Tax Transparency in Africa 2021, launched in May under the auspices of the Africa Initiative, outlines the state of play for 34 African Union members and details their progress in implementing and benefiting from the tax transparency and exchange of information (EOI) standards.
Tax administrations adapted swiftly to challenging circumstances in 2020 and managed to advance the tax transparency agenda on the African continent. Members of the Africa Initiative further expanded their EOI networks to reach 3,752 bilateral relationships in 2020, compared to 685 in 2013. This rapid improvement is mainly due to the growing number of African countries joining the Convention on Mutual Administrative Assistance in Tax Matters. The amount of EOI requests they sent increased more than thirteenfold since the start of the Initiative in 2014. In 2020, for the first time, African countries sent more requests than they received.
“The devastating socioeconomic impact of the COVID-19 pandemic on Africa and the challenges in mobilising financing to jump-start African economies clearly demonstrate that reliance on Official Development Assistance alone is no longer the solution,” said Mr Albert M Muchanga, Commissioner for Economic Development, Trade, Industry and Mining from the African Union Commission.
“Africa needs to take bold and tangible actions to consolidate its tax base. Some of the measures include strengthening capacities for raising domestic taxes and significantly reducing illicit financial flows from the continent. These, among others, are critical to achieving the targets and aspirations of the African Union Agenda 2063 as well as the United Nations Sustainable Development Goals. In this respect, the Africa Initiative on tax transparency is a step in the right direction in reducing tax evasion or avoidance as well as all other forms of illicit financial flows from Africa.”
Improved EOI infrastructures have helped tax administrations collect more revenue: in 2020, two African countries identified nearly EUR 35 million of additional taxes as a direct consequence of the requests sent. In total, since 2009, EOI enabled African countries to identify over EUR 1.2 billion of additional revenues (tax, interest and penalties) through offshore tax investigations, including EOI on request, and voluntary disclosure programmes launched prior to the first automatic exchanges of financial account information (AEOI). Interest in AEOI is growing in Africa. Nigeria undertook its first exchanges in 2020, joining Ghana, Mauritius, Seychelles and South Africa, while Morocco and Kenya committed to begin first exchanges in 2022. This dynamic has continued in 2021 with the commitment of Uganda to start AEOI in 2023.
In spite of the limitations imposed by the COVID-19 pandemic, capacity-building activities dedicated to African jurisdictions have expanded. Close to 1,300 officials from 35 jurisdictions benefitted from trainings in 2020, which was more than the cumulative figure for the 2015-2019 period.
Political buy-in for the multilateral tax transparency efforts was markedly reinforced over the past twelve months: Mali joined the Global Forum in 2020, bringing to 32 the number of Africa Initiative members, and the African Union Commission and Eswatini added their weight to the Yaoundé Declaration. This call for action to enhance domestic resource mobilisation by tackling illicit financial flows (IFFs) through international tax co-operation now counts 31 signatories.
The Africa Initiative is supported financially by the European Union, France (Ministry of Europe and Foreign Affairs), Norway (Agency for Cooperation and Development), Senegal (Resource Mobilisation and Investment Attractiveness Institutional Support piloted by the Ministry of Finance of Senegal and supported by the African Development Bank), Switzerland (State Secretariat for Economic Affairs) and the United Kingdom (Foreign, Commonwealth and Development Office).
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