Democratic Republic of the Congo: Selected Issues

This paper analyzes domestic revenue mobilization in the Democratic Republic of the Congo (DRC) and offers options to strengthen it. Domestic revenue mobilization (DRM) in the DRC has improved during the Extended Credit Facility ECF program, standing at 13.7 percent over gross domestic product (GDP) in 2023, though it remains persistently low relative to peer countries. The recent improvements in revenue mobilization have been driven by stronger corporate income taxation (particularly stemming from the extractive sector). A comparison between DRC’s and peer countries’ tax structure points to significant room for boosting domestic revenues with stronger mobilization of personal income taxes, taxes on international trade and transactions and goods and services. In addition, the country’s tax potential (estimated on the basis of its structural characteristics and a stochastic frontier model) points to significant scope for improving tax-to-GDP ratio, by about 10 percentage points under more efficient tax policy and tax collection. Finally, tax administration reforms based on recommendations from the recently published the Tax Administration Diagnostic Assessment Tool report can significantly contribute to boosting DRM, with particular focus on tax-avoidance in the mining sector.