Half of AU shies from tax initiative

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Cape Town - The African Union Commission is perturbed by African countries’ lack of participation in the OECD’s Inclusive Framework on Base Erosion Profit Shifting (BEPS).

TheOrganisation for Economic Co-operation and Development BEPS offers an opportunity for the continent to collectively confront challenges posed by an increasingly digitalised global economy, particularly as regards taxation.

Commissioner for Economic Affairs at the AUC, Professor Victor Harrison, said less than half of the bloc’s 55 member states were participating in BEPS.

“So far, only 25 African countries are part of this initiative, which is a cause of concern for the African Union. Co-operating on income tax is a substantial source of taxation in Africa, amounting to over 25 percent of the total revenues in most countries. It is, therefore, important that more countries participate in BEPS to reduce the risks associated with taxing the digital economy,” he said during the 4th African Tax Administration Forum (ATAF) High-Level Tax Policy Dialogue.

The growth of multinational enterprises and the digital economy, Prof Harrison noted, demanded development of robust tax systems.

The 2020 Revenue Statistics Africa Report - produced by the AUC, ATAF and OECD - indicates that the tax-to-GDP ratio for the 26 African countries that provided their data remained low at 17,2 percent.

This was in comparison to 22,8 percent in Latin America and 32,2 percent in OECD states.

Figures for major economies such as Nigeria and the DRC were as low as 5,7 percent and 6,6 percent respectively.

Prof Harrison said the low tax-to-GDP ratios in Africa pointed to the need to enhance resource mobilisation and revenue collection.

“It is also imperative for African countries to properly tax the digital economy to derive the benefits therein. Thus, tax administrators should be adequately equipped to overcome the constraints they face in taxing the digital economy,” he added.

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