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Could the holes in the healthcare system speed up tax reform?

Pursuing a system of unitary taxation to prevent multinational corporations from avoiding tax is among the recommendations in the drive to achieve sustainable health coverage in Africa.
Covid-19 has exposed the low budget allocations to public healthcare on the continent. Image: Siphiwe Sibeko, Reuters

The Tax Justice Network Africa (TJNA) recently hosted an online discussion on fiscal policy and achieving sustainable health coverage in Africa.

Mustapha Ndajiwo, executive director of the African Centre for Tax and Governance, gave a presentation on health financing and taxation for sustainable health care. Ndajiwo’s presentation included the results of a study undertaken in five African countries – Kenya, Malawi, Burundi, Nigeria and South Sudan – and the interaction between taxation and financing health care.

There is a significant gap between child health care in Africa and the rest of the world. Maternal health care is significantly worse off in Africa.

The Covid-19 pandemic has exposed the weaknesses of public healthcare institutions and the low budget allocation to health care.

Read: Africa’s health systems should use AI technology in their fight against Covid-19

The United Nations Sustainable Development Agenda (2030) includes health as one of its goals. This appears out of reach, and Africa’s health spending only accounts for about 1% of global expenditure.

Abuja Declaration

The heads of state of African Union countries committed, in April 2001, to taking “all necessary measures to ensure that the needed resources are made available from all sources and that they are efficiently and effectively utilised”. Through the Abuja Declaration they pledged to set a target of allocating at least 15% of their annual budget to improve the health sector.


Achieving adequate healthcare financing requires strong fiscal measures, and requires a critical assessment of fiscal policy.

Resource mobilisation faces a number of challenges, such as the loss of fiscal revenue through illicit financial flows and profit shifting (shifting profits from a high tax jurisdiction to a low tax jurisdiction).

Double taxation treaties (a treaty between two countries that allocates taxing rights) can have a harmful effect on potential tax revenue (for example, where country gives up its rights to tax interest and royalties payable to residents in the other jurisdiction).

Read: The tricky thing about double tax agreements

Tax incentives also create an avenue for tax leakages. (For example, a foreign company may set up a manufacturing company in a special economic zone in the developing country for the years that it is entitled to the tax incentive, and leave immediately thereafter).

There have been calls for a more equitable, unitary system. According to the Tax Justice Network, under a unitary tax approach, the profits made by a multinational corporation should be apportioned to each country where it operates based on how much of its real economic activity took place in that country.


Kenya has an estimated population of 53 million. The country’s infant mortality rate is 33.6 deaths out of 1 000 infants, and the adult mortality rate is 252 per 1 000 people for men and 174 per 1 000 for women. A Universal Healthcare programme was also launched to provide affordable health care by 2022. However, Kenya’s health allocation fell from 7.1% to 3.08% in the 2019/2020 budget.

The informal sector escapes the tax net, and Kenya also loses about US$1.1 billion a year from tax incentives and exemptions.


Malawi is one of the least developed nations in the world, and ranks 172 out of 189 countries on the human development index. Budgetary allocation for health stood at 9.75% in 2018/2019.

The country had a tax-to-GDP ratio of 17% in 2018, and loses on average US$650 million per year in illicit outflows.

Malawi largely relies on donors to fund parts of its health sector.


Burundi is one of the most densely populated countries in Africa, and has a GDP per capita of US$270.1. As at 2018 life expectancy was 52.2 years.

The country offers numerous tax exemptions. Its fiscal deficit increased from 1.2% of GDP in 2014 to 5.7% in 2015 as a result of short term incentives.

Burundi loses an estimated 6% of its GDP to illicit financial flows.


Nigeria is the largest producer of oil in Africa, and its economy is vulnerable to oil price volatility. It ranks 153 out of 189 on the human development index. In 2015 there were only four doctors for every 10 000 people in Nigeria.

In 2016 out of pocket expenditure by individuals was 75.21 % of current health expenditure. Nigeria’s budgetary allocation to health in 2019 was N367 billion (US$1 billion) representing just 4.1 % of the entire budget figure.

Read: South Africans must be healthier for universal healthcare to succeed

The country’s tax-to-GDP ratio stands at 6%, making it one of the lowest in the world. It is estimated that Nigeria accounts for 30.5 % of illicit financial outflows from Africa. The country also loses tax revenue to incentives.

South Sudan

South Sudan is ranked 186 out of 189 on the human development index, and has one of the worst health indicators with infant mortality and under-five mortality rates at 39.3 and 99.2 per 1 000 live births respectively.

In 2015 it was estimated that South Sudan had a current health expenditure per capita of US$28.

What should African countries do?

The recommendations include:

  • Introducing open and zero-based budgeting, and allowing greater budget participation;
  • Increasing budgetary allocations to health;
  • Publishing budget information;
  • Creating a strong link between fiscal policy and health policy;
  • Reviewing the tax incentive framework;
  • Pursuing a system of unitary taxation;
  • Introducing sin taxes to address the externalities of the consumption of unhealthy products such as tobacco; and
  • Improving the state-citizen relationship through accountability to improve legitimacy and voluntary compliance.

What should civil societies do?

The recommendations include:

  • Increasing capacity to conduct policy related research;
  • Ensuring that the relevant civil society actors – including journalists, activists and professionals working in the development sector – are trained such as they are better informed on the issues and the importance of their roles in addressing the challenges; and
  • Civil society organisations should form coalitions to advocate sustainable health financing.

Panel discussion

Standout remarks from the discussion:

  • Dr Nkechi Olalere, executive director of strategy processing at the Strategic Purchasing Africa Resource Centre, said Covid-19 has now made the case that health should be strongly supported. With the political will it is possible to increase funding to the health sector.
  • Alec Cobham from the Tax Justice Network said the low levels of taxation, poor and highly gendered health outcomes, and the disproportionate low spending on women is depressing. A higher allocation to health care spending from higher taxes would have real health benefits.

He is also of the opinion that if government relies more on tax to fund health care, citizens are more likely to hold the government accountable.

Cobham referred to an initiative of the Organisation for Economic Co-operation and Development to reform international taxation, but is of the opinion that very little of the additional tax will go to African countries.




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What does it mean to say “the adult mortality rate is 252 per 1 000 people for men and 174 per 1 000 for women” ?

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