As published on thenationonlineng.net, Sunday 5 December, 2021.
“African countries should review their tax incentive regimes and policies to evaluate the impact that the Pillar Two minimum tax rate rules might have on their effectiveness,” the African Tax Administration Forum (ATAF)’s Executive Secretary, Mr Logan Wort said.
Speaking at Mazars conference ‘Set for change: tax transparency, a way towards sustainability’, Mr Wort noted with concern that in most jurisdictions there exists little transparency and governance for granting of such incentives. Stating his doubts regarding whether the recent Inclusive Framework’s two-pillar solution will result in any significant additional tax for Africa, he cautioned that under Pillar 2 solution, these incentives, may actually be ceding taxing rights to the recipient country.
Leaders from corporations, NGOs, institutions, and Mazars’ professionals from all over the world shared their insights on how international companies can embrace sustainable taxation.
In a thought-provoking interview, Mr Wort sat down with Erik Stroeve, Financial Services Tax Partner at Mazars, to discuss tax sustainability in Africa.
“The African journey over the last decade has been very much interlinked with the international cooperation journey and in particular the role of the U.S. and the EU in that cooperation journey. This is important because times have changed and continue to do at an ever increasing pace. This is as true for African countries as any other country. In 2008 the global financial crisis put great pressure on domestic economies in Europe, the US and others, including African countries. Following this crisis and the increased financial pressures on both governments and citizens in developed countries attitudes towards artificial profit shifting by multinational enterprises to low tax jurisdictions started changing, and global tax cooperation commenced work on base erosion and profit shifting by multinationals (MNEs) with the aim to safeguard this much needed revenue.
Africa also saw the need to improve Domestic Resource Mobilisation (DRM) so as to create sustainable revenue and move away from dependence on loans and aid which represented between 20 and 70% of African countries budgets. Improving DRM in Africa requires revisiting tax policies such as the granting of tax incentives, enacting more effective tax legislation and improving tax operating systems to both enable voluntary compliance and combat tax avoidance, evasion, and Illicit Financial Flows (IFFs).
Aggressive tax planning practices through artificial profit shifting by some MNEs is a well-publicised problem. This is particularly the case in Africa where corporate tax avoidance is a major contributor to IFFs , costing Africa billions of dollars in lost revenues needed for social development and to rebuild African economies decimated by the pandemic.
ATAF which is 12 years old, representing 40 of the 54 countries in Africa, works with our members to drive tax policy and operational change and improve tax administration capacity and technical skills to improve Domestic Resource Mobilisation on the continent.
Through our work we support countries to tackle such tax avoidance and that assistance has helped countries assess in excess of USD2.3 billion additional taxes and collect over USD900 million additional tax in less than six years from transfer pricing audits. ATAF is also consulting with business to improve voluntary compliance in Africa.”