Most of African Customs register positive results on revenue collection in 2022

As a new year starts, it’s time to take stock of results made by Customs in the previous year. Despite the negative impact of the Covid-19 and of the Russia-Ukraine conflict on African nations, most of African Customs seem to have achieved satisfactory results in terms of revenue collection. However, there are some exceptions, like Cameroon, where the National Treasury announced a loss in customs revenue of nearly 20 billion CFA francs (34 million USD) in 2022, mainly ascribed to the implementation of the Economic Partnership Agreements (EPAs) in force, respectively, with the European Union (EU), and the United Kingdom (UK). This figure was revealed on January 9, in Yaoundé.

In Nigeria, on the other hand, the Nigeria Customs Service recently reported that between January and November 2022 customs revenue stood at 639.65 billion Naira (1.41 trillion USD), largely exceeding the target set by Customs of N15.42 billion (33.4 billion USD), with a 102 percent performance in revenue generation.

The Customs Division of the Ghana Revenue Authority (GRA) also disclosed that Customs collected in 2022 a total of 22.26 billion Cedis (2 billion USD) as against a target of 20.62 billion Cedis (1.8 billion USD), so exceeding its revenue collection target by 7.95 per cent.

In Kenya, the Kenya Revenue Authority (KRA) recently announced that a 10.2 percent growth was reached in revenue collection only during the first five months of 2022.

Positive results have been reported also by the National Revenue Authority (NRA) of South Sudan, that only in the month of December 2022 collected a record SSP17 billion (29,7 million USD), mostly generated from Non-oil Revenue. The country however, is still confronted with a low level of automation of customs procedures. Despite a comprehensive web-based revenue management system (E-Tax system) was introduced in March 2022 allowing traders to submit and monitor on-line customs declarations, this system is operational only at the Nimule border post and the Juba airport, which together handle about 90% of South Sudan’s trade.

The above trends clearly show how African countries' national budgets are heavily based on customs and trade taxes, mainly on imports. On the other hand, the other major revenue stream, represented by income taxation (consisting in taxes that are levied on the income produced by citizens or businesses) remains very weak. This is mainly because of the limited size of the manufacturing sector and the small contribution of this sector of the economy to the GDP of African states.

In essence, African governments counterbalance the difficulty of collecting tax revenue domestically on taxpayers and businesses, with the imposition of high trade taxes, especially on imported goods. For example, in Côte d'Ivoire, customs revenue accounts for about 45 percent of the total tax revenue collected by the state. In so-called fragile or poorly diversified economies this share can also reach levels above 60-70%. By way of comparison, in the EU, customs duties and agricultural levies represent between 10 and 15% of the total EU budget, bearing in mind that duties collected by EU member States' Customs are only partially transferred to the EU, as currently they retain 25% of the amount of duties collected as collection fees.

That's why customs and trade facilitation reforms should always be linked to wider tax reform programs. At least in Africa...