Paying Taxes: 10 African Countries With Highest Tax-To-GDP Ratios

By Dana Sanchez Published: July 14, 2015, 12:16 pm

How well are African countries doing when it comes to collecting taxes?

It all depends on the data. Poor data or no data is available from many African countries, Mail&Gaurdian reports. Some stars in the area of African tax transparency include Liberia, Mali, and Togo, which consistently collect data. On the opposite end are about 20 countries including Zimbabwe and Malawi that have no data.

Developed countries like the U.S. often question the ability of African countries to spend aid efficiently, Mail&Guardian reports.

Africa has seen huge private-sector inflows, building on the “trade-not-aid” mantra that is currently in favor.

Foreign direct investment (FDI) into sub-Saharan Africareached $42 billion in 2014 — a 5 percent increase — according to UNCTAD (United Nations Conference on Trade and Development) figures, Mail&Guardian reports.

The role of foreign direct investment in Africa remains significant. African countries depend on corporations with headquarters in other countries for up to 14 percent of their government funding, on average.

International Monetary Fund figures show that about half of all developing countries have tax-to-GDP ratios less than 15 percent, compared with an average of 34 percent in OECD (Organisation for Economic Co-operation and Development) countries. Many African countries fall well below 15 percent.

World bank data highlights which African countries have done the best at raising tax-to-GDP ratios. The higher the ratio, the more the countries are increasing growth and efficiency, Mail & Guardian reports. A higher ratio also means a country is decreasing its dependence on donors.

The tax-to-GDP ratio is an economic measurement that compares the amount of taxes collected by a government to the amount of income that country receives for its products, according to Wisegeek. By comparing these amounts, economists get a rough idea of how much the economy is fueled by its tax collections. Comparing the tax-to-GDP ratios of different countries can be misleading because different circumstances are unique in each country and contribute to the overall economic climate, Wisegeek reports.

National economies are spurred by how much people spend and the prices of the products they want. How much tax revenue stimulates an economy is what economists hope to learn when they study the tax-to-GDP ratio.

Taxes paid by individuals and corporations usually account for most of the taxes collected by a government, according to Investopedia. Customs and duties paid by users of goods and services also make up a portion of tax receipts.

The tax-to-GDP ratio is the total amount of taxes collected by a government divided by the country’s GDP. Some countries like Sweden have a high tax-to-GDP ratio (as high as 54 percent). Others such as India have a low ratio. When tax revenues grow at a slower rate than the GDP of a country, the tax-to-GDP ratio falls.

African countries raise more than $527.3 billion annually from domestic taxes, compared to $73.7 billion received in private flows and $51.4 billion in official development assistance, according to New Partnership for Africa’s Development (NEPAD) and other sources, according to UN.org.

North Africa is well represented in the top 10, contributing three African countries with high tax-to-GDP ratios. On the opposite end is Nigeria, which has an average of a 2 percent tax-to-GDP ratio and is unable to pay its workers as the oil crunch lingers — but that’s for another list. Nigeria shows the dangers of weak revenue collection plagued by numerous leaks, Mail&Guardian reports.

Here are the 10 African countries with the highest tax-to-GDP ratios based on three-year averages using World Bank data.

Sources: Mail&GuardianAfrica, WorldBank, Investopedia, WisegeekUN.org.

Crocodile farming on Benguerra Island in the Bazaruto Archipelago, Mozambique. Photo: Dave Hamman/Getty

Crocodile farming on Benguerra Island in the Bazaruto Archipelago, Mozambique. Photo: Dave Hamman/Getty

10: Cape Verde, Mauritius, and Mozambique

Tying in tenth place, these three countries share a tax-to-GDP ratio of 18.7

Senegal, Momar Sar, weekly market. Photo: Aldo Pavan/Getty

Senegal, Momar Sar, weekly market. Photo: Aldo Pavan/Getty

9: Senegal

Tax-to-GDP ratio: 19

Ice Cream on the Marginal, Angola, Luanda Bay. Photo: Ken Gerhardt/Getty

Ice Cream on the Marginal, Angola, Luanda Bay. Photo: Ken Gerhardt/Getty

8: Angola

Tax-to-GDP ratio: 19.7

Minibus taxi and street market stalls, Tunisia. Photo: Holger Leue/Getty

Minibus taxi and street market stalls, Tunisia. Photo: Holger Leue/Getty

7: Tunisia

Tax-to-GDP ratio: 20.5

Independence Avenue, the main street in Windhoek. Photo: Getty

Independence Avenue, the main street in Windhoek. Photo: Getty

6: Namibia

Tax-to-GDP ratio: 22.5**

Morocco, Fes, Medina, Tanneries souk. Photo: Des/Getty

Morocco, Fes, Medina, Tanneries souk. Photo: Des/Getty

5: Morocco

Tax-to-GDP ratio: 23.7

Botswana, Okavango Delta, Tourists on trip in a Mokoro canoe. Photo: GFC Collection/Getty

Botswana, Okavango Delta, tourists on trip in a mokoro canoe. Photo: GFC Collection/Getty

4: Botswana

Tax-to-GDP ratio: 24.7

Student sangoma (traditional healers), South Africa. Photo: Jeremy Woodhouse/Getty

Student sangoma (traditional healers), South Africa. Photo: Jeremy Woodhouse/Getty

3: South Africa

Tax-to-GDP ratio: 25

Street scene in Victoria City, Mahe Island, Seychelles. Photo: Photo: Danita Delimont

Street scene in Victoria City, Mahe Island, Seychelles. Photo: Danita Delimont/Getty

2: Seychelles

Tax-to-GDP ratio: 29

Algerian policeman beside a Harley Davidson motorcycle. Photo: Nick Laing/Getty

Algerian policeman beside a Harley Davidson motorcycle. Photo: Nick Laing/Getty

1: Algeria

Tax-to-GDP ratio: 35.5

 

 

 

 

 

 

 

 

 

 

 

 

 

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