Improved tax systems putting ‘real money’ into African economies

African tax authorities have generated more than $5 billion in the last eight years in new tax assessments through improved administrative systems, a broadened tax base, and investments in technology.

In the previous year, they increased their potential income from tax collections by $400 million – and year-to-date new assessments worth approximately $70 million were raised.

Read: New global tax rules may see African countries losing out, again How does the new global tax deal impact Africa?

Reflecting on the work of the African Tax Administrative Forum (Ataf), outgoing executive secretary Logan Wort said the increased tax revenue relates to “real money” getting into African economies.

“It did not come from raised taxes but from improved audit capabilities, the closing of tax arbitrage gaps, and better taxpayer relationships, particularly with multinational companies.”

African network

Ataf was established in 2009 to serve as an African network to improve tax systems on the continent.

It has assisted its 44 member countries to raise their average tax-to-GDP ratio from 14% in 2009 to around 18% today.

Nigeria has seen an almost doubling of its tax-to-GDP ratio to 13.5% in 2024.

Wort was spokesperson for former finance minister Trevor Manuel before heading up the Finance and Investment Sector Coordinating Unit of the Southern African Development Community.

This prepared him for his role at Ataf where he had to navigate the politics of taxation on the African continent.

“It required better political rather than tax knowledge to deal with the African tax landscape.”

African politics is a minefield and rather difficult to navigate. The cultural dynamic of ‘leaving no one behind’ means growth and development can be slow.

Besides cultural dynamism, there are linguistic and subregional issues.

Business in poverty

Wort says although the official development assistance in support of African countries is well-intended, most of it (around 70%) gets spent on salaries and administration. Ataf spends only 20% on salaries and administration.

“That is rare,” he says.

Underneath all of this is an “industry of development”. He calls this the “underbelly” of development.

When development agencies and donors assist, it justifies their “raison d’être”.

However, as soon as countries develop the ability to become self-sufficient, they tend to be less kind.

Being good to others is part of an industry that provides jobs and political leverage, says Wort. “There is business in poverty and underdevelopment. That business is an aid and development industry with people who have built careers on it.

“Once people don’t need the aid, these careers are being threatened.”

A stark reminder

Over the years, Africa has been reminded of its vulnerability and the precariousness of its dependence on Western development assistance.

First, the subprime financial crisis in the US and Europe, followed by the introduction of base erosion and profit shifting measures introduced by the Organisation for Economic Cooperation and Development (OECD), and more reently the rise of right-wing politics has seen the reduction of foreign aid to Africa.

The continent’s debt burden has ballooned, including SA, which had almost no debt 15 years ago and now carries a debt burden of close to 80%.

Wort believes African governments are too slow to respond to the tax reforms necessary for growth. However, the pressure from international bodies such as the OECD and the International Monetary Fund forces them to reform.

Policy involvement

Growth must come from better policy involvement in taxation on the continent – the treasury departments, academics, and technical assistance through tax reforms, audit capacity, the rewriting of tax codes, changing legislation, and improving tax collections.

There is a lot of politics in taxation, says Wort. “It is through tax that government and citizens meet.

“At election time, governments tend to focus on the areas where they made the biggest impact, which is generally at the very lowest end of society.”

The social contract is tested through the level of tax compliance and at the voting station.

Youth revolts in Africa

The classes who fund the economy are not the focus for politicians during elections.

“And we see that in the increase in youth revolts across the continent,” Wort notes.

He will spend his last working day in Seville, Spain, for the International Conference on Financing for Development where he will hand over to Mary Baine.

Read: Baine to take African Tax Administration Forum helm

Ataf chair Edward Kieswetter said Baine brings a wealth of leadership experience and a deep commitment to advancing fair, effective, and inclusive tax systems across the African continent.

Baine had been deputy executive secretary of Ataf for several years, where she led the organisation’s strategic planning, international cooperation, and African multilateral initiatives.

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