The mobilization of domestic resources is improving steadily in African countries, said a new report launched on Thursday at AU headquarters in Ethiopia’s capital Addis Ababa.
The 2nd edition of the Revenue Statistics in Africa 2017 covered 16 African countries, including Cape Verde, Cameroon, DR Congo, Cote d’Ivoire, Ghana, Kenya, Mauritius, Morocco, Niger, Rwanda, Senegal, South Africa, Swaziland, Togo, Tunisia and Uganda.
The report reveals that the average tax-to-gross domestic product (GDP) ratio for the countries was 19.1 percent in 2015, an increase of 0.4 percentage points from that of 2014.
Yet the 19.1-percent ratio is still lower than the average tax-to-GDP ratios of Latin America and the Caribbean (LAC) and the Organization for Economic Cooperation and Development (OECD), which are 22.8 percent and 34.3 percent respectively.
In 2015, taxes on goods and services were the largest contributor to total tax revenues in the African countries, which is 57.2 percent, mostly in the form of value-added tax (VAT), followed by taxes on income and profits, which is 32.4 percent, according to the report.
Speaking at the launch ceremony, Olawale Maiyegun, AU Director for Social Affairs, noted the need of large-scale resource mobilization to successfully implement Africa’s development agenda.
Traditional ways of mobilizing resources for development in Africa are unreliable and inadequate, the director said.
“Although the ODA (official development assistance) and FDI (foreign direct investment) have been useful in assisting African countries for financing developmental programs, countries can not continue to rely on ODA since it undermines the coherent implementation of national development plans,” he said.
The report discusses the role of domestic resource mobilization in improving governance and the business environment, particularly in African states classified as fragile.
“While African countries have made significant efforts to strengthen their tax policy and tax administration capacity, they continue to face the challenges of large informal sectors, and a narrow tax base, particularly in resource-rich countries that makes them vulnerable to unstable resource revenues,” Maiyegun said.
The report is jointly produced by the African Tax Administration Forum, the AU Commission and the Organization for Economic Co-operation and Development (OECD). Enditem