Africa has sustained gains in domestic resource mobilisation made since 2000, as tax revenues remained stable in 2016, according to Revenue Statistics in Africa 2018. Providing internationally comparable data for 21 participating countries, the report finds that the average tax-to-GDP ratio was 18.2% in 2016, the same level as in 2015, which represents a strong improvement from 13.1% in 2000.
The third edition of Revenue Statistics in Africa, released today in Paris during the 18th International Economic Forum on Africa, shows that tax-to-GDP ratios varied widely across African countries, ranging from 7.6% in the Democratic Republic of the Congo to 29.4% in Tunisia in 2016. Six countries -Mauritius, Morocco, Senegal, South Africa, Togo and Tunisia- had tax-to-GDP ratios greater than or equal to 20% in 2016. In comparison, the average tax-to-GDP ratio for Latin America and the Caribbean was 22.7% and 34.3% for OECD countries in 2016.
Revenue Statistics in Africa is a joint initiative between the African Tax Administration Forum (ATAF), the African Union Commission (AUC) and the Organisation for Economic Co-operation and Development (OECD) and its Development Centre, with the support of the European Union.
The publication, which now covers 21 countries, shows that revenue trends are mixed. Between 2015 and 2016, the tax-to-GDP ratios of 11 countries increased while those of 10 countries in the sample decreased. Botswana registered the highest increase (1.3 percentage points) followed by Mali (1.2 percentage points). The largest decreases (of over 2.0 percentage points) occurred in the Democratic Republic of the Congo and Niger. The changes in tax-to-GDP ratios were primarily due to economic factors. Declines in oil prices coupled with lower activity among mining and oil companies contributed to the decreases in the Democratic Republic of the Congo and Niger, while a significant increase in the sale of diamonds in Botswana has increased revenues. In contrast, the increased tax-to-GDP ratio in Mali is partly explained by improvements to tax administration.
African economies continue to rely heavily on taxes on goods and services, which accounted for 54.6% of total tax revenues in the Africa (21) average. Value-added taxes (VAT) alone accounted for 29.3% of revenues. However, the contribution of income taxes is increasing: taxes on income and profits accounted for 34.3% of total revenues across the Africa (21) in 2016 and have contributed the most to growth in tax revenues since 2000, increasing by 2.6% of GDP to reach 6.2% of GDP in 2016. Corporate income tax revenue increased by 1.4 percentage points over this period to 2.8% of GDP, while revenue from personal income tax rose from 2.1% to 3.0% of GDP in 2016, a historic high.
The report also contains data on non-tax revenues, which continued to decline across the 21 countries on average in 2016 but remain an important source of income in certain countries. These revenues, which include income from natural resources and grants, exceeded 5% of GDP in nine of the 21 countries.
Revenue Statistics in Africa is an important part of the African Union’s Strategy for the Harmonization of Statistics in Africa (SHaSA) and is aligned with the African Union’s Agenda 2063 and SDG 17.1. This edition contains a special chapter on SHaSA, identifying its approach to establishing an efficient statistical system that covers the political, economic, social, environmental and cultural development and integration of Africa, as well as the role of Revenue Statistics in Africa in this strategy.
Tax revenues as a percentage of GDP
- The Africa (21) average tax-to-GDP ratio was 18.2% in 2016, which is 5.0 percentage points higher than in 2000 but unchanged from 2015.
- In 2016, tax-to-GDP ratios ranged from 7.6% in the Democratic Republic of the Congo to 29.4% in Tunisia. Six countries (Mauritius, Morocco, Senegal, South Africa, Togo and Tunisia) had tax-to-GDP ratios greater than or equal to 20% in 2016.
- The change in the tax-to-GDP ratio since 2000 is comparable with the increase in the LAC region (4.7 percentage points) and significantly stronger than growth amongst OECD countries over the same period (0.4 percentage points).
- Between 2015 and 2016, the tax-to-GDP ratios of 11 countries increased while those of 10 countries in the sample decreased. This contrasts with 2015, when the Africa (21) tax-to-GDP ratio increased by 0.5 percentage points from the previous year on average and in 15 of the 21 countries.
