Burkina Faso’s Tax Revenue Lags Behind Regional Peers

Despite some progress in recent years, Burkina Faso’s tax revenue mobilization remains below par, posing a significant challenge to the country’s development prospects.

The Current State of Affairs

According to the World Bank, Burkina Faso’s tax revenue-to-GDP ratio has averaged 16 percent over the past five years, well below the West African Economic and Monetary Union (WAEMU) convergence criterion of 20 percent. This indicates that the country is struggling to mobilize sufficient tax revenues to fund its development needs.

Recommendations for Improvement

International experts are recommending a multi-faceted approach to address this issue. This includes:

• Strengthening revenue administration by enhancing the autonomy of the tax administration, simplifying taxation for small businesses, broadening the value-added tax (VAT) base, and increasing the coverage of personal income tax.
• Introducing new tax policy measures, such as:
  • Enhancing IT systems
  • Increasing compliance rates
  • Collecting arrears
  • Improving customs administration capacity

The Current Tax Structure

Burkina Faso’s current tax structure is heavily reliant on taxes on goods and services, with VAT accounting for more than half of total tax revenue. However, this reliance has led to a decline in corporate income tax and international trade tax revenues over the years.

IMF Recommendations

The International Monetary Fund (IMF) is recommending that Burkina Faso’s government consider:

• Streamlining the excise tax on drinks
• Increasing the rate on alcoholic beverages and tobacco products
• Increasing the coverage of personal income tax to include all wage components in line with the Income Tax Act

Progress and Challenges

Burkina Faso’s tax revenue has shown some improvement in recent years, reflecting a normalization in tax collection and stronger economic growth. Total tax revenue increased by 15.7 percent in 2016 and 15.1 percent in 2017, while nominal GDP grew by around 8-9 percent per year over the two-year period.

However, despite this progress, Burkina Faso’s tax revenue remains below par compared to other sub-Saharan African countries. According to a recent analysis, Burkina Faso could potentially mobilize at least an additional 1.7 percent of GDP in revenue if it implements the recommended tax policy and administrative measures.

Conclusion

To address these challenges, the government must prioritize improving domestic revenue mobilization to meet the country’s development needs. With security shocks intensifying development challenges, it is crucial that Burkina Faso finds ways to increase its tax revenue to fund essential public services and investments.