19 September, 2024 - Dr. Lyla Latif

Achieving Economic Development in Africa Through Progressive Taxation

Tax and the International Financial Architecture

Africa has been facing many challenges to achieving economic development, and the issue of generating sufficient revenue to fund development plans and public services remains one of the biggest challenges. However, one solution that has been overlooked is the implementation of a progressive tax system. A progressive tax system is a taxation mechanism where the tax rate increases as the income or wealth of an individual or corporation increases. This system has the potential to promote income equality, fund social programs, and reduce reliance on external borrowing and debt.

Benefits of a progressive tax system: One of the primary benefits of a progressive tax system is that it promotes income equality. In many African countries, there is a vast disparity in income levels, with a small percentage of the population earning a significant proportion of the wealth. A progressive tax system can help reduce this gap by taxing the wealthiest individuals and corporations at a higher rate. This mechanism helps generate revenue to invest in education, healthcare, infrastructure, and other public services that can improve the quality of life for citizens and promote economic growth. Another advantage of a progressive tax system is that it can generate revenue to fund social programs that benefit the most vulnerable in society. African countries face many social challenges, including high levels of poverty, inadequate healthcare, and inadequate education systems. Through a progressive tax system, governments can fund programs that address these issues, promote social justice, and create a more sustainable and inclusive economy. A progressive tax system can also help reduce reliance on external borrowing and debt. Many African countries have significant external debt burdens, which can limit their ability to invest in public services and infrastructure. By implementing a progressive tax system, governments can generate revenue to fund these investments without relying on external borrowing.

Challenges of implementing a progressive tax system: Implementing a progressive tax system is not without challenges. One of the primary challenges is the need for strong political will and effective tax administration. Governments must have the political will to implement the system and the capacity to administer it effectively. This requires investing in tax administration systems, simplifying the tax system, increasing transparency, and reducing corruption. Another challenge is the need for citizen support. Citizens must understand the benefits of a progressive tax system and be willing to comply with the tax laws. Governments must, therefore, engage citizens and educate them on the benefits of the system and how it works.

Conclusion: A progressive tax system has the potential to help African countries achieve economic development without reliance on debt. It can promote income equality, fund social programs, and reduce reliance on external borrowing. However, implementing a progressive tax system requires strong political will, effective tax administration, and citizen support. It is, therefore, essential for African governments to invest in these areas to achieve the full potential of the progressive tax system. By doing so, African countries can create a more sustainable and inclusive economy that benefits all citizens.

Uploaded by Dr. Lyla Latif

I have expertise in public finance and redistribution. My research, legal practice and publications focus on the physical and digital creation, movement, allocation and taxation of wealth, income, profits and revenue towards development needs and advancing progressive tax systems. I also train on international business taxation and on curbing illicit financial flows. My work has benefited African based and international advocacy organisations and think tanks; informed policy and law making at government level and provided pan-African specialist insight to international financing organisations. Outside Africa, I have studied and published on the tax systems of Afghanistan, Bangladesh, Sri Lanka, the UAE and Qatar. I have supported capacity building, strengthening tax literacy and redefining norms around revenue mobilisation, financial flows, digitalisation, realising rights, financing and implementing SDGs, redistribution and fiscal systems in Africa. I am a first-class law graduate from the University of Nairobi, with a double Masters; one in public finance and financial services law and another in public policy and development. I have a PhD in wealth tax and financing public health. As the Chief Executive of Lai'Latif & Co Advocates, I have crafted a unique legal practice that not only excels in corporate and international taxation, and transactions law but also uplifts underprivileged women through a philanthropic wing powered by zakat. My dedication to social justice extends to my prominent roles on the boards of the Tax Justice Network (UK) and the International Lawyers Project. My expertise has been instrumental in shaping tax doctrine and practice in East Africa, as a member of the East Africa Law Society's inaugural Tax Law Committee. I am also a trainer with Capabuild, Rotterdam's premier tax capacity building organisation, imparting my knowledge of international tax norms and rules to revenue authorities in Botswana, Indonesia, and Kenya. As the visionary Chair and co-founder of the Committee on Fiscal Studies, I lead a team of brilliant minds in our quest to reform and strengthen tax systems in the global south. Through research, policy advocacy, capacity building, and tax trainings, I strive to bridge the knowledge gap and empower developing nations to build more robust and equitable fiscal systems. In October 2023 I was appointed by the Ministry of Information, Communications and Digital Economy of the Republic of Kenya to lead on developing a roadmap and regulations for creating an enabling environment for emerging technologies (AI, IoT, 5G) and data governance in Kenya. I have also designed for Tax Justice Network Africa an Anti-IFF Policy Tracker for AU Member States to pilot and evaluate the extent to which their laws, institutions and cross border exchange of information is robust in preventing IFFs.