Financial Crime World

Burkina Faso Seeks to Boost Domestic Revenue to Meet Development Challenges

Overview

Burkina Faso is facing a revenue crisis that threatens its ability to implement its national economic and development strategy (PNDES). The country’s tax revenue-to-GDP ratio remains below the West African Economic and Monetary Union (WAEMU) convergence criterion of 20 percent.

Analysis by the International Monetary Fund (IMF)

According to a recent analysis by the IMF, Burkina Faso could potentially mobilize an additional 1.7 percentage points of GDP in revenue if it strengthens its revenue administration and introduces new tax policy measures. The IMF’s findings are based on benchmarking Burkina Faso’s tax revenue with other sub-Saharan African countries.

Challenges in Mobilizing Domestic Revenue

Despite progress, Burkina Faso still faces significant challenges in mobilizing domestic revenue. Taxes on goods and services are the main source of revenue, with Value-Added Tax (VAT) accounting for more than half of total tax revenue.

Recommendations by the IMF

To address these challenges, the IMF recommends a multipronged approach involving:

  • Strengthening revenue administration
  • Introducing new tax policy measures:
    • Enhancing the autonomy of the tax administration
    • Simplifying small businesses taxation
    • Broadening the VAT tax base
    • Increasing the coverage of personal income tax
    • Streamlining excise taxes on drinks
    • Increasing rates on alcoholic beverages and tobacco
  • Further enhancements to IT systems
  • Increasing compliance rates and collecting arrears
  • Strengthening customs administration capacity

Quotes

“Improving domestic revenue mobilization is crucial for Burkina Faso’s development challenges,” said a senior IMF official. “By implementing these recommendations, the country can generate additional revenue to support its economic growth and development goals.”

Government Response

The government of Burkina Faso has welcomed the IMF’s recommendations and is already working on implementing them. The country is also seeking to improve its tax administration and reduce corruption, which is seen as a major obstacle to effective tax collection.

Conclusion

Burkina Faso faces significant challenges in mobilizing domestic revenue, but with the right policies and reforms, it can generate additional revenue to support its development goals.