THE mobilisation of domestic resources is improving steadily in African countries, according to new data from Revenue Statistics in Africa 2017 released in Addis Ababa at a recent meeting of tax and finance officials from 21 African countries hosted by the Department of Economic Affairs of the African Union Commission (AUC).
The average tax-to-GDP ratio for the 16 countries covered in this second edition of the report was 19.1 percent in 2015, an increase of 0.4 percentage points compared to 2014. Every country has experienced an increase in its tax-to-GDP ratio compared to 2000, with an average rise of 5 percentage points.
Revenue Statistics in Africa 2017 includes revenue data for twice as many countries as the first edition, providing comparable data on tax and non-tax revenues for 16 participating countries: Cabo Verde, Cameroon, Democratic Republic of Congo, Côte d’Ivoire, Ghana, Kenya, Mauritius, Morocco, Niger, Rwanda, Senegal, South Africa, Swaziland, Togo, Tunisia and Uganda.
For the first time, the report provides an average of the participating countries – ‘the African (16) average’- showing that in 2015, the average tax-to-GDP ratio in these countries was 19.1 percent. This is lower than the average tax-to-GDP ratios for Latin America and the Caribbean (LAC) and the OECD: 22.8 percent and 34.3 percent, respectively. The average tax structure of the African countries resembled that of the LAC region, except that social security contributions were a more significant component of revenues in the latter. In 2015, taxes on goods and services were the largest contributor to total tax revenues in the African countries (57.2 percent on average), mostly in the form of Value-Added Tax (VAT); followed by taxes on income and profits (32.4 percent).
As a percentage of GDP, total non-tax revenues were lower than tax revenues in all 16 African countries, although the amounts varied considerably between countries due to a wide disparity in natural resource revenues and international donations (foreign aid, debt relief, or funding of national programmes). Non-tax revenues as a percentage of GDP also varied significantly more than tax revenues over time.
A special chapter in the report discusses the role of domestic resource mobilisation in improving governance and the business environment, particularly in the 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.
The report is produced jointly by the African Tax Administration Forum (ATAF), the African Union Commission (AUC) and the Organisation for Economic Co-operation and Development (OECD), with the financial support of the European Union. It contributes to improving the understanding and monitoring of domestic resource mobilisation in Africa, a priority of the 10-year implementation plan of the AUC’s Agenda 2063, the United Nations Addis Ababa Action Agenda on Financing for Development, and Sustainable Development Goal 17.1.