Tax revenues in African countries, on average, have remained at the same level during 2018 for the fifth consecutive year, with the ongoing COVID-19 crisis expected to significantly reduce public revenues across the region, according to a new report.
The 2020 edition of Revenue Statistics in Africa shows that the average tax-to-GDP ratio for the 30 participating countries remained unchanged for the fifth consecutive year, at 16.5%. With countries facing high levels of uncertainty due to the ongoing pandemic, African governments will need to carefully sequence their efforts to secure fiscal space for a strong and inclusive recovery and, once the health and economic crises are under control, mobilise additional domestic revenues to meet longer-term objectives.
The report, launched on Thursday during a virtual event, identifies a wide variation between the level and trajectory of public revenues across the 30 participating countries, including Chad, Lesotho, Malawi and Namibia for the first time. Tax-to-GDP ratios ranged from 6.3% in Equatorial Guinea and Nigeria to 32.4% in the Seychelles. The tax-to-GDP ratio exceeded 25% in four countries (Morocco, Seychelles, South Africa and Tunisia) and was less than 10% in five (Chad, the Republic of the Congo, the Democratic Republic of the Congo, Equatorial Guinea and Nigeria).
Between 2010 and 2018, the Africa (30) average tax-to-GDP ratio increased by 1.4 percentage points (p.p), with most of the growth occurring between 2010 and 2014. By comparison, the tax-to-GDP ratio in Latin America and the Caribbean (LAC) rose by 1.9 p.p. to 23.1% while the OECD’s average rose by 2.0 p.p. to 34.3% between 2010 and 2018. The report shows how taxes remain the largest source of public revenues in Africa and are typically more stable than non-tax revenues: average non-tax revenues fell from 8.3% to 6.5% of GDP between 2010 and 2018 due to declines in natural resource revenues and grants.
Taxes on goods and services were the main source of tax revenues among Africa (30) countries, accounting for 51.9% of total tax revenues on average in 2018; value-added tax alone accounted for 29.7% of total tax revenues. Revenues from corporate income tax, which tends to be more volatile than other taxes, are also high in Africa relative to other regions, at 19.2% of total taxation compared to 15.5% and 9.3% in the LAC and OECD areas, respectively. By contrast, social security contributions and personal income taxes are comparatively low in Africa.
The report contains a special feature about domestic resource mobilisation during and after the COVID-19 pandemic. This examines the fiscal policy responses of countries to the pandemic and explains the importance of continuing support for households and businesses as fiscal positions allow, ensuring the effectiveness of these measures through appropriate targeting, and of monitoring their impact. It also discusses the potential contribution of the African Continental Free Trade Area (AfCFTA) to the region’s resilience and economic recovery.
Revenue Statistics in Africa is a joint initiative between the Centre for Tax Policy and Administration of the Organisation for Economic Co-operation and Development (OECD), the OECD Development Centre, the African Tax Administration Forum (ATAF) and the African Union Commission (AUC), with technical support from the African Development Bank (ADB) and the Cercle de Réflexion et d’Échange des Dirigeants des Administrations fiscales (CREDAF). The 2020 edition received financial support from the governments of Ireland, Japan, Luxembourg, Norway, Sweden and the United Kingdom.
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