Some 30 African countries subscribing to the membership of the African Tax Administration Forum have concluded a four-day meeting in Gaborone, Botswana, agreeing in one accord to prevail on African governments to encourage domestic resource mobilization for development and discourage aid dependency.
In the discussion that began on October 22-26, the member countries represented by Finance ministers and heads of revenue authorities as well as some development partners, representatives of international and regional organizations, academia, and tax practitioners, brainstormed on the challenges and opportunities facing ATAF members in building strong tax systems to mobilize domestic resources for their national development.
The participants said issues of aid and building African self-reliance through Domestic Resources Mobilization (DRM) was both timely, and significant if Africa’s development agenda 2063 is to be realized.
The conference took into consideration the nature of the economic environment and the opportunities and pressures for improving DRM; persuading citizens and governments to adapt the key role of taxes.
It also looked at the need to widen the tax net to increase DRM through closer consideration of policy opportunities, and taxation of the informal economy, high net-worth individuals, extractive and the agriculture sector.
The over 200 participants, strongly criticized “ill-conceived” tax incentives offered potential investors as a substantial drain on Africa’s revenue, while the impact is either not measured or insignificant to the foregone revenue.
They suggested that the ATAF supports a whole range of government approaches on evaluation and develop cost benefit analysis to assess the impact of incentives, considering possible work on incentives in the context of the extractive industry.
The participants further recognized that Africa’s ability to improve its DRM relies on political support to introduce well designed and appropriate tax policies and effective updated legislation that is supported by efficient tax administrations.
They also acknowledged the ATAF’s tax information progress on the continent, by welcoming the African tax organization’s tax policy work, and noted that the African Tax Outlook is the benchmark for tax policy making and ATAF key tools, including the Model Double Tax Agreement that balances taxing rights between countries, and the ATAF suggested approach to drafting transfer pricing legislation which is extensively used by members.
In preparing for the next decade, participants called for strong integrated systems for economies of scale, a closer dialogue between tax administration and policy, political support for implementation and improved taxpayer education to reinforce a tax paying culture and the social contract.
The African Union’s recognition is a game changer in raising the political profile of tax issues in this area, and the conference called for DRM to become an AU theme in a future year. They also noted growing tax harmonization and collaborative initiatives in regional fora.
The meeting applauded the ATAF for its technical assistance work, new Technical Assistance Policy and its plans to cover all taxes and related systems.
Participants called on the ATAF to develop an online platform for members to share best practices and solve technical issues. They welcomed the ATAF’s bilateral ‘downstream’ assistance which strengthens individual tax administrations. The meeting launched a Manual on the Delivery of Technical Assistance stressing the importance of country ownership, ‘South-South’ support between African countries, evaluation and impact analysis. This forms the basis for developing ATAF policy briefs (‘upstream’ work) and tools for strengthening legislation and developing systems.
The ATAF in response to the call for greater engagement of Commissioners of Tax Authorities will launch a new high-level dialogue in 2019 to harness and share leadership experience. A key element will be developing a strategy for intra-agency support after determining the areas for attention and assistance.
This accordingly, will seamlessly complement the established annual dialogue on the nexus between tax policy and administration that is already developing a closer relationship with policymakers, government and the legislator to build tax systems which reflect broader internal and external economic development.
To reinforce DRM, the meeting discussed the opportunities for improving voluntary compliance in African tax systems and the challenges of a large informal economy. Areas considered included presumptive taxes, segmentation and sector challenges including oil and gas, taxpayer education, auditing integrity, and the significance of the social contract.
Participants recognized the challenges and opportunities posed by the digitization of the economy. The growing importance of data, intangibles, and the absence of a physical presence to do business challenges the global tax rules. Africa must have a powerful proactive voice in the global tax debate to ensure the rules are fit for purpose in Africa. The meeting called on the ATAF to form a Committee on Digitization.
In addition, African innovation building on initiatives such as Mpesa offers a real chance to improve taxpayer connectivity, increase understanding and develop alternate African online systems for assessment and collection reflecting the continent’s needs.