ICT Revolution: Boosting Tax Revenue in Southern Africa – Insights from SADC Countries (2023)

A recent article by Jemiluyi, O. O., and Jeke, L. (2023) titled “Tax Revenue Mobilization Effort in Southern African Development Community (SADC) bloc: Does ICT Matter?” published in Cogent Economics & Finance by Taylor & Francis shows that ICT indicators (internet usage and mobile cellular) have a positive and significant effect on tax revenue mobilization.

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ICT development, particularly internet usage and mobile cellular subscriptions, significantly and positively impacts tax revenue mobilization in SADC countries. – Jemiluyi and Jeke 2023

This article explores the impact of ICT on tax revenue mobilization in the Southern African Development Community (SADC) bloc. In the dynamic landscape of Southern African economies, the intersection of information and communication technology (ICT) and taxation has emerged as a transformative force. The authors investigate whether ICT development enhances tax revenue generation in 12 SADC countries from 2001 to 2020. The authors find that ICT development, measured by internet usage and mobile cellular usage, has a positive and significant effect on tax revenue in the SADC bloc. This effect is robust for different types of taxes, such as taxes on goods and services and taxes on income, profit, and capital gains.

How the study was conducted

The study employed panel data from 12 SADC member countries from 2001 to 2020. The dependent variable was tax revenue as a share of GDP, and the main explanatory variable was ICT, measured by internet usage and mobile cellular subscriptions. The study employed the Fully Modified OLS (FMOLS) method to estimate the long-run relationship between tax revenue and ICT, controlling for other variables. The FMOLS method is suitable for panel data with heterogeneous and endogenous regressors. The study also tested for panel unit root, panel cointegration, and panel causality.

What the authors found

The authors found that ICT indicators (internet usage and mobile cellular) have a positive and significant effect on tax revenue mobilization. This is consistent for all categories of taxes examined.

The study found that ICT enhances tax revenue by mitigating the challenges of delay, high administrative costs, evasion, and corruption associated with paper-based tax procedures. ICT also increases the tax base by generating employment and spurring productivity and innovation in the economy.

In addition, the authors noted that the level of ICT development and usage is not uniform across the SADC countries. Some countries have better ICT infrastructure, literacy, and institutional quality than others. These factors may affect the potential benefits of ICT for revenue mobilization.

What the authors recommend

• The authors suggest that ICT can be a useful tool for enhancing revenue mobilization in developing countries, especially in the SADC region. The article recommends that policies aimed at fostering digital automation of tax processes should be prioritized in revenue mobilization plans of SADC countries.
• The authors also recommend that SADC countries adopt policies that foster digital automation of tax processes, as well as sound public finance policies, to improve their revenue mobilization capacity.
• In addition, the authors recommend that policies aimed at fostering digital automation of tax processes should be prioritized in revenue mobilization plans of SADC countries. The article also calls for further research on the mechanisms and channels through which ICT affects tax revenue.

In conclusion, the study by Jemiluyi, O. O., and Jeke, L. sheds light on the pivotal role of Information and Communication Technology (ICT) in shaping tax revenue mobilization within the Southern African Development Community (SADC) bloc. The positive and significant impact of ICT indicators, such as internet usage and mobile cellular subscriptions, across diverse tax categories underscores the potential of digitalization in overcoming challenges associated with traditional, paper-based tax procedures. As the findings suggest, embracing digital automation not only mitigates issues related to delay, high administrative costs, evasion, and corruption but also expands the tax base by fostering employment, productivity, and innovation. However, the authors caution that the uneven levels of ICT development among SADC countries may influence the effectiveness of these benefits. Consequently, the article advocates for the prioritization of policies aimed at digital automation in revenue mobilization plans, emphasizing the need for sound public finance policies. The call for further research on the nuanced mechanisms through which ICT impacts tax revenue serves as a valuable directive for future exploration in this dynamic intersection of technology and fiscal governance.