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Tax Reform, Digitisation Key To Financing Africa’s Devt – ECA

The United Nations Economic Commission for Africa (ECA) has set a four-point agenda for African governments to implement in order to enable Africa achieve the UN 2030 global goals (SDGs), and the AU Agenda 2063.

The ECA, in its Economic Report on Africa released on Sunday at the Conference of Ministers and distributed by the Africa Press Organisation (APO) Group, specifically recommended that Africa must digitise its economies, broaden its tax base, prevent further deterioration of fiscal and debt positions, and aim for double-digit growth to

According to the latest Economic Report on Africa, a flagship publication of the ECA which focuses on fiscal policy, government revenues account for 21.4 percent of earnings which is insufficient to meet countries’ development financing needs.

Speaking during the launching of the report at Marrakesh, Morocco, the ECA’s Executive Secretary, Vera Songwe, said that “the Report identifies several quick wins in Africa’s pursuit of additional fiscal space to finance its accelerated development.

“[It also] focuses on the instrumental 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.

Songwe noted further that with just a decade away from the SDG, African countries continued to search for policy mixes to help accelerate the achievement of the SDGs, pointing out, however, that for many countries, “financing remains the biggest bottleneck with implementing capacity a close second.”

While analysing and highlighting both challenges and opportunities, the Report also recommended comprehensive macroeconomic 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.

In addition, the Report reflected further that 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”, it emphasized the need for Africa to do more, and work towards achieving a fine balance between raising revenue and incentivizing investments, in order to boost growth.

Also, the Report showed that in some of Africa’s largest economies, namely South Africa, Angola and Nigeria, growth trended upwards but remained vulnerable to shifts in commodity prices.

The ECA reported further that East Africa remained the fastest growing region in the continent during, 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 in 2018 compared to 2017.

On the issue of Africa’s debt burden, the Report showed 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.

The Report projected that African countries can increase government revenue by 12–20 per cent of GDP by adopting a policy framework that strengthens revenue mobilisation, including through digitalising the various economies, stating that digitization could enhance revenue mobilization by up to 6 per cent.

The report stated further: “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 mobilize 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”, it added.

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