Taxation of African States: the weight of the colonial heritage

France had implemented a heavy tax policy aimed at having colonization financed by African territories. After independence, this heritage was largely preserved.

While French colonization in Africa is the subject of much debate, research in economic history provides an enlightened look at this question through the examination of quantitative historical data.

One of the important markers of colonization on the former colonized territories is the establishment of fiscal and budgetary tools. We study them scrupulously in this article.

As has already been shown regarding theWest Africa, it appears that during almost all of the colonial period the objective of Paris' fiscal policy was to levy enough resources in each of the colonized territories so that colonization cost virtually nothing to the taxpayers of metropolitan France.

The high level of taxation of the colonies by the metropolis

To this end, France has favored very specific levy methods that are quickly profitable and relatively easy to implement: taxes on production or marketing monopolies on goods such as alcohol; taxes on imports consumed by colonial residents; but also taxes paid by local populations such as the "poll tax". This consisted of requiring village chiefs to collect a lump sum from each inhabitant of working age or, in Niger and Mauritania, from the number of heads of herds.

Another profitable process for the colonizer: the forced labor, dedicated to the construction of roads, ports and railways.

It has thus been calculated that poll tax and forced labor in 1925 constituted half of public revenue in French-speaking sub-Saharan Africa.

It was only after World War II that more modern fiscal tools such as direct income taxes were developed. Indeed, at that time, France wanted to accelerate public investment in its colonies, and, even if the post-war governments were ready to finance this public expenditure by subsidies, it became necessary to develop new tools tax levies within the colonized territories.

Thanks to an important work of collection and analysis of the public accounts of the 18 former French colonies of North Africa and sub-Saharan Africa (Algeria, Benin, Burkina Faso, Cameroon, Central African Republic, Congo, Ivory Coast, Gabon, Guinea, Madagascar, Mali, Morocco, Mauritania, Niger, Senegal, Chad, Togo, Tunisia) and the ministries in charge of colonization, we show that the tax levies were quite high: on average, the colonial administrations of the empire French taxed 9% of the colonies' GDP in 1925, and 16% in 1955.

These figures were higher than the average for non-colonized countries with the same level of per capita income during the same period. This strong tax extraction was not a French specificity but rather a general characteristic of the colonial States of the XX^e century.

The evolution of expenditure

During the colonial period, public spending was biased – in the sense that it had to serve the interests of French settlers and investors first. They were also expensive – as they were also used to remunerate French civil servants and soldiers at relatively high salaries.

In the 1950s, hoping to preserve its dominance, the French colonial power became more “developmentalist” and increased social spending, especially in education.

It granted certain political rights to local populations and satisfied demands for equal pay. Wage costs in the public sector were therefore high. The public sector wage premium – measured as the ratio between the average salary in the public service and the GDP per person of working age – was significantly higher in the colonies (7,3) than in France (1,3 ).

Given these high unit costs, the public investments implemented and the French subsidies provided to finance them proved insufficient to improve the economic development of the colonies in the desired way.

After independence, a temporary drop in the tax burden

How, once gained independence, did the newly independent States manage their public finances? This is the object of our ongoing research.

By reconstructing for the first time the series of public finance data for all the former French colonies in North Africa and sub-Saharan Africa from 1900 to the present day, and by scrupulously examining the changes around independence, we have been able to establish that the decolonization caused a drop in fiscal pressure, but only temporarily.

On average, between 1965 and 1970, the level of revenue rose to the level it had in the 1950s – and this despite the dismantling of the colonial federations, the departure of French administrators and settlers, and the flight of some of the French capital. The graph below illustrates this point.

It makes it possible to compare the shares of public revenue (excluding grants and loans) as a percentage of GDP observed just before independence (1949-1955) and those observed ten years later (1965-1973). It reads as follows: Chad's public revenue represented 3,5% of GDP in 1949-1955 and 8,9% in 1965-1973.

All the countries on the diagonal (Niger, Burkina Faso, Benin, Senegal, Togo, Mali, Mauritania) were able to collect, ten years after independence, as much as during the last colonial period; those above the diagonal (Algeria, Gabon, Central African Republic, Tunisia, Congo, Cameroon, Morocco, Madagascar, Chad and Côte d'Ivoire) have increased their public revenues. The only country that collects less is Guinea.

This is due to several factors. The strongly regressive head tax – set as a flat rate regardless of income, it increases inequalities – was maintained in most countries until the 1970s, even if it changed its name and sometimes its mode of taxation. collection.

More modern and progressive tax systems have gradually been put in place by adopting the deduction at source of taxes on formal wage income. Customs duties on imports continued to be increased. As the extraction of raw materials is increasing (oil in Algeria, Congo and Gabon, bauxite in Mauritania, phosphate in Morocco, etc.), tax revenues on these mining products have been deducted.

Finally, exports of agricultural products were taxed through the organizations of the "stabilization funds": by imposing a fixed price on producers, the States were able to benefit from the differences with export prices aligned with world prices, often higher than prices paid to producers. These revenues then enabled them to finance expenditure that was more favorable to urban populations and not to rural populations.

On the expenditure side, the first results of our research reveal that, without exception, these States have significantly increased the share of public revenue intended for the payment of current expenditure in education (consisting essentially of teachers' salaries) while that devoted to services public health services has stagnated or even decreased.

The graphs below show that almost all the countries, with the exception of three of them, dedicated a larger share of their income to education after independence compared to the last colonial period (the points being almost all above the diagonal). On the other hand, the situation is the opposite in terms of health: almost all have lowered health budgets relative to the orientations of the 1950s.

The lasting impact of colonization

The objective of our current research is to try to understand the origin of these budgetary choices. Are they due to personnel constraints? It is possible that, for the decolonized countries, it was easier and faster to train teachers than qualified health personnel.

In any case, these social expenditures are only part of public expenditures; it remains for us to examine the other items of expenditure, such as general administration and public investment (transport, telecommunications, electrification, etc.), as well as the policies put in place with regard to the nationalization of private companies.

It will have been understood: the newly independent States had to deal with a mode of levy inherited from colonization, of which only the reforms implemented more than 30 or 40 years after independence seemed to reduce the weight.

Taxes on international trade accounted for a third of public revenue from the 1940s to the 1970s. Trade liberalization has caused these tax levies to fall. It was only at the turn of the 2000s that domestic taxes compensated for these losses in tax revenue.

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This article is published as part of the symposium “African Modernities. Conversations, circulations, decentrings”, which takes place from June 9 to 11, 2022 at ENS-PSL, on the Jourdan and Ulm campuses. Find here the program of these exchanges.

Sandrine Mesple-Somps, In charge of research, Research Institute for Development (IRD); Denis Cogneau, Economist , Research Institute for Development (IRD); Justine Knebelmann, Economist, Massachusetts Institute of Technology (MIT), and Yannick Dupraz, Economist, Aix-Marseille University (AMU)

This article is republished from The Conversation under Creative Commons license. Read theoriginal article.