Chronicle Editor
Prosper Ndlovu
WITH only five years left before the deadline for the United Nations Sustainable Development Goals (SDGs), it is clear that many African countries face significant financing gaps to achieve these targets and those espoused under the African Agenda 2063.
The need to adapt to challenges and opportunities of the digital age amid emerging global issues such as the recent shift in the Donald Trump-led United States’ foreign policy, which has trimmed foreign aid spending and torched a wave of trade wars, the rising debt crisis facing many African countries, geopolitical tensions, and climate change complications, have magnified calls for scaling up Domestic Resource Mobilisation (DRM) across Africa to drive sustainable development programmes and enhance equality.
Similarly, considerations for balance with regards to ensuring taxation fairness, optimising vast natural resource exploitation, promoting inclusivity, gender equality, climate/environmental sustainability and governance (ESG) factors, must play a more dynamic and central role.
The 2024 UN Report on Financing for Sustainable Development indicates the funding gap for developing countries has increased to about US$4 trillion per year. Further, the African Economic Outlook 2024 report by the African Development Bank, suggests the annual financing gap for African countries is estimated to be $402,2 billion.
Addressing these financing gaps requires concerted efforts in enhancing DRM capacities of African countries, says Mr Logan Wort, executive secretary for the African Tax Administration Forum (ATAF).
He was speaking during the organisation’s recent annual general meeting that was attended by regional tax experts, administrators, and policy makers in Rwanda.
Among other things, regional tax experts have emphasized the necessity for Africa to move with speed in embracing technology and digital solutions for the enhancement of effectiveness and efficiency of tax administration.
This includes tackling head-on the scourge of Illicit Financial Flows (IFFs) — illegal movement, transfer or use of money and assets across borders — and enhancing value-added productivity in Africa to steer robust intra-regional investment and trade, which remain comparatively lower globally.
Given the growing weaponisation of aid and the complications associated with donor dependence, Africa must assert her financial independence, and in doing so, taxation is an essential lever for ensuring the sustainable development of nations.
To achieve this, a higher level of key stakeholder collaboration is critical, including strengthening the capacity of the media sector to expand tax education and expose IFFs while holding governments to account on how public finances are utilised.
In addition to facilitating money laundering and tax evasion, development argue that IFFs promote corruption and deprive African states of crucial resources for the implementation of ambitious public policies in the areas of health, education, infrastructure and economic development. The figures are alarming.
In its 2020 Economic Development in Africa Report, UNCTAD noted that “stopping illicit capital flight could almost cut in half the annual financing gap of $200 billion that the continent faces to achieve the Sustainable Development Goals”.
The report stated that every year, an estimated $88,6 billion, equivalent to 3,7 percent of Africa’s Gross Domestic Product (GDP), leaves the continent as illicit capital flight.
“It is, therefore, imperative that we strengthen our mechanisms to combat these practices and work together to put in place effective strategies to stem this financial haemorrhage that is holding back our development efforts,” Mr Mamadou Sere, a senior Burkina Faso government official told journalists during a recent regional media and taxation reporting conference held in Ouagadougou.
He added: “In this fight, the media and communication professionals play a key role. By informing the general public, raising awareness of tax obligations and denouncing fraudulent practices, you contribute to the formation of a conscious and committed public opinion.
“The media are essential partners in promoting tax transparency and encouraging positive change in our societies.”
Mr Eugene Southgate, a South Africa-based media and taxation expert within ATAF who also attended the meeting, buttressed the critical role of the media in shaping public perception, including in influencing policy discussions on taxation and promoting informed civic engagement.
“When tax policies are misunderstood or misrepresented, it leads to misconceptions, reduced compliance, and ultimately, revenue losses, which then directly impacts on a country’s ability to grow its economy to take care of its people,” he said.
“We have seen across many of our member countries, when tax matters are communicated effectively, they foster trust, accountability, and voluntary compliance, which are key ingredients for sustainable domestic revenue mobilisation. So, what and how tax information is communicated is crucial.”
Mr Southgate also challenged government communicators to equally rise to the occasion in not only keeping the citizenry informed but making information readily available in a simple and understandable way so that when the public engage with the revenue authority it is easy and pleasant.
“The challenge to our communicators is how we communicate the message of DRM to the people. Ask the general public what is DRM and I guarantee you very few will know,” he said.
“A well-informed media is an essential partner in explaining complex tax policies in a way that resonates with the public.”
Over the past 15 years, ATAF has provided technical assistance, training, and policy support that has helped member countries including Zimbabwe to increase their tax-to-GDP ratios, enhance compliance rates, and combat illicit financial flows.
Whilst some progress is being made on enhancement of tax systems on the continent, African countries continue to report low tax-to-GDP ratio relative to other regions including comparable regions.
For instance, the 2023 edition of the African Tax Outlook, shows that the average tax-to-GDP for participating Africa countries was about 15,43 percent based on 2022 data, which is a slight improvement from the previous year.
However, these ratios are clearly below those of comparable regions such as the Latin American and Caribbean (LAC) region where the average tax-to-GDP ratio is about 21.7 percent and 34,1 percent for the Organization for Economic Cooperation and Development (OECD) countries.
However, hopes are high that as Africa embraces technology and digital solutions in tax administrations, together with targeted strategies for tax base expansion, effective use of exchange of information and tax transparency, sustained capacity building on transfer pricing and international tax, effective taxation of the digital economy, exploring new taxing opportunities such as environmental and climate issues, health and tobacco taxes, these should assist the continent to enhance tax-to-GDP ratio in the coming years.
Periodic engagements between ATAF and journalists have led to the establishment of the African Tax Media Network in 2018 in Kigali, Rwanda, a landmark step towards creating a dedicated platform to support journalists and communicators in tax reporting.
The initiative is aimed at bridging communication gaps, limited access to information, and technical complexities that often hinder productive engagement between tax officials and journalists.
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