Where Does Your Tax Go? Previously Under Lock And Key, New IMF Data Shows Africa Is Just Complicated
Nigeria’s presence in the ‘bottom 10’ is puzzling, as is Zimbabwe’s in the ‘top 10’.
DUE to the widely differing taxation structures across Africa, comparisons of how much revenue comes to a government from taxes is not easy.
But some general rules hold true. More highly-developed nations are better at collecting taxes, and tend to have such revenue forming a higher percentage of their GDPs. But showing how varied the landscape is, developed countries such as the Scandinavian nations that have big welfare programmes also have much higher shares of GDP—the comparable figure for Denmark is for example nearly three times that of the United States.
A more reliable rule is that because most tax bases are related to economic activity in a country, an increase in the level of economic activity generally yields more tax, and a decrease in economic activity leads to a decline in tax.
The International Monetary Fund recently for the first time made its data on government tax and non-tax revenues available to the public, which it says is meant to encourage more debate on revenue policy especially for developing countries—the majority of which are in Africa. It is data that may come in handy in a year when the continent is looking for post-Millennium Development Goals funding.
Mail & Guardian Africa looked at one available indicator—tax revenue as a per cent of GDP. While direct comparison is not possible, there are some interesting trends across the continent.
For one, conflict countries tend to have lower tax revenues. This could be because either the tax administration has been destroyed, such as in Somalia, where there has been no data for decades, or because the resulting breakdown in social order encourages non-compliance or stealing.
While this kind of scenario is applicable to the countries with the lowest tax revenues as a share of their GDP—Libya, the Central African Republic and Guinea Bissau, the presence of Nigeria in the bottom five is puzzling.
Tax revenue in Africa’s largest economy forms just 8.45% of its GDP. In another oil economy, Equatorial Guinea, taxes are just 11.86% of its GDP. But for another similarly crude-dependent country, Angola, taxes form 38.4% of its revenue—the second highest value on the continent.
Another large country, the Democratic Republic of Congo (DRC), also features in the bottom 10, with taxes at 9.71% of its GDP.
On the other end is Lesotho, where tax revenues form a whopping half of its gross domestic product. Swaziland also depends on taxes for a third of its revenue, as does Algeria, which has a generous social welfare programme.
Also high up on the scale are the continent’s more developed economies, suggesting more efficiency in collection: Namibia, Seychelles, Botswana, South Africa, Morocco and Mauritius.
But showing just how Africa is complicated, Zimbabwe also lands in its top ten, dependent on taxation for a quarter of its GDP, suggesting it has been levying lots of taxes as it seeks to keep a struggling economy afloat.
Yet post-conflict Liberia and African star Cape Verde have taxes forming almost the same proportion of the GDP.
Another trend is that East African countries tend to fall in the middle band, with no East African Community (EAC) member ranked in the top 20.
Given Eritrea’s exclusion from the world economy, and its reputation for taxing even its diaspora heavily, you would expect that taxes would form a major chunk of its GDP. But at 10.42%, it is in the bottom 10.
Just shows this continent doesn’t fit into convenient boxes.
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