Tax Reform, Digitization at the Heart of Africa's Development Financing – ECA Report

Marrakech / Addis Ababa, March 23, 2019 (ECA) – A new report from the United Nations Economic Commission for Africa (ECA) says it is urgent that African countries broaden and deepen their bases for tax and revenue collection while taking advantage of digital technologies for compliance, to achieve urgent development goals. [Download your copy here: www.uneca.org/era2019 ]

Launched today in Marrakech, Morocco, where the 52 countries of the ECA^{North Dakota} The session takes place, the Economic Report on Africa 2019 (ERA 2019), regrets the continent's low public revenue / GDP ratio of 21.4% in 2018, noting that the continent needs to increase this figure significantly in order to adequately fund national development programs. as well as those set out in Agenda 2030 and Agenda 2063.

The report, whose theme is "Fiscal Policy for Financing Sustainable Development in Africa," states that public revenues on the continent can increase by 12 to 20 percent of GDP through rigorous collection of tax and non-tax revenues, including aligning tax policy with the business cycle.

This encourages governments to invest in strong institutions and advanced data collection methods that provide better control over non-tax revenue streams while encouraging them to venture into areas that are difficult to tax, such as tax credit. agriculture, the informal sector and the digital economy.

Reforming tax administration systems through digitization, refraining from unproductive tax incentives and becoming highly disciplined in debt, are other proposals to expand public resources for development finance in Africa.

The continent could increase tax revenues by $ 99 billion, or 4.6 percent of gross domestic product (GDP) a year, if it decided to implement these recommendations swiftly, according to the report.

There is a lot to be done by leveraging digital systems to generate revenue. For example, Rwanda increased revenue collection by 6% of GDP by introducing electronic taxation and South Africa used online tax payments to reduce compliance costs by 22.4%. reducing the compliance timeframe for the value-added tax by 21.8%. hundred.

However, improving tax and revenue performance can not be based solely on tax efficiency, but also on the provision of essential public services to reduce inequalities and encourage economic growth and compliance. , the report said.

This should go hand in hand with the fight against corruption and the strengthening of accountability to reduce inefficiencies in tax collection.

The report also highlights the importance of multinational and state corporations that dominate this sector of natural resource exploitation.

"However, multinational corporations also have the ability to adopt complex international tax avoidance strategies that transfer the benefits of underlying economic activities to untaxed or untaxed jurisdictions, described as base erosion and corruption. benefit sharing, "says the report. .

Eliminating the shortcomings of existing agreements with multinationals could increase the tax revenues of the governments concerned by about 2.7% of gross domestic product (GDP), funds that can be used to achieve the Sustainable Development Goals. (ODD), adds the report.

Africa has a huge funding gap estimated at 11-13% of GDP per year if it is to meet the goals of the United Nations Sustainable Development Goals and the Agenda 2063, but the ERA 2019 shows that this gap can be quickly filled.

"To achieve these two goals, Africa needs to increase its domestic investment rate to 30-35 percent of annual GDP and triple its growth rate from 3.2 percent to about 10 percent a year," he said. said Adam Elhiraika, Head of Macroeconomics and Governance at ECA. Division that coordinated the work on the report.

"The ERA 2019 is very timely for Africa as it explores comprehensive ways to finance development at a time when funding resources have been negated by the aftermath of the 2008 global financial crisis. and the reversal of commodity prices in 2014, "said ECA executive secretary. – Ms. Vera Songwe after the launch of the report.

She was optimistic: "Although these precedents have made it difficult to implement the United Nations Development Agenda and the 2030 Africa Development Program and the African Union Agenda 2063. for a prosperous, integrated and peaceful Africa, I am convinced that the need to generate additional revenue Financing for these development programs will be much easier for African countries that take into account the carefully crafted recommendations in this report. "

"ECA did such a good job with the Economic Report on Africa 2019 to the extent that we ask the Commission to go further, "said Gambian Minister of Finance and Economic Affairs Mambury Njie, adding that" we now know where the problem is [with mobilizing internal resources for development] is."

One of the ways to go further lies in the question: "How can we transform structural transformation into support for fiscal policy in Africa?", Asked the Egyptian Deputy Minister of Planning, Mr Ahmed Kamaly

At the launch, speakers also asked ECA to deepen its research on the influence of tax incentives on investment and revenue collection, although experts generally agreed that It was becoming increasingly clear that the incentives did not make a big difference.

Others suggested that the Commission should undertake studies on how to integrate the informal sector into the formal economy to obtain more revenue and seek to support Member States in the implementation of the conclusions and recommendations of the report.

A global message to remember from the ERA 2109 "is that in Africa we have a challenge to raise for the financing of the SDGs but this challenge is not insurmountable, it can be solved with serious efforts and targeted to mobilize more domestic revenue through fiscal policy, "Elhiraika said. resume.