Tax revenues rose across African countries on average in 2022 due to higher commodity prices.
Revenue Statistics in Africa 2024 reveals that the average tax-to-GDP ratio of the 36 countries covered in the report which includes Mozambique, Somalia and Zambia for the first time was 16.0% in 2022, an increase of 0.5 percentage points (p.p.) from the previous year and above the level prior to the COVID-19 pandemic (15.5% in 2019). However, Africa’s average tax-to-GDP ratio in 2022 remained below the averages for Asia and the Pacific (19.3%), Latin America and the Caribbean (LAC, 21.5%), and OECD countries (34.0%).
The report, which was launched by the African Union Commission (AUC), the OECD and the African Tax Administration Forum (ATAF) at an informal meeting of the G20 Development Working Group chaired jointly by South Africa and Brazil, shows that tax-to-GDP ratios varied widely across African countries in 2022, from 2.6% in Somalia to 33.5% in Tunisia.
Amid a macroeconomic context characterised by a slowdown in growth in Africa, high global commodity prices, rising living costs and ongoing financing challenges for African governments, tax revenues increased as a percentage of GDP in 23 countries, decreased in 11 and remained unchanged in two between 2021 and 2022.
The Democratic Republic of the Congo and Chad recorded the largest increases in their tax-to-GDP ratio in 2022 (3.6 p.p. and 3.3 p.p. respectively), as a result of higher corporate income tax (CIT) revenues from the extractive sector. The largest falls occurred in Mali and Sierra Leone (1.9 p.p. in both cases) due to declines in revenues from taxes on goods and services.
The new report reveals that CIT revenues rose by 0.4% of GDP on average across Africa in 2022, primarily due to increases in countries with significant production of hydrocarbons and minerals. Revenues from taxes on goods and services rose by 0.1% of GDP on average in 2022 while revenues from personal income tax (PIT) and social security contributions remained unchanged from the previous year. Given the volatility of revenues from commodities, African governments may need to diversify their sources of revenues to achieve lasting increases.
Higher commodity prices also boosted non-tax revenues, which averaged 6.2% of GDP in the 35 countries with available data, an increase of 0.4 p.p. from the previous year. Revenues from rents and royalties increased by 0.4% of GDP on average in 2022, as did revenues from interest and dividends. Non-tax revenues ranged from 0.7% of GDP in South Africa to 23.7% in the Republic of the Congo in 2022.
Over a longer timeframe, Africa’s average tax-to-GDP ratio rose by 1.1 p.p. between 2013 and 2022 due to increases of between 0.2 p.p. and 0.3 p.p. in revenues from PIT, CIT, social security contributions, VAT and other consumption taxes. By comparison, the averages for the LAC region and OECD countries increased by 0.8 p.p. and 1.4 p.p. respectively between 2013 and 2022. Over the same period, non-tax revenues among the 35 African countries declined by 1.1% of GDP on average, offsetting the increase in tax revenues.
Revenue Statistics in Africa is a joint initiative of AUC, the OECD Centre for Tax and Policy and Administration, the OECD Development Centre, and ATAF, with technical support from the African Development Bank and the Cercle de réflexion et d’échange des dirigeants des administrations fiscales (CREDAF). The new report includes a special feature on facilitation and trust as drivers of voluntary tax compliance, which is based on a study by ATAF.
The 2024 edition of Revenue Statistics in Africa is supported by the European Union and the governments of Ireland, Japan, Luxembourg, the Netherlands, Norway, Spain, Sweden, Switzerland and the United Kingdom. It forms part of the second phase of the Pan-African Statistics Programme, a joint initiative between the African Union and the European Union.
Source; OECD.org