Africa: How Can African Tax Collectors Help Cope with the Economic Impacts of COVID-19?

19 April 2020
analysis

There is no scarcity of criticism of the methods that OECD governments have used - and not used - to prevent the spread of the Covid-19 virus. By contrast, the steps they have taken to deal with the economic consequences of the pandemic are more widely appreciated. The OECD now reports regularly on the wide range of measures that governments are taking to counter the three main inter-related economic threats: recession, large-scale company bankruptcies, and the declining incomes of the poor and vulnerable. Tax agencies play a prominent role. Corporate and individual tax obligations have been reduced or deferred on a large scale, and through a wide variety of channels.

Some African governments are already taking similar steps. For example, Kenya recently announced a package of measures including a reduction in the standard rate of corporate income tax and a personal income tax exemption for anyone earning less than 24,000 Kenyan Shillings a month ($226). From the perspective of protecting the incomes of the poor, this exemption looks like very good news. Unfortunately, and not because of any failures on the part of the Kenyan government, it will not benefit many Kenyans. Only 12% of the employed population of Kenya are active payers of personal income tax. The great majority of poor Kenyans do not earn enough to pay it at the best of times. Further, personal income tax coverage in Kenya is actually very high relative to most countries in Africa. In nearby Rwanda, which like Kenya has an unusually effective revenue authority, active payers of personal income tax account for less than 3% of the labour force.

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