The writer
Across Africa, governments are under mounting pressure to mobilise domestic revenues to finance development, reduce fiscal vulnerability, and lessen dependence on external borrowing. Yet the continent’s tax landscape remains structurally weak.
According to the OECD’s Africa Revenue Statistics (2023), the average tax-to-GDP ratio in Africa stands at 16.5%, significantly below the OECD average of 34.1% and even lagging behind regional peers in Latin America and the Caribbean (21.7%).
The IMF and the African Tax Administration Forum (ATAF) estimate that Africa loses USD 40–60 billion annually to tax avoidance, under-reporting, illicit financial flows, and systemic inefficiencies; an amount nearly equivalent to the region’s entire annual health budget.
This is not simply a tax revenue problem; rather, it is a data intelligence issue. Tax administrations across Africa continue to rely on manual audits, fragmented data, legacy systems, and reactive enforcement. In an era where economic activity is digital, mobile, and borderless, these approaches are no longer fit for purpose.
Despite recent reforms by various tax administrators across Africa, more than 85% of African workers remain in the informal sector, narrowing the effective tax base and limiting the capacity of tax administrations to identify, assess, and enforce compliance.
What Developed Tax Administrations Get Right – And Why Africa Should Pay Attention
While African tax authorities face these challenges, the world’s most advanced administrations; including the United States, United Kingdom, Canada, Australia, Singapore, and parts of the European Union, have spent the last decade redefining tax governance through data and artificial intelligence (AI).
Some of the key insights below offer clear lessons for Africa.
- AI-Driven Fraud Detection and Audit Precision
The U.S. Internal Revenue Service (IRS) uses machine-learning models to detect anomalies, flag under-reporting, and identify fraudulent refund claims. In 2023 alone, the system blocked more than $5.4 billion in fraudulent refunds. Over a decade, it has prevented more than $43 billion in losses.
Similarly, the UK’s HM Revenue & Customs (HMRC) runs Connect, one of the world’s most powerful taxpayer data-matching platforms. Connect ingests data from banks, land registries, customs, offshore reports, and even social media to identify hidden income and aggressive tax avoidance. HMRC generated an additional £4.6 billion in extra tax for the 2024-25year via Connect—about 35% higher than its average annual yield of £3.4 billion.
The Australian Taxation Office applies advanced analytics and deep-learning techniques across more than one billion transactions annually to identify under-reported wages, misclassified business expenses, and GST-related fraud. In a single fiscal year, the ATO’s AI-enabled systems detected over A$530 million in unpaid tax and blocked approximately A$2.5 billion in fraudulent activity.
Truth 1 – Modern tax enforcement must be intelligence-led, not manpower-led.
- Integrated Taxpayer Data Systems
Modern tax administrations do not treat taxpayer records as scattered fragments; they operate unified, interconnected data ecosystems that allow them to see the full financial picture of individuals and businesses.
The United States IRS processes over 3 billion third-party information returns each year, including employer filings, bank reports, investment account statements, mortgage records, and payment platform data. These data flows allow the IRS to cross-verify taxpayer declarations with independent information, sharply reducing under-reporting and detection gaps.
The United Kingdom has built one of the most integrated taxpayer data environments in the world. HMRC’s digital filing systems synchronise payroll (PAYE), employer records, Self-Assessment filings, VAT submissions, banking data, and customs declarations. This integration ensures that discrepancies appear instantly, strengthening compliance while reducing the administrative burden on taxpayers.
Singapore’s Inland Revenue Authority (IRAS), through its No-Filing Service, tax returns for eligible taxpayers are automatically pre-filled using data pulled from employers, banks, financial institutions, pension systems, and government databases. More than 95% of salaried workers in Singapore now file electronically, with the vast majority requiring no manual corrections.
These unified systems give tax authorities a 360-degree view of taxpayer behavior, dramatically improving accuracy, building trust, and enabling true risk-based compliance.
