Africa’s tax landscape is undergoing a seismic shift, transforming from a passive cost of doing business into a dynamic battleground for governments and corporations alike, according to Okey Umeano FCCA, deputy director of financial markets at the Central Bank of Nigeria.
“In Africa today, tax is no longer just a cost of doing business – it’s becoming a constant business battleground,” Umeano said. “All across the continent, governments are ramping up real-time reporting systems, expanding digital taxes, and tightening cross-border scrutiny in a race to widen their revenue nets.”
This transformation comes as African nations grapple with significant financial challenges. The African Development Bank estimates that the continent requires approximately US$400 billion annually to bridge its infrastructure gap by 2030. With external support dwindling, governments are turning inward. Umeano noted, “OECD estimates that the continent has an average tax-to-GDP ratio of 16%, much lower than the global average of 34%… Where will this money come from if not from taxes?”
Bold Moves in Tax Enforcement
Governments are prioritizing enforcement over simply raising rates. In Kenya, the Revenue Authority (KRA) mandated the Electronic Tax Invoice Management System for all VAT-registered businesses in February 2024. This system requires digital invoices to transmit transaction data to KRA in real time, aiming to boost revenue collection to a record KES 3 trillion (about US$22 billion) for 2024-25, up from KES 2.4 trillion in 2022-23.
South Africa is also cracking down, particularly on multinationals. “Frustrated at unfair transfer pricing activities, the South African Revenue Service (SARS) is taking a much more aggressive stance,” Umeano explained. SARS has established a dedicated transfer pricing audit unit to scrutinize multinationals’ reports and prevent profit shifting, alongside plans to pre-agree transfer pricing terms, increasing documentation demands and audit risks.
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Nigeria’s Expanding Tax Net
In Nigeria, tax authorities are extending their reach to non-resident companies providing digital services. “Non-resident companies providing digital services are now subject to Nigerian taxes if they have significant economic presence (SEP) in Nigeria,” Umeano said. This includes sales, downloads, and advertising services, with mandatory VAT registration and remittance for non-resident suppliers. Additionally, Nigeria has tightened transfer pricing rules, requiring country-by-country reporting for qualifying multinationals.
“Many other regulations are coming from Nigeria’s new tax laws, which accountants and finance professionals must pay attention to,” Umeano added. “CFOs must manage higher compliance costs and navigate complex transfer pricing requirements.”
Ghana’s E-Levy Experiment
Ghana’s experience with the E-Levy, a tax on electronic transactions introduced in 2022, highlights the political risks of new tax measures. Initially set at 1.75% and later reduced to 1.5% after public backlash, the levy helped narrow Ghana’s fiscal gap but became a contentious issue in recent presidential elections. “Living partly in Ghana at the time, I witnessed firsthand how vexed Ghanaians were by this tax,” Umeano recalled. The new government abolished the levy earlier this year, leaving a revenue gap that may prompt new taxes. “Businesses must prepare for these,” he warned.
A New Era of Tax Compliance
Umeano emphasized the rapid evolution of tax systems across Africa. “The taxman is no longer knocking; he is already inside your ERP system,” he said. “If you move profits across borders, expect tax authorities to move in on you. Digital profits are now taxable even without a local office, local staff, or local servers.”
For businesses, non-compliance is no longer a viable option. “In Africa’s new tax landscape, non-compliance is not cheaper; it is much, much costlier,” Umeano cautioned. As economies modernize, tax systems are evolving even faster, demanding strategic navigation from finance professionals. “This is not the time to treat tax as an annual ritual or a back-office task – it’s a front-line strategic function, critical to managing risk, protecting value, and unlocking growth opportunities,” he said.
Umeano urged businesses to invest in real-time compliance and engage proactively with regulations. “Those who anticipate these shifts… will not just survive Africa’s tax revolution; they will lead it,” he concluded.
