The Regional Analyses Africa
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The regional analyses Africa At 52.9% Africa has the highest While Africa has a higher than average Total Tax Rate of average number of taxes, it is any region. the lack of electronic filing in the region which contributes ‘Other’ taxes are the largest most to the difficulty of paying element of the Total Tax Rate taxes. In only 3 of the 53 for Africa while labour taxes economies do the majority of are the smallest part, which companies use electronic filing is the reverse of the global for all major taxes. picture. The elimination of cascading sales taxes While the average Total Tax is beginning to change Rate for the region has fallen this profile. significantly since 2004 (by 16 percentage points largely Africa has the second highest as a result of the replacement average for the time to comply of cascading sales taxes), the of 320 hours. reduction in the average time to comply has been more Consumption taxes (VAT) take moderate (28 hours) and the the most time in Africa – 127 fall in the average number hours on average. of payments has been small (2.3 payments). At 36.1 Africa has the highest average number of payments The most significant falls of any region. in the time to comply have been in labour taxes, though this has increased slightly in recent years. 34 Paying Taxes 2014. PwC commentary 52.9 320 36.1 Total Tax Time Number of Rate (%) (hours) payments Nigeria Country article, page 44 Uganda Country article, page 48 South Africa Country article, page 46 The following economies are included in our analysis of Africa: Algeria; Angola; Benin; Botswana; Burkina Faso; Burundi; Cameroon; Cape Verde; Central African Republic; Chad; Comoros; Congo, Dem. Rep.; Congo, Rep.; Côte d’Ivoire; Djibouti; Egypt, Arab Rep.; Equatorial Guinea; Eritrea; Ethiopia; Gabon; Gambia, The; Ghana; Guinea; Guinea-Bissau; Kenya; Lesotho; Liberia; Libya; Madagascar; Malawi; Mali; Mauritania; Mauritius; Morocco; Mozambique; Namibia; Niger; Nigeria; Rwanda; São Tomé and Principe; Senegal; Seychelles; Sierra Leone; South Africa; South Sudan; Sudan; Swaziland; Tanzania; Togo; Tunisia; Uganda; Zambia; Zimbabwe The regional analyses: Africa 35 Figure 3.11 The sub-indicator trends for Africa All three sub- indicators have Line: Time (hours) Bar: Total Tax Rate (%) fallen over the Bar: Number of payments nine years of the study 342 343 340 327 318 317 316 316 314 72.2 71.3 70.3 71.1 70.1 67.8 58.2 58.3 54.3 38.8 38.6 38.1 37.9 37.8 37.4 36.8 37.1 36.5 2004 2005 2006 2007 2008 2009 2010 2011 2012 The trend data in Figure 3.11 includes only those economies for which data is available for all years of the study and therefore the figures differ from the regional averages for 2012. The economies that are excluded are: Liberia, Libya, South Sudan Source: PwC Paying Taxes 2014 analysis The nine year trends in Africa 2012 this had dropped not just to below The fall in the Total Tax Rate from the Africa average, but also to below the 70.3% in 2004 to 54.3%18 in 2012 is the world average. The time to comply in 29 most marked, with smaller reductions in economies around the region is above the time to comply and in the number of the world average with seven economies payments made. The 2012 average Total (Republic of Congo, Cameroon, Tax Rate for the region is well above Senegal, Mauritania, Chad, Libya and the world average, due in part to the Nigeria) having hours in excess of 600 continuing presence of cascading sales (over 15 weeks). taxes in Comoros and The Gambia. As explained below, it is the replacement The average number of payments of cascading sales taxes by VAT that has for the region is also well above the contributed most to the drop in Total world average, yet over nine years Tax Rate for the region. it has dropped by only just over two payments. At the start of this period, The average time to comply in the the Central Asia & Eastern Europe, African region has been consistently and Central America & the Caribbean above the world average since 2004 regions both had more tax payments and the gap between the two averages than Africa; both of these regions now has steadily increased over that have fewer payments than Africa. The period. As shown in Figure 3.11, the lack of availability of online filing and number of hours has reduced by just payment systems is the main reason for under 10% since 2004, though the the number of payments sub-indicator rate of reduction has slowed in recent being high. This is exacerbated by the years. Other regions have had more number of different taxes and the fact