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UNECA. Public Resource Mobilisation and Aid in Africa. African Economic Outlook 2010 Gregory De PAEPE Policy Analyst OECD Development centre September 15 th , 2010. UNECA. AEO partners + coverage. Lead partner (since 2007/08). Other partners. Experts Network. - PowerPoint PPT Presentation
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African Economic Outlook 2010
Gregory De PAEPEPolicy Analyst
OECD Development centre
September 15th , 2010
UNECA
Public Resource Mobilisation and Aid in Africa
Financial partners (European Development Fund)
Other partners
UNECA
Lead partner(since 2007/08)
Experts Network= 10 Independent African Think Tanks
From 47 to 50 countries
= 99.5% of Africa’s GDP
= 97.3% of its population
AEO partners + coverage
Focusing on key structural issues every year
Special annual focus:
2003: Privatisation2004: Energy2005: SMEs2006: Transport2007: Water and sanitation2008: Technical & vocational skills development2009: Innovation and ICT
2010: Public Resource Mobilisation and Aid
Public Resource Mobilization and Aid
Why Public Resource Mobilization
Taxes in Africa: some stylized Facts
1
2
3 Policy options
Mobilising one’s own
resources for development
Building accountable
states
Big bang for your
aid buck
Ownership & governance
The cornerstone of broad-based development
ODA < 50% tax revenue
ODA > 50% tax revenue
No available data
Source: Development Centre, based on AEO country survey’s, 2010.
1. WHY PUBLIC RESOURCE MOBILIZATION
Liby
aEq
uato
rial G
uine
aSe
yche
lles
Gab
onAl
geria
Ango
laBo
tsw
ana
Sout
h Af
rica
Cong
oM
auriti
usN
amib
iaSw
azila
ndTu
nisia
Cape
Ver
deM
oroc
coAF
RICA
N A
VERA
GE
Nig
eria
Egyp
tLe
soth
oSu
dan
Chad
Djib
outi
Zam
bia
Sene
gal
Cam
eroo
nKe
nya
Mau
ritan
iaCô
te d
'Ivoi
reSã
o To
mé
& P
rinci
peAF
RICA
N M
EDIA
NBe
nin
Gha
na**
Com
oros
**M
ali
Gam
bia
Togo
Burk
ina
Faso
Tanz
ania
Gui
nea
Uga
nda
Moz
ambi
que
Rwan
daM
adag
asca
rLi
beria
Mal
awi*
Cent
ral A
fr. R
ep.
Nig
erEt
hiop
iaSi
erra
Leo
neCo
ngo
Dem
. Rep
.G
uine
a-Bi
ssau
Buru
ndi 0
400
800
1200
1600
2000
Tax revenue per capita
ODA per capitaUSD
Mobilising Africa’s public resources: can and must be achieved
Median
Average
Source: Development Centre, based on AEO country survey’s, 2010.
2. SOME STYLISED FACTS
19961997
19981999
20002001
20022003
20042005
20062007
10
15
20
25
30
35
40
Taxes as a share of GDP in Africa% GDP
0
500
1000
1500
2000
2500
3000
3500
Average tax collection per capita in Africa
Upper Middle Income Lower Middle Income Lower Income
USD per Capita
Source: Development Centre, based on AEO country survey’s, 2010.
Encouraging trends considering income levels
≈ USD 3000
≈ USD 500
≈ USD 70
2007 2007
2. SOME STYLISED FACTS
Source: Development Centre, based on AEO country survey’s, 2010.
