AU: Nigeria, Others Target $220b Revenue from Taxes
Nigeria and other members of African Union are taking steps to enact legislation to attract additional revenue of $220 billion from taxes.
Also, there are moves to boost generation by approximately $40 billion from cross border transactions.
Members of the union concluded a three-day meeting of the Specialised Technical Committee on Finance, Monetary Affairs, Economic Planning and Integration-Sub-Committee on Tax and Illicit Financial Flows in Addis Ababa, Ethiopia.
It had as the theme “Tax in Africa: contemporary issues affecting the continent”.
The members adopted recommendations that ensure African interests are protected in the design and implementation of the global tax rules, and ways to improve domestic resource mobilisation for Africa’s development.
The meeting convened by the African Union Commission Department of Economic Development, Tourism, Trade, Industry, Mining (ETTIM); was supported by the African Tax Administration Forum (ATAF).
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Those who attended by included experts and senior officials from the Ministries of Finance, tax administrations, and academia, among others.
They interrogated key issues on the tax regimes in Africa and made recommendations to guide reviews and reforms of national tax policies to protect member- states’ tax bases.
The meeting discussed parameters of the African position on the promotion of inclusive and effective tax cooperation at the United Nations and on the consideration of the enactment of a Domestic Minimum Top-up tax for tax base protection ahead of the incoming global tax rules; adopted recommendations to use the VAT toolkit by ATAF for improved revenue collection on cross-border supplies; and identified areas where future legislative action or coordination would benefit member-states, and the African Union and relevant partners.
They also addressed wasteful tax incentives, stemming of illicit financial flows, and improving continental domestic resource mobilisation. necessary for the development of the continent.
The Union noted that the new global tax rules were have impact on national tax incentive policies across the continent.
According to the Union, the development has presented an opportunity for African countries to protect themselves from ceding their taxing rights to countries where multinationals are resident on existing tax incentives lower than the 15 percent global minimum tax, according to the new rules.
The Union said: ” This requires African countries to enact domestic minimum top-up tax legislation to tap into this revenue. Similarly, revenue collection from e-commerce goods and services requires the implementation of simplified VAT regimes.”
African Union Commissioner for Economic development, Trade, Tourism, Industry and Minerals, Amb. Albert Muchanga,noted that to effectively operationalize the UN Convention on International Tax Cooperation, the process must be inclusive in incorporating the views of existing African structures and leverage the work of the UN Committee of Experts on International Tax Cooperation. Further, the Member State-led intergovernmental body ought to have a well-resourced technical structure to focus on specific pain points in developing countries not addressed by previous initiatives to address gaps in tax cooperation. “At the continent level, the core issue is how Africa can develop tax administrations to increase investments from the current level of 20 percent of GDP to 40 percent. By incorporating the views of existing African structures, the operationalization process of the Convention will ensure accountability and full ownership by the Member States.”
Head of Policy Unit at the Ministry of Finance of the Republic of Ghana and the Chair of Experts of Sub-Committee on Tax and Illicit Financial Flows, Raymond Nazar, called for improved tax collection systems supported by trade and investment to shield the continent from the vulnerabilities to external shocks and dependency. “Estimates show that enacting legislation to protect tax bases from losses due to tax incentives could result in an additional revenue of around $220 billion while cross-border transactions and e-commerce have the potential to generate approximately $40 billion in revenue for the African industry by 2023”. The domestic resource mobilization, he noted, is critical as the continent builds back economies from the Impact of; the COVID-19 pandemic, the Russia- Ukraine crisis, climate change, drought and food insecurity.
Acting Executive Secretary, United Nations Economic Commission for Africa (ECA), Antonio Pedro, underscored the need for a complete overhaul of the global financial system, the creation of an operational debt relief and restructuring framework, strengthened domestic resource mobilization as well as an inclusive international tax system. “Global financial architecture reforms need to be coupled with an international tax framework that can ensure the taxing rights of African countries in an inclusive and equitable manner. As such, it is critical to formulate an African Position on the UN Tax Convention.”
For Africa to realize the aspirations of Agenda 2063, ATAF Executive Secretary , Logan Wort emphasised the urgency in addressing the tax regime gaps to boost domestic resources mobilization noting the importance of domestic taxes such as VAT to African economies. “As directed by the Ministers in the 5th Ordinary Session of the Specialised Technical Committee on Finance, Monetary Affairs, Economic Planning and Integration, together with the African Union Commission, we have developed the Suggested approach to Domestic Minimum Top-up Tax. This is a design feature to offer protection to Member States who may be exposed to the effects of the Global Minimum Tax as agreed under Pillar Two of the Inclusive Framework”. Further, ATAF has published a VAT Digital Toolkit for Africa to help African jurisdictions secure VAT in the digital economy by providing support for the effective collection of VAT.
Source: The Nation
