Marrakesh, Morocco, March 23, 2019 – Increasing use of information technology is improving tax administration in Africa and moving it towards convergence with global standards but corruption still poses a serious challenge, the Economic Commission for Africa (ECA) says.
African countries should take full advantage of the opportunities for greater efficiency and effectiveness offered by digitalization to improve tax administration, according to ECA in the 2019 edition of the Economic Report on Africa (ERA) launched today in Marrakesh, Morocco.
The Report acknowledges the advancement made in some 18 African countries that have introduced electronic filing and payment system, citing benefits it brought for Rwanda, South Africa and Kenya as examples.
“Rwanda was able to boost tax revenues by six per cent through such measures, suggesting the large scope for revenue gains in countries that have not yet done so,” says the Report.
In South Africa e-taxation lowered the time and cost of complying with the value-added tax (VAT) by more 22 percent, while in Kenya, digitalizing VAT operations helped to boost collections by more than $1 billion between 2016 and 2017, according to the Report.
But even with these gains, some challenges, chiefly corruption, continue to plague tax administration on the continent, cautions the Report whose theme is “Fiscal Policy for financing sustainable development in Africa” in the chapter dealing with the subject.
“Tax collectors are well placed to extract bribes from taxpayers, particularly in cases where collectors and taxpayers meet face to face,” and “aggressive tax enforcement, designed to elicit bribes, can lead to abuse of human rights,” it says.
It adds that about 40 per cent of respondents in a survey conducted in 29 African countries believed that “most” or “all” tax officials were corrupt.
Other challenges identified in the Report include high cost of tax collection, lack of political will and coordination, inadequate tools to tax the wealthy, inadequate administrative capacity and low quality of tax administration at sub-national levels.
It notes that more women are working in tax administration as skills that are in demand are increasingly those of accountants, auditors, lawyers, researchers and information technology specialists because direct personal contact with taxpayers is becoming less frequent.
Although men still outnumber women in the field by a wide margin, it states that the number of women in tax administration in Africa is rising even if it is still a far cry from what obtains in Organization for Economic Co-operation and Development (OECD) countries where women account for 60 per cent of the workforce in tax administration.
The 2019 edition of ERA examines the institutional and policy reforms that can enable African countries to maximize domestic public resource mobilization to finance their development agenda, focusing on the role of fiscal policy.
The Report identifies several quick wins in Africa’s pursuit of additional fiscal space to finance achievement of the Sustainable Development Goals (SDGs) and the aspirations of Agenda 2063. It illustrates how African governments could increase their fiscal space, particularly the tax ratio, by 12–20 per cent of GDP annually, for instance, by expanding and deepening the tax base, improving tax administration, tackling tax avoidance, enhancing non-tax revenue collection and improving natural resources governance.