base could
provide an alternative to other forms of revenue, such as
international aid, loans and remittances. The African Union
(AU) regards advances in tax collection and building up fiscal
institutions as a way for states to improve governance.