African tax systems find it easier to tax purchases than wealth. A mobile phone top-up, a liter of fuel or an imported product generates an immediate tax payment. Wealth spread across companies, real estate, financial investments and accounts held abroad, however, requires reliable registries, banking data and tax authorities capable of identifying the ultimate beneficial owner. Governments therefore tax more easily what they can see.
The latest Revenue Statistics in Africa report, jointly published by the Organisation for Economic Co-operation and Development (OECD), the African Union Commission and the African Tax Administration Forum, puts a figure on this imbalance.
Taxes on goods and services accounted for 51.2% of tax revenues across the 38 countries covered in 2023. Value-added tax alone represented 26.6%, while taxes on income and profits accounted for 40%, including 16.5% from personal income tax and 21.4% from corporate income tax.
The picture, however, requires some nuance. Wealthier taxpayers generally pay more tax in absolute terms. But taxes borne by poorer households consume a far larger share of their income, directly reducing their ability to pay for food, housing, transport and healthcare.
The World Bank estimates that most African households pay more in taxes than they receive through transfers and subsidies. For the lowest-income households, the tax burden can even exceed the value of public assistance, worsening poverty in the short term.
VAT: Governments’ go-to source of tax revenue
The preference for indirect taxation is primarily driven by administrative constraints. VAT collected from a limited number of importers, wholesalers and formal businesses is easier to secure than income tax in economies where a large share of employment and transactions takes place outside the tax system.
According to the joint OECD, African Union Commission and African Tax Administration Forum report, the average tax-to-GDP ratio in the countries studied stood at just 16.1% in 2023, compared with 19.6% in Asia-Pacific, 21.3% in Latin America and 33.9% in OECD countries. Twenty of the 38 African countries studied remained below the 15% threshold.
Faced with social spending needs, infrastructure investment and debt servicing, governments therefore favour taxes that generate revenue quickly. VAT, customs duties and excise taxes meet that requirement. Their effectiveness in raising revenue, however, comes at a distributional cost.
Read also : DGI announces tax deadline: who needs to pay and when
A low-income household spends almost all of its income, while a wealthy family can save or invest a significant share of its earnings. The same VAT rate therefore takes up a much larger proportion of the former household’s available resources.
Informality does not fully shield poorer households. Even when they buy goods in unregistered markets, taxes paid upstream by importers or wholesalers are partly passed on through prices, the World Bank notes. The tax ultimately reaches the consumer without necessarily appearing on a receipt.
Wealth that is difficult to tax
The heavy reliance on indirect taxation contrasts with the growing concentration of wealth. According to Oxfam’s Africa’s Inequality Crisis and the Rise of the Super-Rich, published in July 2025, four African billionaires held $57.4 billion in wealth, more than the combined wealth of 750 million people.
Dollar millionaires, representing 0.02% of the continent’s population, are estimated to hold nearly one-fifth of its wealth, while the poorest half owns less than 1%. The combined wealth of African billionaires is estimated to have increased by 56% over five years.
These wealth estimates should be distinguished from administrative tax data. They nevertheless highlight the scale of assets that may escape taxation, either entirely or partially.
According to Oxfam, wealth taxes generated an average of just 0.3% of African GDP in 2022, compared with 0.6% in Asia-Pacific, 0.9% in Latin America and 1.8% in OECD countries. Nearly two-thirds of African countries are estimated to have no inheritance or gift tax, while none applies a genuine annual tax on net wealth.
Read also : Morocco’s tax authority simplifies transport tax incentives with new guide
Real estate itself is often undertaxed. Incomplete land registries, outdated property valuations, unregistered changes in ownership and weak tax collection deprive local authorities of a source of revenue that is nevertheless difficult to move abroad.
Tax breaks granted to companies also reduce the taxation of capital. Oxfam estimates that corporate tax incentives cost 20 African countries $4.9 billion annually. Yet exemptions designed to attract investment do not always deliver the jobs or technology transfers promised.
An imbalance reinforced by public spending
Inequality is not determined solely by how taxes are collected. It also depends on how public revenue is spent. A tax system that relies heavily on consumption can be offset by free public services and well-targeted social transfers.
The World Bank notes that the tax burden borne by low-income households often exceeds the benefits they receive through subsidies and direct assistance. In other words, a tax system that appears progressive on paper can coexist with fiscal policies that leave some households poorer once VAT and other indirect taxes are taken into account.
Debt pressures further complicate the equation. Oxfam says that 44 of the 47 African countries with active programmes with the IMF or World Bank reduced the share of spending allocated to education, healthcare or social protection in 2023 and 2024.
Households are therefore exposed twice: they pay consumption taxes while having to cover more private expenses to access essential services.
Taxing differently without weakening revenues
Rebalancing the system does not mean eliminating VAT. It remains a stable and relatively efficient source of government revenue. Broad exemptions can also benefit wealthier groups more because they spend more in absolute terms and can create additional opportunities for tax fraud.
The World Bank cites Senegal, which removed certain VAT exemptions on non-medical services provided by private healthcare facilities and mainly consumed by wealthier households. The challenge, therefore, is to specifically protect essential goods and vulnerable households rather than multiply poorly targeted exemptions.
Property taxation offers another avenue. Oxfam estimates that Morocco and South Africa collect the equivalent of 1.5% and 1.2% of GDP, respectively, through land and property taxes, among the highest levels on the continent.
If all African countries reached Morocco’s ratio, the additional revenue could theoretically exceed $34 billion a year. Such an extrapolation remains indicative, however, as administrative capacity and property markets vary significantly from one country to another.
Read also : Can tax reform reduce the competitive advantage of Morocco’s informal sector?
Freetown offers a more directly transferable example. Sierra Leone’s capital expanded its property registry and reassessed property values. The reform halved the tax due on the cheapest 20% of properties while more than tripling the tax on the most expensive 20%.
Potential revenue increased more than fivefold, with 70% coming from the quarter of properties with the highest values.
More effective taxation of large fortunes also requires specialized units, beneficial ownership registries, digitized land records and more effective international exchanges of financial information. Without these tools, raising headline tax rates may generate little additional revenue.
Oxfam estimates that increasing wealth taxation by one percentage point and taxation of the income of the richest 1% by 10 percentage points could generate $66 billion a year. This figure represents a scenario rather than a budget forecast. It nevertheless illustrates the scale of the revenue potential that is currently being overlooked.
The African debate, therefore, is not only about how much tax is collected, but who ultimately bears the burden. As long as governments know more about what ordinary households consume than about the wealth held by their richest taxpayers, ordinary citizens will remain the easiest taxpayers to reach.
