A report by the African Union has shown that African countries could lose up to US$500 billion in revenue from taxes, due to the COVID-19 pandemic.
As a result Africa’s economy is expected to shrink by 9% and a loss of about 30% in fiscal revenue and this will leave African countries at the mercy of international borrowers.
The report disclosed that Africa’s greatest source of tax revenues is from duties on goods and services since the continent is more import driven.
The AU report reported that in 2017, 53.7 per cent of tax revenue was raised from import duties. Nevertheless, with COVID-19 limiting movements and closing borders across the world, imports have decreased dramatically.
In Africa, the average GDP tax rate is now much too low at 17.2%, compared to 22.8% in Latin America and 34.2% in the OECD. This, the study said, would force most countries on the continent to borrow to fill the vacuum – even though some countries either suffer from debt or are at high risk.
The African Union report added that the shortage of revenue generated as a result of the coronavirus pandemic would seriously affect public resources.
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