substantial reforms in the same period. that in many economies payments are For example, the Central Asia & Eastern made to several levels of government. Europe time to comply was 136 hours higher than Africa’s in 2004, but by 18 In this section the averages are calculated only for those economies that have been included in all nine years of the study to ensure that we represent a true trend. The trend data for 2012 will therefore differ from 2012 data which includes all economies. The economies excluded from the Africa region trend data are: Liberia, Libya and South Sudan 36 Paying Taxes 2014. PwC commentary The Total Tax Rate in Africa The cascading sales taxes still present The fall in Figure 3.12 shows how the Total Tax in Comoros and The Gambia (for Rate in Africa breaks down into the 2012) contribute heavily to the high Africa’s Total Tax three main components of profit taxes, proportion of sales and other taxes, Rate since 2004 labour taxes and other taxes. It shows which in turn leads to a high Total Tax how the rate of decline in the Total Tax Rate. Burundi, Djibouti, Mozambique, is largely due Rate varies between the three main Sierra Leone, Swaziland and, most to the abolition types of tax. Labour taxes account for a recently, the Democratic Republic of relatively small proportion of the Total the Congo have abolished cascading of cascading Tax Rate and the labour tax percentage tax systems and adopted a VAT system sales taxes has remained virtually flat since 2004 leading to the significant reduction in due to the small number of reforms the Total Tax Rate. If the two economies and the fact that while some economies that still have cascading sales taxes have decreased labour taxes, others were excluded from the regional have increased them. ‘Other’ taxes have average it would reduce to 46.1%. fallen noticeably, particularly in the last five years. While the trends for each of Looking across the Africa region, the types of tax are consistent with the corporate income tax is prominent in global trend, the profile of taxes is still the majority of economies while labour out of step, with ‘other’ taxes still being taxes and mandatory contributions are the largest component (rather than the relatively small. In three economies, the smallest at the global level) of the Total Central African Republic, Equatorial Tax Rate and labour taxes being the Guinea and the Republic of Congo, the smallest (rather than being the largest case study company must pay the higher as is seen for the global average). of a corporate income tax on profits or a minimum sales tax based on turnover. In all three cases the sales tax is higher than the profit tax and therefore the company pays no profit taxes. Nevertheless these economies still had high or fairly high Total Tax Rates of 87.6%, 44.1% and 63.8% respectively in 2012. Figure 3.12 Trend in Total Tax Rate in Africa by type of tax Total Tax Rate (%) 40 35 30 25 Other taxes 20 Profit taxes Labour taxes 15 10 5 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: PwC Paying Taxes 2014 analysis The regional analyses: Africa 37 Figure 3.13 The fall in Total Significant movements in Total Tax Rate between 2011 and 2012 – Africa Tax Rate in the Decrease Total Tax Rate Increase Democratic Central African Republic 20.2 Republic of the Côte d’Ivoire 7.0 Congo dwarfs Niger 4.2 increases in Senegal 3.0 other economies Malawi 2.5 South Sudan 2.4 -2.6 South Africa -10.5 Ghana -221.0 Congo, Democratic Republic of Source: PwC Paying Taxes 2014 analysis Figure 3.13 shows the African • South Sudan, which features in the economies that have had the most study for the first time, increased its significant movement in Total Tax rate of corporate income tax from Rate between 2011 and 2012. Only 9 10% to 15%. Senegal also increased of the 53 African economies exhibited its corporate income tax rate from significant changes in the Total Tax 25% to 30%. Rate. The reforms affected profit, labour and ‘other’ taxes, but the • Malawi abolished its minimum reforms with the biggest impact on level of tax which was based on a Total Tax Rate were made to ‘other’ percentage of turnover, but this did taxes. In each of the three tax types not affect the case study company of tax some reforms reduced the Total as it was already paying corporate Tax Rate, while others increased it. income tax at a level above the Without the reduction in the Total threshold. The increase in Total Tax Rate recorded in the Democratic Tax Rate is largely explained by Republic of the Congo, the African an increase in the effective rate of average would have increased.