Improving Domestic Revenue Mobilization in Africa

While the tax-to-GDP ratio in OECD countries in 2016 stood at 34.3per cent, and was 22.7 per cent in Latin America and the Caribbean, the average tax-to-GDP ratio in 2016 for African countries covered in the 2018 African Tax Outlook was 16 per cent. The ratio for Africa varies widely between countries, ranging from about 5 per cent in Nigeria to about 28 per cent in Seychelles. The relatively poor performance of African countries in collecting taxes presents a huge challenge, considering that the continent has an annual financing gap of between $68-$108 billion for infrastructure alone, according to the African Development Bank. The World Bank estimates that between 50 and 80 per cent of what is required to finance the Sustainable Development Goals (SDGs) in developing countries must come from domestic resources. Since tax collection in developing countries will determine whether the Sustainable Development Goals can rival the success of the Millennium Development Goals (MDGs), it becomes imperative to improve taxation in Africa if significant progress must be made with the SDGs in the continent.