Expand Tax Base To Fund Covid-19 Fight, African Govts Urged

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By Staff Reporter

GOVERNMENTS across Africa have been urged to devise innovative financing models to harness finances to fund healthcare and social interventions to ameliorate the devastating effects of the Covid-19 pandemic.

This came out during the ongoing session of the 2021 African Economic Conference (AEC) underway in Cabo Verde.

Participants were unanimous governments across the continent should expand the tax base, tackle illicit financial flows, as well as reduce mounting debts in order to nip the numerous challenges wrought by coronavirus.

“We are defining new financial mechanisms. We need to use non-conventional models and to think outside of the box, or without even the box,” said Nicolas Kazadi, Democratic Republic of Congo (DRC)’s Finance minister.

With increasing debt levels, the ministers called for the re-organisation of debt, particularly external debt, to free up resources for other critical public services such as healthcare and education.

“The public debt is an atomic bomb that is going towards the African continent,” said Olavo Avelino Garcia Correia, Cabo Verde’s Vice-Prime minister and Finance minister.

“We cannot have an economy that works only to pay debts,” added Garcia.

The minister presented Cabo Verde’s case where 60% of revenue is channelled towards servicing debt.”

Beyond a debt moratorium from international financiers such as the International Monetary Fund (IMF), countries were called to restructure and re-organise external debts.

It was agreed Africa had potential to attract massive foreign direct investment (FDI) by strengthening its institutions and countering negative publicity, which has worsened the continent’s risk ratings.

Nations, said the ministers, need to create a society that abides by principles, ethics and laws that promote honesty and punish corruption.

“We must not ignore the role of the private sector in reducing poverty and development,” said Kazadi.

He added that African governments needed to create robust, transparent and accountable institutions.

Garcia also cited better governance as the panacea for illicit financing and corruption. “It is up to the African, to build solid institutions that will stop illicit funds and money laundering,” he said.

There was general agreement that African countries needed to diversify to better face future challenges. The continent also needed a voice in global and international financial institutions. “Our institutions cannot stand for only peace and security but also for growth and development.

“Finding solutions to debt are with Africans, we just need to do our homework, but partnerships with international partners is important.”

Kazadi said technology is also there to help Africa.

“I cannot have an inspector behind every taxpayer, but profile their travel, shopping, income, everything is registered and the state can intelligently manage information and lessen tax evasion.”

On the recently reviewed Special Drawing Rights (SDR) allocations by the IMF, Kazadi urged countries, particularly rich and developed ones, to redistribute their portions to poor countries that desperately need help.

The 2021 edition of the AEC, which kicked off Thursday, was officially opened by President José Maria Neves.

The event is taking place amid the dark cloud of the Covid-19 pandemic which has negatively affected African economies by reducing revenues and triggering a debt crisis.

The AEC, taking place both physically and virtually, has been organised by the African Development Bank, ECA and UNDP.