DFID Research: Taxing Africa for better governance
Mick Moore, of the International Centre for Tax and Development, highlights the importance of taxation in Africa and its impact on the relationship between citizens and their governments
Construction workers in Ethiopia. Picture: Simon Davis/DFID
Eliminating development aid and promoting taxation among African citizens has been identified as a source for better governance in Africa. Research being conducted by the International Centre for Tax and Development (ICTD) suggests that taxation is integral to better governance and a more prosperous citizenry. According to Mick Moore, CEO of ICTD and a professional fellow at the Institute of Development Studies (IDS), there are pragmatic and ultimately beneficial reasons for taxing Africa.
In his TEDx lecture “Why Tax Africa” Moore revealed that taxation is inherently very supportive of basic democratic principles. Where and how governments get their money is important in determining the behaviour of these bodies in relation to the prosperity of their citizens. Ultimately, “governments that depend on tax need their citizens to prosper” said Moore.
According to Moore, tax is consequentially very important for Africa because taxation is directly related to how people are governed. Governments throughout the western world, depend on the taxes of their citizenry in order to be successful. Taxation is a mutually beneficial relationship that depends on the citizens feeling that their taxes are working to their advantage through improved public services such as health care and education, while ensuring that governments have resources available at their disposal for other matters of the state.
Africa, however, is unique. Africa not only relies on revenue generated by broad general taxation but has 2 other sources of income, namely: development aid and natural resource revenues. African governments have complete autonomy over revenue generated by the sale of natural resources such as oil, gas and various minerals. The problem that arises is that, unlike other governments that depend on general taxation for income, development aid and natural resource revenues provide African governments with alternatives. These alternatives result in governments not being compelled to ensure the prosperity of their citizens. The implications of this scenario are that governments have no incentive to provide better public services for their citizens or for their citizens to prosper as the government itself does not solely depend on the prosperity of its citizens for revenue.
As Moore said:
If the government depends on general taxation it has a common interest in the well-being of its citizens, promoting prosperity.
The solution is therefore to fund Africa through tax and not development aid. Natural resource revenues should be given to citizens through monthly payments, or other systems, and then the government can tax its citizens and generate revenue through taxation while allowing their citizens to prosper. Allen Kagina, of the Uganda Revenue Authority, was quoted as having said that there is a need for Africans to “elevate ourselves from just being tax collectors and tax commissioners to being state builders”, recognizing that modern taxation involves an element of marketing, good communication and psychology.
The ICTD was created in 2012 as a global policy research network funded by the Department for International Development and Norad. It aims to contribute to development through the mobilisation of knowledge that will help make taxation policies more conducive to pro-poor economic growth and good governance.