Africa generates €1.69bn from tackling tax evasion and illicit financial flows,says report

By Onome Amuge

African countries have realised additional revenues totalling €1.69 billion following the tackling of tax evasion and illicit financial flows in the continent.

This is according to the 2023 “Tax Transparency in Africa” progress report unveiled at the  just concluded 13th meeting of the Africa Initiative in Cape Town, South Africa.

The report is a joint publication by the African Union Commission, the African Tax Administration Forum and the Global Forum on Transparency and Exchange of Information for Tax Purposes, with support from the African Development Bank.

In an assessment of the progress made by 38 African countries in tackling tax evasion and other illicit financial flows (IFFS) through transparency and exchange of information, the report  indicated that from 2009 through 2022, the measures put in place effectively boosted tax revenue, interest and penalties, underscoring a substantial progress in tax transparency across the continent.

The release of the report comes as African governments continue to step up efforts to bolster domestic resource mobilisation in the face of economic headwinds that include global inflation and mounting debt levels.

This is as the Organization for Economic Cooperation and Development also estimates that Africa loses as much as six billion dollars each year in illicit financial flows.

Among its key highlights, the report showed that 23 African countries,including Nigeria, are now parties to the multilateral convention on Mutual Administrative Assistance in Tax Matters , the most comprehensive instrument for all forms of  co-operation to tackle tax evasion, thus substantially expanding their exchange of information networks.

It was also reported that 1170 officials from 37 African countries received training  in the effective use of expression of interest  (EOI) instruments in 2022, while a further 1 800 officials were trained by local trainers who had participated in the Train the Trainer) programme.

Going forward in 2023, the Global Forum Secretariat said it will continue to build capacities on cross-border assistance in the recovery of tax claims in Africa with a focus on the essential building blocks necessary for effective participation in this form of international co-operation. It also promised to develop guidance and practical tools to be used by countries interested in putting in place an enabling domestic and international legal framework, as well as establishing operational frameworks for cross-border assistance in the recovery of tax claims, complemented by tailored assistance to interested countries.

Zayda Manatta, Head of the Global Forum Secretariat, while addressing tax commissioners, high-ranking representatives, experts, as well as regional and international organisations and the civil society at the event, cited a World Bank study that projected that participation in exchange of information mechanisms could increase African countries’ tax revenues from 5 per cent to 19 per cent of GDP.

“The more familiar countries are with this tool, the more they exploit this tool, the more revenue should be collected. And if you manage to monitor this link between revenue collection and exchange of information, we would be able to further demonstrate the benefits countries are getting from this tool,” she said.

On his part,Edward Kieswetter, commissioner of the South African Revenue Service (SARS) and co-chair of the Africa Initiative said collaboration was essential to serve the shared ambition for effective resource mobilisation.

 “A tax risk anywhere, is a tax risk everywhere. Tax administrations are called to serve a transformative and higher purpose in the interest of society, Kieswetter said.

Also speaking at the event,Enoch Godongwana ,South Africa’s minister of finance commended the Africa Initiative, noting that during the past eight years, the initiative has changed the tax transparency landscape in Africa and aided the mobilisation of more than €300 million in domestic resources.