African nations demonstrate healthy tax growth, OECD finds

1 Apr 16

Tax revenues in some African countries have risen by up to almost 7% since 2000, making a key contribution to economic development, the OECD has found.

According to the first edition of a new report, Revenue Statistics in Africa, continued efforts to mobilise domestic resources, modernise tax systems and pursue reform have paid off for the eight African nations studied, which together make up almost a quarter of the continent’s GDP.

“This growth has mainly been driven by increases in taxes on incomes and profits and more specifically by increases in corporate income tax revenue,” the report said.

Substantial increases in value-added tax and social security contributions were also a factor, it added.

Of the countries included in the report, Tunisia saw the biggest increase with a 6.7 percentage point rise in tax revenues since 2000, putting its tax-to-GDP ratio at 31.3% in 2014.

It was followed by Morocco, Rwanda and South Africa, all of which saw increases of 5-6 percentage points.

This compares to an average rise of just 0.2% among wealthy OECD nations between 2000 and 2014.

Even the African nations that saw the smallest increases beat this, with Mauritius seeing a rise of 0.9%, taking its tax-to-GDP ratio up to 17.8%.

The other countries included in the report were Cameroon (3.3% increase), Côte d’Ivoire (2.4%) and Senegal (3.3%).

The report noted that some of the countries included were significantly dependent on non-tax revenues, and more specifically on grants such as foreign aid and resource rents, as well as property income.

These tend to be more volatile than tax revenues, making such countries’ finances less predictable.

South Africa saw the lowest percentage of non-tax revenues as a share of GDP, at 0.6%, while on the other hand taking the highest share of taxes on incomes and profits as a portion of total tax revenue, at 51.2%.

South Africa was also the only participating country where the share of personal income taxes is higher than the OECD average.

Across all the countries covered, the share of corporate income tax revenue as a proportion of total tax revenue was significantly higher than the 8.5% OECD average. In six of the eight nations, these ranged between 13% and 18%.

Consumption taxes yielded the largest share of total tax revenue across all the eight countries however, accounting for over 55% in Cameroon, Côte d’Ivoire, Mauritius, Rwanda and Senegal. With the exception of the latter, more than half of this is generated by VAT.

Tunisia and Morocco however displayed a more evenly spread tax mix in comparison. Around 30% of taxes came from levies on income and profits; 35-40% was from consumption taxes; and 20-28% came from social security contributions.

In the six sub-Saharan African countries, social security contributions were much smaller, ranging from 1.5% in South Africa to 11.3% in Côte d’Ivoire.

The report was jointly produced by the African Tax Administration Forum, the African Union Commission and the OECD in response to a demand from governments, citizens and policymakers for reliable and comparable information.

The data from the eight countries will now be added to the OECD’s worldwide Revenue Statistics Database. 

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