Taxes are important. They're a primary way in which governments fund essential services like healthcare, education, infrastructure and social protection programmes. They are vital to the economic development of countries.
In sub-Saharan African countries, the need for public services is great and fiscal resources are often scarce. Getting the public to pay their taxes is essential. However, a variety of structural and governance challenges have made it difficult to effectively mobilise revenue.
Recent tax protests in Kenya illustrate the growing tension between taxpayers and the government in the region. The protests underscore the importance of designing tax policies that not only raise revenue but also distribute the tax burden fairly across different income groups. If governments don't address these issues, they risk eroding public trust and increasing tax resistance.
The logistical difficulties of tax collection are another obstacle. Many sub-Saharan economies are characterised by small-scale enterprises and subsistence agriculture, which complicate tax administration. The informal sector - estimated to account for up to 80% of employment in some countries - largely operates outside the formal tax net. It's difficult for governments to capture this significant portion of economic activity within their revenue systems.
Tax collection in sub-Saharan Africa is also hindered by inefficient administrative systems. In many countries, tax authorities are under-resourced and under-staffed, making it difficult to monitor compliance. Personal visits to taxpayers' homes or businesses are often required to collect taxes. This drives up administrative costs and increases opportunities for corruption. In many cases, tax records are manually maintained - a system that's prone to manipulation, inefficiencies and data losses.
Our research shows that one of the most important factors influencing tax compliance in sub-Saharan Africa is trust in government.
Citizens are more likely to comply with tax obligations when the government is perceived as fair and transparent in the use of tax revenues. A strong social contract - where citizens feel taxes are returned to them in the form of public goods and services - is critical.
Conversely, when public services are inadequate or corruption is perceived as widespread, tax morale diminishes. This leads to greater tax resistance. In Kenya, Tanzania, Uganda and South Africa, studies have shown that satisfaction with public services improves tax compliance. Another study has found that perceived corruption has a negative effect on tax compliance in sub-Saharan Africa.
Governance quality also plays a role in shaping tax compliance. Citizens who trust their government and perceive that tax revenues are used to reduce inequality are more likely to pay their taxes.
Progress
Despite the challenges of collecting revenues, many African countries have made progress over the past three decades.
From the mid-1990s to 2016, total revenue (excluding grants) in the median African economy rose from around 14% to over 18% of GDP. Tax revenue increased from 11% to 15% of GDP.
This is a significant achievement, but Africa still remains the region with the lowest revenue-to-GDP ratio globally.
Weak tax administration systems continue to limit governments' ability to finance development initiatives. As a result, many countries struggle to provide essential services like healthcare, education and infrastructure.
Countries also tend to rely on "regressive" taxes, like taxes on consumption. These affect poorer households the most, as they spend a larger share of their earnings on taxable goods and services. This weakens the redistributive effect of tax systems and can exacerbate poverty and inequality.
Way forward
Technology could help address many of the challenges associated with tax collection. Digital tax systems, mobile money and online filing could help reduce inefficiencies and increase transparency. Some countries, such as Rwanda and Ghana, have already embraced technology to simplify processes and enhance compliance.
However, many rural areas in sub-Saharan Africa lack the internet infrastructure needed to do this. Digital tax systems require tax authorities to invest in infrastructure and training.
Still, as mobile technology penetrates the region, governments will be able to use digital tools to expand their tax base and improve compliance.
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Reducing corruption
To strengthen tax compliance, improving the social contract between governments and citizens is essential. Research shows that when people believe their taxes are used for public goods and services that benefit them, they are more willing to comply.
Tax morale can be improved through transparency, reduced corruption, and ensuring that tax revenues are visibly channelled into development projects.
Targeted communication campaigns about how tax funds are used can help restore faith in government institutions.
The path to improving tax systems and compliance in sub-Saharan Africa is long. But with the right policy interventions, governments can unlock revenue potential. This will contribute to stronger economies, better public services, and ultimately, more equitable and inclusive development across the region.
Heikki Hiilamo, Professor of Social Policy, University of Helsinki
Enrico Nichelatti, PhD candidate, University of Helsinki
