Africa’s domestic revenue mobilisation can do better, experts

Among the ways countries can have more efficient domestic revenue collection, experts say is through digitisation of systems which improves efficiency and reduced costs as has been in the case of countries such as Rwanda. Courtesy.

Africa can build more resilient economies through efficient tax collection systems to generate the resources to meet its development goals and targets over the next few decades.

These were some of the takeaways from the Economic Commission for Africa (ECA) Conference of Ministers (COM2019), which has concluded in Marrakech, yesterday.

Officials said that this requires the continent to prioritise domestic revenue mobilisation efforts and triple current rates of growth.

An increase of 12-20 per cent in tax collection can raise up to $400billion and go a long way in funding $600 billion financing gap Africa faces, according to experts.

But that will also require fiscal prudence to strengthen a social contract between government and its people.

Although the conference agreed that digitisation provides an opportunity to raise taxes as well as greater transparency and better governance, they were also cautious about its challenges, in terms of what to tax and where to tax it, making it ever easier to shift profits and compounding the estimated $50bn loss the continent suffers from illicit financial flows.

The African Continental Free Trade Area (AfCFTA) was also a key topic of discussion with the initiative now on the brink of being operationalised.

This requires 22 countries to ratify the agreement and during the event, Ethiopia ratified it, bringing the total number to 21 countries.

“The AfCFTA is a great opportunity to accelerate what has been done bilaterally by some African countries. This will help bring growth to a higher level in a co-development approach,” Mohamed Benchaaboun Morocco’s Minister of Economy and Finance, said on the trading block that could be one of the largest in the world.

However, the enormity of the challenges of implementing the agreement should not be under-estimated, speakers cautioned.

The conference brings together African Ministers of Finance, Planning and Economic Development or their representatives. This year it was held under the theme - Fiscal policy, trade and the private sector in the digital era: A strategy for Africa.

The discussions put emphasis on how and why African countries should take full advantage of the opportunities offered by digitalisation, to accelerate growth to double digits by 2030.

ECA Executive Secretary Vera Songwe highlighted the fact that although Africa is still growing, with GPD growth expected to increase to 3.4 per cent in 2020 from 3.2 per cent this year, it needs to triple for the continent to realise its goals.

The ECA flagship publication - Economic report on Africa  2019  - was also launched during the conference.

Among other issues the detailed Report reveals that debt levels remained high as African countries increased their borrowing, to ease fiscal pressures most of which have been precipitated by the narrowing of revenue streams that has gone on since the commodity price shocks of 2014.

The report also examines the relationship between fiscal policy and debt sustainability in Africa.

“Digital identification can broaden the tax base by making it easier to identify and track taxpayers and helping taxpayers meet their tax obligations. By improving tax assessments and administration, it enhances the government’s capacity to mobilise additional resources. Digital ID systems yield gains in efficiency and convenience that could result in savings to taxpayers and government of up to $50 billion a year by 2020.”