Logan Wort, executive secretary of the African Tax Administration Forum (ATAF), makes the case for why the international tax conference in Abuja will make a significant contribution.
From 26 to 29 September, members of African revenue authorities and tax experts from all over the world will attend the Third International Conference on Tax in Africa (or ICTA 2017) in Abuja, Nigeria. A flagship conference of the African Tax Administration Forum happening every two years, ICTA 2017 will ask delegates to deliberate over Building Strong Domestic Tax Regimes in Africa: Strengthening VAT, PIT and CIT. What is so significant about this?
Domestic resource mobilisation (DRM) is recognised as a top priority for financing development by the African Union’s Agenda 2063, the Monterrey Consensus (2003), the New Partnership for Africa’s Development (NEPAD), the Ninth African Development Forum and the High-Level Panel on Illicit Financial Flows. The implementation of the UN Agenda on meeting Sustainable Development Goals (SDGs) and the AU’s Agenda 2063, hinge on Africa’s ability to mobilise domestic resources to fund development.
But what exactly is DRM?
DRM refers to the generation of savings from domestic resources that can be deployed for socio-economic development. This can happen through both the public and private sectors. The public sector does this mainly through taxation.
It’s important to note that the total estimate of financing the SDGs is approximately USD 120 billion. Closing this financing gap across nearly 100 developing countries, will require a tripling of the current level of country aid! DRM is therefore critical for three reasons:
- to close the financing gap;
- to foster a strong social contract between a government and its citizens (because where governments are dependent for tax revenue from all their citizens, they are more responsiveness to their citizens’ needs);
- to promote good governance (because over-reliance on foreign aid can inadvertently undermine the social contract).
If DRM is aimed at reducing reliance on aid, a key question then is where should donor aid then be deployed for the most beneficial outcomes. The answer to this is greater funding for technical assistance on tax matters and improvements in tax administrations to enable better DRM.
How is ATAF supporting DRM?
ATAF recognises that some of the key reasons why DRM is not optimised across the continent is due to (1) low savings rate (that equals low economic activity rate); (2) illicit financial flows; (3) inappropriate use of tax incentives and exemptions and (4) weak tax administrative systems and capacities. Therefore, ATAF is geared to assist member countries to address these challenges in the following broad areas:
- Implementing the basics of any Revenue Administration such as completing a taxpayer register, functioning audit unit and recovery processes, embedded in legislation that provide certainty;
- Tax base broadening initiatives;
- Improving tax administration capabilities;
- Strengthening Tax Policy;
- Providing a platform for African countries to voice matters at regional and international level.
To assist countries, ATAF conducts scoping missions to assess, analyse and determine, in conjunction with the host country, both short and long-term strategies in broadening the tax base. Such initiatives include workable action plans to identify and bring parts of the informal economy into the tax net or to advise countries on technical improvements to their tax system which will promote DRM.
Improving tax administration capabilities means that numerous country programmes and technical assistance missions are aimed at enhancing the capacity of revenue administrations in specialist areas such as detecting and dealing with transfer pricing abuses; exchange of information; development of legislation that closes loopholes that are prone to abuse; the use of compliance risk management practices to ensure optimisation of resources; and to identify areas of revenue leakage and non-compliance.
To strengthen and develop expertise on the continent, instruments such as the recently established VAT Technical Committee, bring experts on the subject matter together to the benefit of the continent. Because tax policy aims to ensure predictability and equity in taxes, ATAF assists member countries in identifying and addressing tax policies that may lead to opportunistic avoidance practices and erosion of the tax base.
How will the conference help?
International tax cases may make the headlines, but in the end, the economic success and prosperity of Africa will hinge on the ability of African governments to effectively mobilise domestic resources by broadening their tax bases, and implementing efficient and effective systems to enhance tax administrations.
The structure of this conference reflects not only the wide range of the related subjects. What is exciting, is the high calibre content participants will be getting their teeth into: from boosting revenue during trying economic times to accelerating investment; from addressing VAT leakages to looking at VAT and digital economy; and from enhancing personal income tax to the importance of the ATAF’s Africa Tax Outlook.
This year’s ICTA is special for ATAF because it is being held in Abuja. Abuja is not just the capital of Nigeria, an economic powerhouse in Africa. It is also home to ATAF’s Chair of the Board, Mr William Babatunde Fowler, who is also the Executive Chairman of the Federal Inland Revenue Service of Nigeria.
Mr Fowler is one of six African experts recently elected to the prestigious UN Committee of Experts on International Cooperation in Tax Matters. Five of those six experts come from ATAF member countries. Ms Elfrieda Tamba is another ATAF Board member and also the commissioner general of the Liberia Revenue Authority. Ms Margaret Chikuba, Mr Eric Mensah and Mr George Obell are from the revenue authorities of Zambia, Ghana and Kenya, respectively. So this is a huge honour for the individuals and their respective countries, ATAF, and for Africa in general and a testimony to the success of the common mission to transform and enhance tax administration at a global level.
ATAF continues to lead the way in ensuring Africa’s voice on tax matters is taken seriously on the global stage. ATAF remains motivated by its core objectives of improving the efficiency and effectiveness of African revenue administrations and thereby promote DRM as a mechanism to enable member states to improve the living standards of the people of Africa. A prosperous future for Africa is possible but it will only become sustainable if attention is paid to building a solid base which includes building strong domestic tax regimes in Africa.