- VAT revenue as a percentage of GDP in the Africa (21) increased by 2.0 percentage points from 2000, to 5.3% in 2016. VAT revenue accounted for the highest share of tax revenues in 2016 at 29.3%, an increase of 4.9 percentage points from 2000. The share of taxes on trade has fallen from 17.9% of total tax revenue to 11.6% over the same period.
- Revenue from income taxes contributed the most to growth in the average tax-to-GDP ratio of the Africa (21) between 2000 and 2016, increasing by 2.6% of GDP over this period to reach 6.2% of GDP in 2016. On average across the Africa (21), corporate income tax revenue increased by 1.4 percentage points – from 1.4% to 2.8% of GDP – between 2000 and 2016.
- The Africa (21) average tax structure is similar to that of LAC countries, although social security contributions in LAC are, on average, considerably higher. The Africa (21) average share of personal income tax (PIT) revenues to total tax revenue was 15.8% in 2016, lower than the OECD average (24.4%) but higher than the LAC average (9.7%).
- Non-tax revenues were equivalent to at least 5% of GDP in nine of the 21 countries in 2016. Of the 21 countries, all but four had lower non-tax revenues as a proportion of GDP in 2016 than in 2015.
Faster Transition to Clean Energy Would Bring Great Benefits to Poland
Scaling up renewable energy sources in Poland would benefit the economy, improve people’s health, and reduce serious environmental problems – including the worst air pollution among cities in Europe – says a new World Bank report, “Poland Energy Transition: The Path to Sustainability in the Electricity and Heating Sector.”
The report says that an ambitious target for Poland would be for the share of renewable energy in power generation to reach almost 50 percent by 2030 (versus 14 percent now) – with the share of coal dropping below 40 percent (versus 80 percent now). This transition would drastically lower air pollutants and CO2 emissions while costing the economy just seven percent more than the transition now planned by the Polish government. Furthermore, the local and global environmental benefits would fully compensate for these additional costs.
The most ambitious scenario set forth in the report could also lead to a 25 percent reduction (20,000 jobs) in direct coal mine jobs by 2030, however, it will be more than offset by potential 100,000 jobs a year created by improving the energy efficiency of homes in Poland. Active labor market policies can help mitigate impacts on jobs, which are expected to be negligible at the national level and modest at the local level, given a dynamic economy and tight labor market in the coal-producing Silesian region.
“Poland has already achieved success in decoupling economic growth from emissions. It has simultaneously increased its gross domestic product seven times and decreased its emissions in the electricity and heating sector by 30 percent since 1989”, says Carlos Piñerúa, World Bank Country Manager for Poland and the Baltic States.
“However, Poland’s heavy reliance on coal creates serious environmental problems and imposes heavy health costs on the population, who breathe polluted air. Our analysis shows that investing in renewables now would be good for people’s health as well as economically justified.”
The report acknowledges coal has contributed enormously to Poland’s economic and social development. Yet, European and global environmental trends mean that a transition to cleaner energy is inevitable and technological progress has made switching to cleaner energy affordable and cost-effective. Globally, the energy sector is moving toward sustainability, driven by economics, the need to reduce air pollution, and the national targets set as part of the Paris Agreement.
“More than 60 percent of Poland’s existing coal-fired power plants is over 30 years old. The replacement of these plants presents an opportunity to reduce air pollution and carbon emissions by shifting to cleaner sources,” says Xiaodong Wang, senior energy specialist at the World Bank and the author of the report.
“The decisions made today will strongly shape emissions in 30-40 years, so if Poland wants to put itself on a sustainable path, the time to act is now.”
Oil Market Report: A floor under prices?
OPEC and some non-OPEC oil ministers met in Vienna last week and agreed to curb their output by 1.2 mb/d in order to address growing surpluses in the market. The agreement aims to achieve relative stability and to bring the market towards balance. So far, the Brent crude oil price seems to have found a floor, remaining close to $60/bbl much where it was when the ministers met. Recently, prices have been volatile; in early October Brent crude oil prices reached $86/bbl on concerns that the market could tighten as Iranian sanctions were implemented. Then, thirty-seven days later, they fell back to $58/bbl as producers more than met the challenge of replacing Iranian and other barrels. Such volatility is not in the interests of producers or consumers.
