If we needed a reminder that taxes are a matter of life and death, the coronavirus has provided it. Even highly developed countries are straining to buy vaccine supply, deliver intensive care for patients and ease the pandemic’s economic shocks. For many less-developed countries in Africa, these lifesaving measures are beyond the realm of budgetary possibility.
One reason is the “deadly deficit” of weak domestic resource mobilization — most African countries come up short when it comes to taxation. On average, African countries derive just 17 percent of gross domestic product from taxes — that’s half as much as the far wealthier countries in the Organization for Economic Cooperation and Development. Africa’s tax deficit limits resources for health care, education and other pillars of economic and social development.
The pandemic, of course, has depressed tax revenue along with economic activity, which shrank by 3.7 percent in sub-Saharan Africa last year. South Africa was the only African country able to provide a stimulus package early in the pandemic. More recently, the country has considered raising taxes — while hoping for improved tax collections — to finance its planned coronavirus vaccination campaign.
How do Africans feel about taxes? Even if corporate tax havens cost Africa billions of dollars each year, the perceptions and actions of ordinary citizens matter, too. South Africa, which is still unpacking years of alleged corruption during the Jacob Zuma administration, provides a case study for how the loss of public faith can “gut” tax collection.
On this front, the news for African governments is not good. Afrobarometer surveys in 18 countries in late 2019 and early 2020 show that support for the government’s right to collect taxes, though still a majority, has weakened over the past decade, while a growing number of citizens say that people are avoiding paying their taxes.
Support for taxation has declined
By a 2-to-1 margin (61 percent vs. 32 percent), Africans say their governments have the right to make citizens pay taxes. People in Sierra Leone (89 percent) and Ethiopia (81 percent) are particularly strong in asserting the legitimacy of taxation, but fewer than 4 in 10 Angolans (36 percent) and Malawians (37 percent) agree. (See Figure 1.)
On average across 18 countries, a majority would even be willing to pay more in taxes to support programs for young people (57 percent) and to finance their country’s development without relying on foreign loans (64 percent).
But the view of taxation as legitimate has weakened over the past decade. On average, across 15 countries surveyed regularly since 2011/2013, support for the government’s right to collect taxes has declined by nine percentage points, led by massive drops in Malawi (-31 percentage points), Tunisia (-19 points), Lesotho (-18 points) and Nigeria (-17 points). Sierra Leone is the only country where the perceived legitimacy of taxation increased (+7 points).
More people think others don’t chip in
Over the same period, perceptions that people “often” or “always” avoid paying their taxes have skyrocketed, rising by 20 percentage points across the same 15 countries, from 32 percent to 52 percent. (See Figure 2.)
The change in Ghana is striking: 72 percent say tax avoidance is common, a 42-point increase from a decade ago. Research by the Ghana Anti-Corruption Coalition confirms that only about 1.5 million of the country’s 6 million eligible taxpayers actually pay taxes.
But all of the countries surveyed by Afrobarometer recorded increases in perceived tax avoidance, including surges of 33 points in Kenya and 32 points in Botswana.
What makes effective taxation so difficult?
Survey respondents report a range of other challenges for efficient tax administration. Almost half (48 percent) think that ordinary people pay too much in taxes, while only 12 percent think they pay too little. Africans are solidly (70 percent) behind higher tax rates for the wealthy than for ordinary people, a finding that could provide support for effective taxation of the rich as one of the most realistic strategies for funding responses to the coronavirus pandemic.
But about 85 percent of employment comes from Africa’s informal economy, and we found divided views on whether the government should make sure that small traders and others in the informal sector pay taxes. Even if citizens are willing to pay their taxes, more than 6 in 10 (62 percent) say it’s difficult to find out what taxes or fees they owe.
An even larger majority (77 percent) find it difficult to get information about how their governments use the taxes they collect. Only half (49 percent) believe that their governments use tax revenue for the well-being of their citizens, including just one-third of Nigerians and Angolans (each at 34 percent). (See Figure 3.)
In addition, 35 percent of survey respondents see “most” or “all” tax officials as corrupt, and a further 43 percent see “some of them” that way. Only 4 in 10 Africans (39 percent) say they trust the tax or revenue office “somewhat” or “a lot.”
These perceptions have consequences for how citizens see taxation. In our sample, Africans are more likely to endorse the government’s right to collect taxes if they consider tax officials trustworthy (+13 percentage points) and think that tax revenues are being used to benefit the public (+10 points).
What’s ahead for taxation in Africa?
If better taxation is critical to effective responses to emergencies like the coronavirus, as well as a prerequisite for the achievement of the U.N. Sustainable Development Goals, governments have no shortage of potential targets for action, from regulating tax havens to improving and expanding taxpayer education. One promising but thorny debate focuses on how to tax highly digitized businesses that are making huge profits without an easily taxable physical presence in many African countries.
But at an everyday level, our findings suggest that governments also face the challenge of demonstrating that tax officials are trustworthy and that tax moneys are being well invested to make life better.
Thomas Isbell is a PhD student at the University of Cape Town in South Africa. Find him on ResearchGate. Lulu Olan’g is a Tanzanian freelance researcher and a PhD student at Nazarbayev University in Kazakhstan.