Truth 2 — Effective tax administration requires full-system visibility; fragmented records guarantee fragmented results.
- Automated Taxpayer Services Boost Voluntary Compliance
In modern tax administrations, artificial intelligence is not only improving enforcement, it is also revolutionising how taxpayers receive support. When compliance becomes easier, faster, and more predictable, voluntary filing increases dramatically, and revenue follows.
In the United States, AI-driven virtual assistants at the IRS handled over 13 million taxpayer inquiries in 2023, resolving routine questions on filing, refunds, and payment plans without human intervention. This allowed the agency to redirect staff to more complex cases and contributed to one of its smoothest filing seasons in recent years.
In Singapore, automation is deeply embedded in the taxpayer journey. IRAS automatically pre-fills tax returns with over 95% accuracy by pulling data from employers, banks, insurers, and pension schemes. For most salaried workers, filing takes only seconds. Singapore’s tax gap is among the lowest in the world.
Across these advanced countries, the impact is consistent: higher filing accuracy, leading to fewer disputes reduced administrative costs, freeing resources for higher-value work, improved taxpayer trust, which strengthens long-term compliance culture more timely payments, increasing government cash flow and fiscal predictability
However, in many African countries, compliance is still synonymous with long queues, physical forms, unanswered questions, and complex processes. Taxpayer frustration — not tax resistance — is often the biggest barrier to compliance.
Truth 3: When taxpayers are supported, and not overwhelmed, voluntary compliance becomes the strongest and most sustainable source of revenue growth.
- Digitisation of the Informal Sector to Expand Tax Base
Advanced economies did not eradicate informality through raids, force, or mass registration efforts. Instead, they gradually digitised the informal sector by offering incentives, using simple digital tools, and creating integrated ecosystems that made formalisation advantageous rather than burdensome.
The most successful countries understood that businesses become visible when their transactions become digital.
For instance, Singapore digitised its SME and informal sector by removing nearly all barriers to going digital. Through the Productivity Solutions Grant, the government covered up to 70% of SMEs’ costs for POS systems, bookkeeping software, and e-commerce tools. Monetary Authority of Singapore (MAS), Singapore’s Central Bank, partnered with banks to create low-fee merchant accounts, while the Singapore’s Quick Response Code (SGQR) system unified every bank and wallet under one national QR code, enabling even hawkers to accept cashless payments instantly.
The Hawkers Go Digital programme offered $300 incentives, helping more than 10,000 market traders adopt digital payments within a year.
These reforms did more than modernise commerce; they strengthened tax visibility and reduced under-reporting. Singapore’s digital-first ecosystem contributed to one of the lowest tax gaps globally and supported a major rise in revenue collection:
- IRAS revenue increased 10.7% in FY 2024/25 to S$88.9 billion,
- Reaching 12.2% of GDP, and
- Achieving an arrears rate of only 0.66%, among the lowest in the world.
Truth 4: Digitisation is not a tax tool—it is the foundation for widening the base, improving fairness, and unlocking sustainable domestic revenue.
Conclusion
Africa stands at a defining moment in its fiscal trajectory. The continent’s revenue challenge is not simply a matter of low collections; it is a result of outdated systems that cannot keep pace with a rapidly digitising economy.
Advanced nations have demonstrated that when tax administrations leverage artificial intelligence, integrated data systems, and automated taxpayer services, compliance rises, leakages shrink, and governments unlock unprecedented revenue gains.
For Africa, adopting these tools is not a luxury; it is a strategic necessity. AI-enabled fraud detection can reduce under-reporting, digital payments can illuminate the informal sector, and automated filing support can make compliance effortless for millions.
The continent has already proven its ability to leapfrog legacy infrastructure through innovations like mobile money.
By investing in smart tax systems today, African governments can secure billions in domestic revenue, enhance economic resilience, and lay the groundwork for a fairer and more transparent fiscal future. The window of opportunity is open — but it will not stay open forever.
By Patrick Botchwey