- African states derive little revenue from taxes, relative to the rest of the world
- Aid inflows are dwindling, while prices of commodity exports have dropped
- Some countries on the continent are making up for this by raising taxes
- Only those that maintain favorable business conditions will be successful
African economies have extremely narrow tax bases, particularly when compared with the rich economies in the Organisation for Economic Co-operation and Development (OECD). These reflect the continent’s low economic diversification, the excessive weight of the informal sector, as well as weak governance and regulation.
In recent years, the collapse of global commodity prices, shifts in trade and donor fatigue have led several African countries to reform their tax systems to increase and diversify revenue. By providing stable, predictable funding for public investments and social services, broader tax bases could help liberate African countries from aid and resource rents in the long run. However, they could also compromise much-needed investment and economic growth.