African fiscal capacity building historicised: Colonial legacies and postcolonial challenges

In this chapter, I use new data and insights from the existing literature to document the taxes collected by colonial and postcolonial African states, exploring major sources, types and stylized patterns in the collected revenues. Usually, the colonial and postcolonial periods are rarely put in one analytical framework. I adopt this strategy with a quantitative descriptive analysis, and it reveals Africa´s progress rather than stagnation or failure, especially when Africa is measured on its own merit in the backdrop of colonial exploitation, colonial legacies and the region´s current insertion into the international financial architecture. The analysis shows a duality in colonial economies that imposed “modern” and “native” taxes, both more burdensome to Africans than non-Africans. In the post-colonial period, African countries lean disproportionately towards consumption taxes, with slow and heterogeneous progress on direct taxes on individuals and corporations. A major observation is that the most profitable tax handles in the colonial and postcolonial periods, namely the extractive sectors and other pockets of high incomes, remained largely untaxed or undertaxed. Reforming and improving tax systems in Africa has an internal and external dimension. Internally, structural change and reform-friendly institutional setup remain necessary for robust tax systems. Internationally, the global financial architecture must be reformed to produce a fairer international tax system to spur domestic revenue mobilization in Africa.