Tax collection in Africa rising
PRELIMINARY statistics on the 2015 African Capacity Report (ACR) released yesterday in Addis Ababa, Ethiopia showed that there were significant improvements in revenue collection over the last decade (2006-2015) in Nigeria and 44 other African countries.
But despite the cheering news, the report said effective mobilisation of domestic resources in the 45 countries under review faced significant challenges.
Executive Secretary of African Capacity Building Foundation Prof. Emmanuel Nnadozie, who led discussions on the preliminary report at the 24th Annual Meeting of ACBF Board of Governors in the Ethiopian capital, said the challenges included high capacity constraints and low tax collection efforts.
Nnadozie stressed that between 45 per cent and 50 per cent of the 45 countries surveyed required “very high needs in building institutional and human capacity in almost all areas critical to ensuring effective and sustainable domestic resource mobilisation (DRM)”.
He said the affected countries must train experts and workers in tackling illicit financial flows, revenue collection, fiscal sustainability, strengthening of the financial sector, fighting against corruption as well as social security and safety nets.
The report showed that in 27 of the 45 countries covered by ACR 2015, DRM between 1996 and 2010 was low.
This, it said, was due to a narrow tax base; tax erosion due to high levels of capital flight, weak capacity within the tax administration and the inability to deal with illicit financial flows.
Preliminary findings also showed that the level of taxpayers’ trust in the tax system was low in 89 per cent of the countries surveyed.
The high proportion of fiscal exemptions extended to investors contributed to tax erosion – 97 per cent of the countries surveyed had tax exemptions dedicated to investors, according to ACR.
The African countries surveyed, the report said, also failed to see the value of adhering to platforms as the African Tax Administration Forum – the first platform for exchange between tax authorities, launched in 2009 or the Collaborative African Budget Reform Initiatives (72 per cent of surveyed countries are non- members).
The report said a key element for successful DRM must start with “an effective and visionary, committed and accountable leadership that sets the right tone at the top”.
“Governments must be in the forefront in developing requisite capacities. In the short term, capacity building initiatives should focus on the ways and means to broaden the tax base by, for example, removing unnecessary tax preferences, dealing with transfer pricing abuses and taxing extractive industries fairly and transparently; the conduct of training to develop or improve the skills of workers involved in DRM-related issues.
“There is need to mobilise internal resources to implement the Sustainable Development Goals (SDGs) and Agenda 2063, although this does not mean that Africa should not mobilise external resources as well.”
