- African countries realize $1.85 billion in revenue through voluntary disclosures, information exchange.
- World Bank study suggests information-sharing mechanisms will boost African countries’ tax revenues.
- The report highlights the African country’s $11.6 million tax collection using common reporting standard data.
A new report shows African countries can boost revenue by disrupting Africa’s secret dance with tax evasion. Through initiatives such as voluntary disclosures, and the establishment of information exchange mechanisms, economies in Africa can poison the continent’s passion with tax evasion. Coupled with measures such as robust offshore investigations, African countries have successfully generated additional revenues amounting to a substantial $1.85 billion.
Eliminating tax evasion to build wealth
These revelations are contained in the 2023 Tax Transparency in Africa progress report presented during the 13th meeting of the Africa Initiative in Cape Town.
African countries are adopting these initiatives to combat tax evasion, advance transparency, and improve their capacity to mobilize domestic resources. The report emphasizes how these actions boost economic growth and helped pave the way for a more affluent future for the continent.
The period between 2009 and 2022 marked significant advancements in tax transparency and revenue generation across Africa. These measures, encompassing enhanced tax revenue collection, interest accrual, and penalties, demonstrated substantial progress in tackling tax evasion and illicit financial flows (IFFs).
The comprehensive report, a collaborative effort between the Global Forum on Transparency and Exchange of Information for Tax Purposes, the African Union Commission, the African Tax Administration Forum, and with support from the African Development Bank, examines the progress made by 38 African countries in promoting transparency and exchange of information to combat tax evasion and IFFs. Notably, the study’s conclusions were further enhanced by the participation of five non-member nations.
The release of this report coincides with African governments’ heightened efforts to strengthen domestic resource mobilization amidst prevailing economic challenges, including global inflation and mounting debt levels.
Illicit financial flows Africa
The Organisation for Economic Co-operation and Development (OECD) estimates that Africa experiences an annual loss of up to $60 billion due to illicit financial flows. Against this backdrop, African nations are working to address these issues and mitigate the negative impact on their economies. The report is a valuable resource for policymakers and stakeholders, providing insights and recommendations to guide future strategies in curbing tax evasion and fostering transparent financial practices across the continent.
The initiative aims to equip African countries to participate in global transparency advancements, combat tax evasion and illicit financial flows, and ultimately improve domestic resource mobilization.
The report showcases the transformative impact of the Africa Initiative, which has led to the mobilization of over $329.1 million in domestic resources. This demonstrates the commitment and dedication of African countries to enhance tax transparency and strengthen their economies.
One of the noteworthy achievements highlighted in the report is the successful collection of an additional $11.6 million in taxes by one African country through the use of common reporting standard data. This milestone exemplifies the effectiveness of implementing international tax reporting standards and its positive impact on revenue generation.
Also Read: Illicit Financial Flows Bleeding Continent Dry
More countries joining the initiative
The Global Forum, a key partner in the Africa Initiative, has expanded its membership with the Republic of the Congo, Angola, Zimbabwe, and Sierra Leone, joining as the 165th, 166th, 167th, and 168th members since June 2022.
This expansion signifies African countries’ growing recognition and participation in the global fight against tax evasion and illicit financial flows. Moreover, 23 African countries are now parties to the multilateral Convention on Mutual Administrative Assistance in Tax Matters, further strengthening cooperation and information exchange networks.
In line with global efforts to enhance transparency, 10 African countries have committed to the automatic exchange of financial account information by specific dates, with more countries expected to follow suit in the near future. This commitment, supported by the Global Forum and its partners, will significantly contribute to curbing illicit financial activities and promoting financial integrity.
Capacity building is crucial to ensure the effective implementation of tax transparency measures. In 2022, about 1,170 officials from 37 African countries received training on the effective use of the exchange of information instruments.
Additionally, through the Train the Trainer program, 1,800 officials were trained by local trainers, enabling wider knowledge dissemination and empowering tax administrations to use the tools at their disposal.
Benefits of information exchange
During the presentation of the report, a study by the World Bank was cited, projecting that participation in the exchange of information mechanisms could increase African countries’ tax revenues from 5% to 19% of GDP. This demonstrates the potential for significant revenue growth when countries become more familiar with and actively exploit the benefits of exchanging information.
Edward Kieswetter, Commissioner of the South African Revenue Service and co-chair of the Africa Initiative, emphasized the importance of collaboration in achieving effective resource mobilization.
He highlighted that a tax risk anywhere is a tax risk everywhere, emphasizing the interconnectedness of tax systems and the need for cooperation to combat tax evasion and illicit financial flows. Tax administrations play a crucial role in serving society’s transformative and higher purpose.
The 13th Meeting of the Africa Initiative, held on July 6-7, 2023, brought together tax commissioners, representatives from international organizations, experts, and civil society.
Advancing tax transparency
The meeting provided a platform for knowledge sharing, collaboration, and further strengthening the Africa Initiative’s objectives. Representatives from Zimbabwe and Angola, the new African members of the Global Forum, attended the meeting, showcasing their commitment to advancing tax transparency in their respective countries.
The event also marked the publication of a toolkit to assist tax administrations in setting up and benefiting from initiatives like the Global Forum. This resource will support countries in implementing best practices, improving transparency, and enhancing their capacity to combat tax evasion and illicit financial flows.
Overall, the achievements highlighted in the report underscore the progress made by African countries in tax transparency and resource mobilization. Through their active participation in the Africa Initiative and collaboration with global partners, African countries are strengthening their tax systems, curbing illicit financial activities, and paving the way for sustainable economic growth. The continued dedication to transparency and cooperation will contribute to a more prosperous and equitable future for the continent.
Also Read: IMF calls for transparency, okays $153M loan
