IMF Says African Countries Need To Tap New Revenue Streams

Sub-Saharan African countries should look to tap tax revenues outside natural resources, to finance stimulus measures that could reinvigorate their ailing economies, a new report from the International Monetary Fund says.

The IMF’s Regional Economic Outlook for Sub-Saharan Africa report, released on May 9, notes that growth in the Sub-Saharan region has fallen to its lowest level in 20 years. It highlighted its earlier analysis that showed that, in general, countries can boost revenues by about 3 to 6.5 percent of gross domestic product if they move away from commodity-price-based tax streams and make their tax regimes more progressive.

The IMF report said: “For resource-intensive countries, the focus should be on broadening the sources of taxes away from commodity-related income, including by better balancing income taxes and indirect taxes, and broadening the tax base to improve the resilience of tax revenues. More broadly, countries should focus on strengthening and streamlining tax procedures as was done in Mauritius and Tanzania in the mid-2000s. This includes tapping into e-filing programs to improve the efficiency of tax collection.”

It added: “A major challenge to revenue mobilization in the region has been the large size of the informal sector (cash-based economy). However…there is evidence to support the role of financial development (including the ongoing drive for mobile banking) to help enhance domestic revenue mobilization as informal firms grow.”