Impact of the AFCFTA on Tax Revenue in Togo

Abstract

The aim of this study is to examine the impact of the AfCFTA on Togolese tax revenue. The schematic facts and the gravity model applied to data from 51 countries including 41 African countries and 10 non-member countries of the AfCFTA confirm our hypothesis that the AfCFTA positively inf luences imports and exports of goods and services and generates short-term negative effects in the form of loss of tax revenue (customs duties). Thus, the schematic facts show that Togo’s imports of goods and services from African countries increased from 159.76 billion CFA francs in 2019 to 199.71 billion CFA francs in 2021, an increase of 25%. They also show that over the period 2019 to 2021, the customs duties collected amounted to an average of 54.09 billion CFA francs. This study estimates that if AfCFTA legislation had been in force since 2019, Togo would have lost an amount of around 54 billion CFA francs in customs duties. The gravity model estimates also show that AfCFTA would lead to an increase in trade between Togo and its partners and, in turn, an increase in domestic tax revenue of 2.809% and 3.532% respectively. These results urge public decision-makers to promote Togo’s specialisation in the production of goods and services for which it has a comparative advantage. This strategy will enable Togo to produce more goods and services at lower costs in order to sell them within AfCFTA and reduce unemployment.