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070
2
4
6
8
10
12
14
16Resource taxesTaxes on personal income and profitsVAT and excisesImport duties
% G
DP
But driven by volatile and unbalanced sources of income
Tax share = 36.4% of GDPTaxes on income and profits = 11.6% of GDPVAT = 10.5% of GDPResidual taxes = 14.3% of GDP
Compared to Germany:
2. SOME STYLISED FACTS
Some non resource-rich countries have performed better in terms of tax effort (Tax effort = actual tax revenue/potential tax revenue)
Lesotho
Swazil
andLib
eria
Comoros
*
Namibi
a
(oil)South
Africa
(oil)Kenya
Morocco
Ghana*
Cape Verde
Senegal
Malawi
Gambia
Zambia
Ethiopia
Botswana
Uganda
Rwanda
Guinea-B
issau
*Mali
Burkina Faso*
(oil)Egypt
Mozambique
Tanzania*
(oil)Maurita
nia
(oil)Côte d'Ivo
ire
Mauritius
(oil)Cameroon
(oil)Tunis
ia
Sierra
Leon
e
Centra
l Afr.
Rep.
(oil) Congo Dem. R
ep.
Madagasca
r
Guinea
(oil)Suda
n
(oil)Gabon
(oil)Algeria
(oil)Nigeria
(oil)Cong
o
(oil)Ang
ola
(oil)Chad
*0.0
0.5
1.0
1.5
2.0
2.5
3.0
Tax effort index excl. resource taxes
Source: Development Centre, based on AEO country survey’s, 2010.
Yet several reformers show resource abundance not necessary
Oil exporters usually show low tax effort
African average =1.09
2. SOME STYLISED FACTS
Four Challenges for African Tax Policy Makers
Source: Centre de Développement, sur la base des notes pays des Perspectives économiques en Afrique, 2010.
1. Inadequate capacitySmall staff, low pay, IT, governance …
2. Low to very low fiscal legitimacyHealth, infrastructure, education …
3. Shallow tax baseInformal sector = about 75%
4. Unbalanced tax mixSome overtaxed, some undertaxed
3. POLICY OPTIONS
Micro, small and medium enterprises = low fiscal potential
• High collection costs• Low fiscal returns• Already pay VAT
Formal SMEsMicro / small informal
• Few exemption benefits• Tend to be abusively taxed• « Missing middle »
3. POLICY OPTIONS
Big transactions and enterprises have a high fiscal potential
Multinationals
• Fraud and exemptions• Effective tax rates < nominal tax rates
• Lack of transparency
Big informal transactions
Low collection costs
High fiscal returns
3. POLICY OPTIONS
At national level
3. POLICY OPTIONS
In the medium / long run
• Stimulate private sector development
• Moderate, broad-based effective tax rates
• Strengthen administrative capacity
• Build fiscal legitimacy by improving quality of expenditure
In the short run
• Tax big informal and formal transactions better
• Fight fraud and fiscal evasion
2%
98%
Technical cooperation to "Public Sector Financial Management" in Africa
Total technical cooperation to other sectors in Africa
Source: OECD/DAC 2010
Country Average Cost - revenue
ratioSudan 5.7%Ethiopia 5.3%Congo RDC 5.2%Rwanda 3.2%Tanzania 3.2%South Africa 1.2%ArgentinaEcuadorCosta Rica
1.8%1.0%0.8%
A high multiplier, yet neglected in technical cooperation
yet
Collection costs as a % of collected tax revenues
3. POLICY OPTIONS
www.AfricanEconomicOutlook.org
UNECA
Thank you
The voice of Africa must be heard in the international tax dialogue
CHANGE GLOBAL
RULES OF THE GAME
Country-by-Country MNEs
reporting…
Dealing with misuse of transfer pricing by MNEs
Participation in International Tax
Dialogue
Regional initiatives: African Tax Administration Forum
Local International
= OECD : tax havens…
= OECD : capacity building + peer learning
Being studied as a potential solution =
= Capacity issues
3. POLICY OPTIONS
Untapped resources for resource-rich countries…
• Some non resource-rich countries have performed better in terms of tax effort (Tax effort = actual tax revenue/potential tax revenue)
Source: AEO, 2010.
0.00.51.01.52.02.53.03.5
Including resource taxes Series3
Tax
effor
t
Resource dependent
PART 2: SOME STYLIZED FACTS
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