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UNECA Africa report: digital ID to unlock growth, increase tax base

UNECA Africa report: digital ID to unlock growth, increase tax base

Bringing in digital ID across Africa and registering the continent’s 500 million undocumented citizens would bring about significant benefits to economic and banking inclusion, reduced administration costs and much wider tax bases, according to the United Nations Economic Commission for Africa’s Economic Report on Africa 2019 “Fiscal policy for financing sustainable development in Africa”.

African nations will need to raise revenues in order to have the funding available to implement the programs that will see them reaching the 2030 Sustainable Development Goals, states the report. There is a long way to go, according to Vera Songwe, Under-Secretary General of the United Nations and Executive Secretary of the Economic Commission for Africa: “To meet the SDGs Africa will need to raise an estimated 11 per cent of GDP per year for the next 10 years to close the financing gap. Today, Africa’s average tax revenue to GDP is below 16 per cent.”

Songwe, who will speak at ID4Africa 2019 in Johannesburg on June 18, notes that broadening the tax base and simplifying collection could translate to raising an extra $99 billion each year over the next five years. She identifies rapid digitalization across the board for tax administration as one of the ‘quick wins’ available to African governments.

“Digital identification can broaden the tax base by making it easier to identify and track taxpayers and helping taxpayers meet their tax obligations,” states the report, which references the 2012 Boston Consulting Group’s 2012 study which found that implementing digital ID systems would bring in “gains in efficiency and convenience that could result in savings to taxpayers and government of up to $50 billion a year by 2020.”

Progress in this respect is being made as at least 23 national identification programs were introduced in Africa between 2000 and 2016, up from just 15 in the prior four decades.

“Really the technology’s there, in some countries it’s been there for years, but the political will is part of the problem,” said Ntare Karitanyi, managing director of Rwandan technology consultancy Hobuka speaking to CNBC Africa about digital ID following the report.

“You cannot talk about digital ID if the governments in these countries in Africa do not take the lead. You cannot outsource your security, this is your sovereignty,” said Karitanyi. “We [in the African private sector] have a role to provide systems that are affordable, that are helping the customers as far as financial transactions, accessing social services, adding efficiency to whatever action. Our role is to innovate.”

He also gave a warning on the importance of the government’s role, “50% of that has to be done by government – it’s a matter of sovereignty. If you don’t do it then you’re prone to problems down the road”.

Karitanyi is confident that the digital ID systems which could bring legal identity to the continent’s 500 million undocumented and reach the $50 billion annual savings figure, but there are some basic requirements still lacking. “We need to have data centres on the continent. You can talk about this big target, but it has to trickle down to quick, short deliverables like electricity, data centres, connectivity and skilled people.”

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