Sharon Kavhu recently in Nairobi, Kenya
Africa has over the past decade managed to raise over US$1.1 billion in tax revenue through projects initiated by the African Tax Administration Forum (ATAF), the Southern Times has learnt.
ATAF is an organisation which was established by African revenue authorities in 2009 to improve the performance of tax administrations on the continent.
In an interview on the side-lines of the Pan African Conference on Illicit Financial Flows and Taxation last week, ATAF executive secretary, Logan Wort, said that the revenue was raised mostly through taxation of multi-national corporations (MNCs).
“As ATAF, we provide technical training for our members and in the past 10 years, we trained about 16 000 tax officials either through seminars or online training and we also offer a Master’s Degree in taxation. We also do country programmes or technical assistance programme and currently we have around 24 technical assistance programmes in 24 African countries.
“We largely give technical support in taxation of MNCs and through that programme, we have been able to raise over US$1. 1 billion in tax revenue and of the total figure, we have managed to collect a quarter of a billion dollars that is already in the banks of the five countries that we have been assisting,” said Wort.
He said his organisation had also developed a model for tax treaties that African countries could use to negotiate tax treaties.
The development is in-line with the organisation’s aim which is to provide administration and technical assistance in taxation issues.
Wort said ATAF has also developed several policies and regulatory models for Africa in addition to the value that the organisation brings to the continent.
He acknowledged that Africa was losing tax revenue through illicit financial flows and suggested that African countries should increase its ability to collect taxes instead of increasing tax rates.
“The main issue is that the continent and countries on the continent need to increase their ability to collect taxes, and this is done not by increasing tax rates but by optimising and improving efficiency in the way they collect taxes. This will increase voluntary compliance by citizens because when governments spend the money well, citizens tend to effectively pay their taxes. There is a link between how citizens pay their taxes and how governments spend their taxes,” Wort added.
As much as ATAF has managed to help Africa in having over US$ 1.1 billion in tax revenue, there are several challenges that are halting the optimisation of tax revenue in Africa.
Among the challenges are a lack of capability, skills, knowledge and advanced technologies.
Wort said it was fundamental for countries to invest in their technologies for them to maximise tax revenue from the digital economy.
“The challenges that African countries are facing are mostly related to administration and technical skills and we are trying to be the solution. Well it is not easy, we try our best to assist and we also provide loans for the countries to invest in advances technologies. Some of the loans we provide in partnership with other organisations such as the World Bank among others,” said Wort.
“Most countries have very weak policies and legislation so if you take for example, a country like Liberia, Namibia and Sierra Leone. We have been assisting those countries particularly on transfer pricing. Transfer pricing is where MNCs do business with native subsidiaries and the pricing for those transactions is not charged at a market related price. Under such circumstances, you suffer tax losses and so transfer pricing is one of the most causes of tax losses in these countries.”
He said ATAF only provided technical and administrative assistance and issues of policies and legislation were done at the national level by relevant governments of those countries.
It is against this background that Wort urged governments to work hand in hand with his administration in order to review relevant tax policies and regulations.
With the coming in of the digital era where the digital economy has penetrated the African economy, many African countries are losing tax revenue on these platforms.
However, ATAF is participating in researches on best ways of developing global rules for taxation in the digital economy.
“In the meantime, we are urging countries to do what is within the laws to tax what the digital economy generates. For example, Uganda reported at the recently ended PAC that they are collecting through the consumer the tax for a company that operates in Uganda but is not physically present in Uganda, so countries are finding ways to tax the digital economy in ways that they had not been doing before, which is a good thing. It’s not happening in all African countries but only those with stronger tax authorities,” said Wort.