Paying tax to the government is a compulsory contribution imposed by the government on its workers’ income, business profits, goods, services, and some transactions.
All residents living and working in African countries have to pay taxes to assist in running government activities such as providing social services to its citizens, paying its workers, running military activities and building infrastructure such as roads and hospitals.
In some cases, nonresidents who work in Africa are also taxed according to the money they make while working or conducting business in the continent.
The goal of the African governments is to reduce inequalities and move people out of poverty by using the revenue generated to fund social programs. It is therefore important to have a good working tax system that will help in clearly collecting tax revenue.
In majority African countries, the tax rises when the countries debts rise. Due to the cumulative debts, it becomes difficult for these governments to provide for its citizens and the priority shifts from social services to collecting taxes to pay off debts. Whenever a particular government spends more money than the revenue it receives, the government adds to its debts.
Corruption and using public funds for personal gains is another way in which African governments have managed to increase their debts and as a result, increase the tax paid in their countries.
The only method of reducing a government’s debt and achieve economic growth is to either cut down on spending or increase the taxes. Most governments choose to increase the taxes on its citizens. Those who make more pay a larger share of their income in comparison to those who earn less. All this is to achieve development.
Although the taxes imposed on Africans are higher than in other parts of the world, income is the lowest. The value-added tax on goods and services are also very high. This fact makes it impossible to build the necessary capital.
Africans governments are using taxes to collect money to repay debts which are mostly taken for developmental purposes. Even though there is a high percentage of money lost on corruption, borrowed money has been used in African countries to improve infrastructure. In East Africa, borrowed money has been used to improve the road and rail network, in Congo, Gabon, and Ghana, loans have been used to build Dams and in Nigeria and Sudan, it has been used to build power plants.
Many countries in Africa have over-borrowed money from China and are now looking for ways to repay the money.
Except for Namibia, Zambia, and Lesotho where taxes are among the lowest in the world, Africans pay an average tax of 18 percent on their income. The amount of taxable income, exemptions and tax deductions determines how much tax an individual pay to their government.
Although taxes on its own are not enough to stimulate the economy, reducing expenditure will help to manage the debts.
It is also advisable that governments should cut spending on areas that do not create job opportunities as such areas are not likely to give tangible returns. Fighting corruption will also go a long way in reducing the income tax that citizens have to pay.
These governments need to access the short term and long-term impacts of their tax spending policies. This will allow them to understand what is first in the priority list and what will benefit people for longer periods.
African governments should also be held accountable for effectively performing financial activities. The government should be obliged to answer to the public how money is being used.
A budget reading day is normally set aside for the treasury through the ministry of finance to explain to various parliaments and the public what they intend to do with and how much money they intend to use in the next financial year. The budget is then approved or amended.
A financial accountability structure serves as the basis for creating effective financial processes.