Low-income countries have, on average, reduced their reliance on foreign aid inthe past two decades. This has been achieved in part by collaborating with high-income countries and donor agencies to strengthen the capacity of tax authorities to collect revenue.
While significant progress has been made, various revenue sources remain untapped. Many low-income countries continue to rely heavily on indirect taxes, such as Value Added Tax, and customs and excise duties. Income taxes contribute a very small percentage to total tax revenue, and are paid mainly by people in formal employment and large companies. It is estimated that on average, personal income taxes (PIT) contribute only 2 per cent of GDP in sub-Saharan Africa, which is low when compared to the 10 per cent collected in high-income countries.
