Africaâ?s low income earning countries have a te ndency to introduce more indirect taxes to boost state revenues, but corruption a nd complex tax systems have discouraged smaller firms from entering the official
tax system, a new UN report has revealed.
African countries without mineral wealth have a tendency to heavily burden their citizens with various taxes.
These countries have failed to expand the tax base to include companies that ope rate in the informal sectors, which feel discouraged to enter the official tax s y stem due to corruption.
The African Economic Outlook report, officially launched in Addis Ababa, the Eth iopian capital, Monday, showed countries without minerals and oil were more effe c tive in tax collection.
However, the expansion of the tax systems remains subjects to changes in the int ernational markets such as the recent economic downturn.
â?In these countries, it is the more politically demanding types of taxes – per sonal and corporate income taxes together with value-added Tax – that have been d riving the slow increase in tax shares,â? the report said.
It says although oil-producing countries collect more tax revenue, non-oil produ cers lead in better quality sources of taxes.
Libya, a leading producer of crude oil, abandoned other sources of tax after ear nings from oil exports shot up to 70 percent of the countryâ?s overall wealth in 2007 due to high oil prices.
Countries with higher earnings from oil and other minerals, have mostly abandone d tax revenues and resorted to the tax revenues from crude oil exports.
Algeria, Angola, Botswana, Congo, Chad, Equatorial Guinea, Gabon, Libya and Nige ria fall in the category of countries with lax tax laws.
Burkina Faso, Burundi, Djibouti, Kenya, Lesotho, Mauritania, Morocco, Mozambique , Rwanda, Senegal, South Africa and Zambia, are amongst the countries which have
more indirect taxes.
These are taxes based on consumption of certain consumer goods collected for the government by the various companies. These include VAT, sales taxes and excise d uties.
These consumer taxes target cigarettes, alcoholic drinks and airtime sales taxes , which are collected by companies and paid directly to the government.
The UN report states the difficulties faced by the countries with no oil wealth include the lack of ability to increase the tax base, mainly to reach the compan i es not officially covered under the formal tax system.
The report cites complex tax evasion schemes, the difficulties that some oil pro ducing countries face to determine the exact amount of volumes of crude extracte d to base the taxes and the over-use of certain taxation measures by the various g overnments as weaknesses that need correction.