Africa’s tax-to-GDP ratio at 15.6% in 2021

A report by the Organisation for Economic Co-operation and Development (OECD) has revealed that the unweighted average tax-to-GDP ratio for Africa stood at 15.6% in 2021, showing no change compared to the previous year. Arthur Minsat, the Head of Africa, Middle East, and Europe at the OECD, recently discussed the report's findings in an interview with CNBC Africa. The report highlighted key points regarding the tax-to-GDP ratio, success stories in certain African countries, challenges faced by nations relying on natural resources, and recommendations for boosting non-tax revenues. The average tax-to-GDP ratio for African countries, particularly the 33 countries on the continent, was noted to be lower at 15% compared to regions like Asia and Latin America. Minsat pointed out that African countries are still grappling with the aftermath of the COVID-19 pandemic. Despite successful tax policies in countries like South Africa and the Democratic Republic of the Congo, the overall tax-to-GDP ratio for the continent remained stagnant at 15.6% in 2021. Some nations, however, showcased positive progress with countries like Senegal and Togo increasing their tax-to-GDP ratios through tax administration reforms. On the other hand, countries heavily reliant on natural resources, such as Chad and the Seychelles, experienced a decline in domestic resource mobilization due to fluctuating global commodity prices. Moreover, Minsat emphasized the importance of non-tax revenues which are often volatile and dependent on sources like mining and natural resource extraction. He highlighted the need for African countries, especially those heavily dependent on natural resources, to invest in transforming these resources locally to create more stable and productive employment opportunities. By focusing on sectors that add higher value, countries can generate more stable tax revenues and reduce dependency on fluctuating commodity prices. In conclusion, Minsat recommended that African nations adopt context-specific strategies to enhance their non-tax revenues. By diversifying revenue sources and investing in sectors that promote stable and sustainable economic growth, countries can mitigate the impact of external shocks and build a more resilient economy. The report's insights shed light on the challenges and opportunities for African countries in improving their tax-to-GDP ratios and boosting non-tax revenues to support long-term economic development.