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Africa Must Better Target Tax To Tackle Income Inequality: IMF

by Lorys Charalambous, Tax-News.com, Cyprus

27 October 2014


Tax reforms could remedy rising income inequality in sub-Saharan Africa, according to a recent International Monetary Fund (IMF) seminar.

The "Fiscal Policy and Income Inequality in Sub-Saharan Africa" seminar, held on the sidelines of the 2014 IMF-World Bank Annual Meetings, explored practical areas where taxation and public investment can contribute to more equal income growth.

Antoinette Sayeh, Director of the IMF's African Department, said Governments should look to raise enough revenue before addressing inequality: "In sub-Saharan Africa, the revenue-to-GDP ratio is still relatively low compared to other parts of the world. You cannot have the fiscal space to spend on things that will help reduce inequality if you do not have enough revenue," she said.

Additional revenue can be generated by implementing progressive tax regimes, for example by substituting consumption-based taxes with levies on income or property, Sayeh continued. Another option is the removal of across-the-board tax breaks such as generalized fuel subsidies, which tend to benefit the well-off far more than the poor. Where appropriate, these would be replaced with targeted alternatives, such as conditional cash transfers, Sayeh said.

TAGS: tax | investment | value added tax (VAT) | fiscal policy | International Monetary Fund (IMF) | tax breaks | tax reform | Africa | Tax

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