Tax Revenue and Economic Growth of African Countries

This study evaluates the effect of tax revenue and economic growth of African Countries. The aim is to ascertain the extent to which different components of tax revenue can be useful in moderating economic growth of emerging economies in Africa. Time series data of 38 years on Gross Domestic Product and Foreign Direct Investment on four components of tax revenue of ten selected African countries were extracted from the websites of the World Bank, International Centre for Tax and Development, and African Statistical Year Book publications and analysed using OLS regression techniques. Results show that company income tax has a negative insignificant effect on gross domestic product of African countries and a positive insignificant effect on foreign direct investment of African countries as well as a positive insignificant effect on per capita income of African countries. Personal income tax has a positive insignificant effect on gross domestic product of African countries and a positive insignificant effect on foreign direct investment of African countries. Value added tax has a positive insignificant effect on gross domestic product of African countries, a positive insignificant effect on foreign direct investment of African countries. Custom and excise duty has a negative insignificant effect on foreign direct investment of African countries and a negative insignificant effect on gross domestic product of African countries; with all tax components jointly accounting for substantial variations in economic growth of the countries. The study concludes that tax revenue is a potent tool for improving economic growth of emerging African nations and recommends that government and tax administrators should target at enhancing tax revenue with emphasis on indirect tax components by blocking all avenues of tax evasion and maintaining proper accountability of collected tax revenues to achieve sustainable economic growth in the African continent.