Last week’s meeting reminded us that the Big Three of oil – Russia, Saudi Arabia and the United States – whose total liquids production now comprises about 40% of the global total, are the dominant players. Cooperation between Russia and Saudi Arabia is now the basis of production management with these two countries having a large capacity to swing output one way or the other. For them, prices falling further would place their budgets under great stress. The third, non-playing member, so to speak, of the Big Three is the United States, which is now the world’s biggest crude oil producer and where production management is a company level, economically driven decision. The United States is also the world’s biggest consumer and lower prices are welcome, although its producers will want to see them stay high enough to encourage further investment.
While the US was not present in Vienna, nobody could ignore its growing influence. On the day OPEC ministers sat down to talk, an important piece of data was published: according to the Energy Information Administration, in the week to 30 November the US was a net exporter of crude and products for the first time since at least 1991. The number, 211 kb/d, is modest and even if it proves to be an isolated data point, the long-term trend is clear. In 2018 to date, US net imports have averaged 3.1 mb/d. Ten years ago, just ahead of the shale revolution, the figure was 11.1 mb/d. As production grows inexorably, so will net imports decline and rising US exports will provide competition in many markets, including to some of the countries meeting in Vienna last week.
New data in this Report shows little change to our 2018 estimates. Demand will grow by 1.3 mb/d although there are signs that the pace is slackening in some countries as the impact of higher prices lingers. As far as non-OPEC supply is concerned, our estimate for growth is revised slightly up to 2.4 mb/d. For 2019, our demand growth outlook remains at 1.4 mb/d even though oil prices have fallen back considerably since the early October peak. Some of the support provided by lower prices will be offset by weaker economic growth globally, and particularly in some emerging economies. For non-OPEC supply, we have revised our growth forecast for 2019 down by 415 kb/d, partly due to expected cuts from Russia agreed last week, and to lower growth in Canada. The serious build-up of stocks arising from logistical bottlenecks in Alberta led the provincial government to act very decisively to curb output. The initial cutback of 325 kb/d for three months to allow blockages to ease is a significant development. Apart from lowering production, it should narrow the differential between West Canadian Select prices and WTI, which reached $51/bbl at one point.
Time will tell how effective the new production agreement will be in re-balancing the oil market. The next meeting of the Vienna Agreement countries takes place in April, and we hope that the intervening period is less volatile than has recently been the case.
Asia’s Growth Outlook Steady Despite China–US Trade Conflict
Economies in developing Asia and the Pacific are weathering external challenges thanks to robust domestic demand, while inflationary pressures are abating, says a new report from the Asian Development Bank (ADB).
In a supplement to its Asian Development Outlook 2018 Update report, ADB retained its regional growth forecast for 2018 at 6.0% and for 2019 at 5.8%. Excluding the newly industrialized economies of Hong Kong, China; the Republic of Korea; Singapore; and Taipei,China, the regional growth outlook is maintained at 6.5% for 2018 and 6.3% for 2019.
Lower international commodity prices and central bank action to calm market volatility means inflation in developing Asia is forecast to be 2.6% in 2018 and 2.7% in 2019, down from 2.8% previously forecast for both this year and next.
“The truce on trade tariffs agreed by the United States (US) and the People’s Republic of China (PRC) is very welcome but the unresolved conflict remains the main downside risk to economic prospects in the region,” said ADB Chief Economist Mr. Yasuyuki Sawada. “That said, we are keeping our forecasts for the region’s growth unchanged for this year with some of the biggest economies continuing to hold up well.”
Growth in the PRC, the second largest economy in the world, is still expected at 6.6% in 2018, moderating to 6.3% next year. Growth momentum continues in India on rebounding exports and higher industrial and agricultural output. Growth is predicted at 7.3% in 2018 and 7.6% in 2019.
Gross domestic product growth in Central Asia in 2019 is now forecast at 4.3%, up from the 4.2% forecast in September, as a recovery in public investment and higher output from the Shah Deniz gas field enhance prospects in Azerbaijan. South Asia’s 2019 growth is now pegged at 7.1% versus the 7.2% forecast in September. Southeast Asia is expected to grow 5.1% in 2019 versus the previous forecast of 5.2%. The Pacific is on track to expand 3.1% in 2019.
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