Tax Reforms Pave Africa’s Road to Fiscal Independence
A fiscal revolution is unfolding across the continent, noticeably in South Africa, Ghana, Kenya, Rwanda, Nigeria, Senegal and Morocco as domestic resource mobilization gains momentum.
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Tax reforms and digital systems are reshaping how some African economies finance their budgets and strengthen fiscal independence. Improved administration, data integration, and digital enforcement in tax systems are helping governments collect more while managing tight budgets. The changes are augmenting fiscal resilience.
According to Jared Mokoema Shiswe, a policy analyst at the African Tax Administration Forum (ATAF), this shift is significant because it enhances “Africa’s capacity to finance its own priorities.”
“It is evidence that with the right systems, countries can reduce debt dependency and invest sustainably in sectors like health, education, and infrastructure,” he added. “Improved domestic resource mobilisation, long viewed as a weak link in many economies, is quietly becoming one of Africa’s most important fiscal stories.”
South Africa’s latest results underscore this trend. Its revenue authority (SARS) reported about US$101 billion in collections for the year ending March 2025, roughly US$522 million above target. This is particularly symbolic. SARS attributed its improved performance to a 13% rise in personal income tax receipts and resilient corporate income tax collections, especially from the financial sector.
Commissioner Edward Kieswetter said the rollout of the new two-pot pension system, which allowed partial withdrawals from retirement savings for the first time, boosted taxable income and compliance, enabling the agency to exceed its baseline target for 2024/25. However, even as SARS celebrates, new data from the National Treasury shows the authority lagging behind projections for an ambitious extra-collections target aimed at raising an additional 35 billion rand (US$2 billion) in 2025/26.
The agency has collected about 39.3 billion rand so far, this fiscal year, surpassing the 37.5 billion rand needed to stay on track for its baseline goal but short of the 49.3 billion rand required to meet its expanded target.
Finance Minister Enoch Godongwana has warned that if collections fall short, spending cuts may be unavoidable. Still, the overall trajectory is positive. SARS’ total revenue take of 1.855 trillion rand, or approximately US$101 billion, was 2.1% higher than the previous year, despite sluggish growth and high unemployment.
“This performance reflects improved compliance and administrative efficiency,” Kieswetter told reporters, noting that institutional reforms are starting to deliver results even in a challenging economy.
In Rwanda, the Rwanda Revenue Authority (RRA) announced in late September that it had collected 101.3% of its 2024/25 target, a 16.7% increase from the previous year. The agency credited enhanced taxpayer engagement, targeted sector audits, and expanded use of electronic filing systems for the improvement. It is a relatively similar case in Kenya, with the Kenya Revenue Authority (KRA) reporting strong mid-year results for the 2024/25 fiscal year amid an accelerated digitalisation drive. Recent reforms include electronic invoicing, payroll data integration, and real-time reconciliation tools designed to enhance accuracy and accountability. Some measures have, however, met resistance. A proposed finance law granting KRA broad access to citizens’ financial data was shelved earlier this year following parliamentary opposition, highlighting tensions between enforcement and privacy.
Nigeria’s Federal Inland Revenue Service (FIRS) has also posted solid gains. Improved customs administration and tighter oversight of oil royalties and VAT payments helped federal receipts exceed expectations in early 2025, enabling the government to expand its fiscal envelope.
According to official data, FIRS delivered an additional ₦1.4 trillion (about US$940 million) in revenue, while the Nigeria Customs Service added ₦1.2 trillion (about US$805 million), allowing President Bola Tinubu to raise the 2025 budget to ₦54.2 trillion from ₦49 trillion. For Africa’s largest economy, stronger domestic tax performance is critical to offset declining oil revenues and anchor long-term fiscal sustainability.
In Ghana, the Ghana Revenue Authority (GRA) exceeded its first-half 2025 targets, driven by higher non-oil receipts and better VAT compliance. The results mark a turnaround after years of underperformance that forced the government into an IMF-supported adjustment programme. The gains are now viewed as a pathway to rebuilding fiscal stability without deepening debt exposure.
Together, these stories signal a continental shift. ATAF’s latest African Tax Outlook shows Africa’s average tax-to-GDP ratio rising to 15.1%, up from 14.5% five years ago. While still below the global average of 33%, the upward trajectory indicates steady progress.Analysts project the ratio could reach 20% within a decade if reforms continue to unlock an estimated US$200–250 billion annually in additional domestic financing.
“A major driver of this transformation is digitalisation. Electronic invoicing, online filing, and data-driven risk assessment are now mainstream tools in many tax agencies,” Shiswe said.
According to the IMF’s Building Tax Capacity for Growth 2025 report, countries that digitalise their tax systems can raise collections by up to three percentage points of GDP within a few years, often without adjusting tax rates.
“The real story is not higher tax rates, it’s smarter systems,” said Shiswe. “When governments invest in data, technology, and compliance capacity, revenues increase without placing additional burden on citizens.”
“Technology alone, however, does not guarantee success. Political management and public trust are equally crucial.”
“Kenya’s 2024 protests against new tax measures showed how reforms can backfire if perceived as unfair or opaque. Tax reforms work best when accompanied by transparency and evidence that taxpayers’ contributions translate into visible public services.”
Challenges remain. Some revenue gains, like South Africa’s pension withdrawals, are one-off events unlikely to recur. Informal economies continue to dominate in many countries, leaving large portions of taxable activity untapped. In several markets, more than 60% of economic output still lies outside the formal system. In Morocco, the government has extended electronic filing to self-employed professionals, while Senegal is digitising property tax records to close municipal revenue gaps.
Across West Africa, ECOWAS members are discussing cross-border tax data-sharing frameworks to improve compliance and curb evasion. These efforts underscore a continent-wide modernisation wave rather than isolated national reforms. According to the IMF and ATAF, if Africa’s average tax-to-GDP ratio reaches 20%, the resulting additional revenue could finance universal primary healthcare, education, and major infrastructure across the continent, without resorting to external borrowing.
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