‘Tax reform, digitalisation key to financing Africa’s economic development’

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Nigeria and other African countries must digitalise their economies, broaden their tax base, prevent further deterioration of fiscal and debt positions, and aim for double-digit growth to achieve the United Nation (UN) 2030 Sustainable Development Goals (SDGs) and the African Union (AU) Agenda 2063.

These were the key highlights of the “2019 Economic Report on Africa,” released at the Conference of Ministers in Marrakech, Morocco.

This year’s report, a flagship publication of the United Nations Economic Commission for Africa (ECA), focuses on fiscal policy. The report, which said the government revenue, which account for 21.4 per cent, was insufficient to meet countries’development financing needs, identified several quick wins in Africa’s pursuit of additional fiscal space to finance its accelerated development.

ECA’s Executive Secretary Vera Songwe stated this at the launch of the document.

She said: ‘’The report also focused on the role of fiscal policy in crowding-in investment and creating adequate fiscal space for social policy, including supporting women and youth-led small and medium enterprises.”

She added that a decade away from the SDG. “African countries continue to search for policy mixes to help accelerate the achievement of the SDGs. However, for many countries, financing remains the biggest bottleneck with implementing capacity a close second.”

Analysing and highlighting both challenges and opportunities, the Report also recommends comprehensive macro-economic reforms aimed at building financial resilience, placing emphasis on the need for Africa to accelerate growth to double digits by 2030 and to boost investment from its current 25 per cent of GDP.

While economic growth in Africa remained moderate at 3.2 per cent in 2018 – due to solid global growth, a moderate increase in commodity prices and favourable domestic conditions, the report emphasised that Africa needs to do more and work towards achieving a fine balance between raising revenue and incentivising investments, in order to boost growth.

In some of Africa’s largest economies—South Africa, Angola and Nigeria – the report revealed, growth trended upwards but remained vulnerable to shifts in commodity prices. East Africa remained the fastest growing, at 6.1 per cent in 2017 and 6.2 per cent in 2018, while in West Africa, the economy expanded by 3.2 per cent in 2018, up from 2.4 per cent in 2017.

Central, North and Southern Africa’s economies grew at a slower pace last year compared to 2017. On the issue of Africa’s debt burden, the report revealed 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.

It argued that African countries can increase government revenue by 12–20 per cent of GDP by adopting a policy framework that strengthen revenue mobilisation, including through digitalising African economies, stating that digitisation could enhance revenue mobilisation by up to six per cent.

It said: ”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,” the report said.

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