Corruption, distrust are costing Africa billions in tax revenue

African Development Bank Group has warned that Africa’s biggest taxation challenge is no longer the lack of taxable activity, but the growing trust gap between governments and citizens. The 2026 African Economic Outlook launched during AfDB Annual Meetings in Brazzaville on May 26, estimates that Africa could mobilise an additional $469 billion annually by 2030 through improved tax efficiency alone, particularly by reducing leakages, strengthening institutions and improving governance systems. ALSO READ: How tax reforms in 2025 raised over Rwf130bn in six months According to the report, indirect taxes such as Value Added Tax (VAT) now account for nearly 60 per cent of Africa’s tax revenue, equivalent to $140.8 billion, making ordinary consumers the biggest contributors to government revenues, while direct taxes such as personal income tax remain comparatively weak. Presenting the report, Kevin Chika Urama, the Chief Economist of AfDB, said many Africans are willing to pay taxes if governments improve public service delivery, reduce corruption and make tax systems fairer and more transparent. “African citizens are willing to pay more taxes if governments can simplify the tax system, ensure sufficient accountability in tax collection and demonstrate that taxation leads to public service delivery,” Urama said. “We have huge potentials in domestic revenue mobilisation, and what needs to be done to unlock that potential is in policy reforms, building trust and digitalise the systekms.” ALSO READ: What you need to know about Rwanda’s new tax reforms The report argues that weak trust in institutions continues to undermine voluntary tax compliance across the continent, even as African governments face increasing pressure to raise domestic revenues amid rising debt servicing costs and shrinking fiscal space. According to the report, indirect taxes such as Value Added Tax (VAT) now account for nearly 60 per cent of Africa’s tax revenue, equivalent to $140.8 billion, making ordinary consumers the biggest contributors to government revenues, while direct taxes such as personal income tax remain comparatively weak. “The structure of taxation on the continent still shows significant inefficiencies, and there is still substantial room to improve tax collection without necessarily increasing tax rates,” Urama said. The report estimates that Africa could mobilise an additional $469 billion annually by 2030 through improved tax efficiency alone, particularly by reducing leakages, strengthening institutions and improving governance systems. The report also highlights that digitisation could become Africa’s most effective tool for transforming domestic revenue mobilisation. The AfDB identified digital tax systems, e-government platforms, interoperable financial systems and improved public financial management technologies as some of the highest-yield reforms available to African governments. Across the continent, governments are increasingly investing in electronic tax filing systems, digital identification programmes, mobile money integration and automated customs systems aimed at widening the tax base while reducing corruption and informal cash leakages. The report suggests that stronger digital systems could help African governments improve tax transparency, simplify payment processes and rebuild confidence among citizens who often perceive tax systems as unfair or poorly managed. Urama said rebuilding the “social contract” between governments and citizens remains central to improving tax compliance. The report further notes that formalising even part of Africa’s vast informal sector could unlock up to $125 billion annually in additional revenues. In many African economies, the informal sector accounts for between 40 and 60 per cent of GDP, yet much of the activity remains outside formal taxation systems. Rather than relying heavily on tax increases, the report encourages governments to first focus on “low-hanging fruits” such as improving efficiency, reducing corruption and digitising revenue systems before implementing major tax reforms. “Sequencing of reforms is critical, we need to start from low-hanging fruits before significant reforms so that we can gain citizens’ buy-in and strengthen the social contract.” The report also links stronger governance directly to economic performance, arguing that countries with more transparent and predictable systems tend to mobilise more domestic resources and attract greater private sector investment. As African countries continue grappling with rising debt burdens and external financing pressures, the AfDB argues that restoring public trust in taxation systems may prove just as important as introducing new fiscal policies. “Africa’s development challenge is not a lack of resources, but how to mobilise and manage capital more efficiently,” Urama said.

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Corruption, distrust are costing Africa billions in tax revenue