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Africa’s taxes are ‘holding up connectivity’

African taxmen pick on phone companies because they make lots of money and keep excellent records in a continent where both these things are rare, writes the Economist. “There is no doubt that governments need the cash. Tax to GDP ratios in Africa are still very low – on average below 17%, compared with 35% in OECD countries – and public debt is rising rapidly. It is now above 50% of GDP in almost half of the region’s countries, and the cost of servicing it is onerous. Some people dismiss phone companies’ complaints about tax as mere whingeing. They point out that such firms have grown rapidly despite high taxes. Yet this misses the point.” Phone and internet penetration rates in Africa are still far below those of other regions and connectivity is costly relative to incomes. As mobile phones spread, they speed economic growth and help boost productivity. Fast cable internet may be even better at creating well-paid jobs, boosting the number of start-ups and stimulating exports. Although data are still scarce, there is every reason to think that phones, the internet and the technologies that they enable may together provide Africa with the most powerful tools yet to alleviate poverty, boost growth and ultimately catch up with the rich world. “Governments should remember that the best way to get less of something is to tax it heavily – and Africa plainly needs more connectivity, not less.” Read more

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