Business

Tax loss by African nations is three times what they get in aids annually –Osinbajo

We’re building a new gov’t culture that competes for private sector investment- Osinbajo

Vice President Yemi Osinbajo has lamented that tax problems of African states have remained much the same in complexity and character despite efforts by the continent’s tax administrators to address the problem.

He stated this on Tuesday in his keynote address on the theme, “Building Strong Domestic Tax Regimes in Africa: Strengthening VAT, Personal Income Tax and Companies Income Tax” at the African Tax Administrators Forum (ATAF) 3rd International Conference on tax in Africa, held in Abuja.

The Vice President lamented, that the estimated revenue loss for developing countries from tax evasion, is three times greater than the amount they receive in foreign aid each year.

Osinbajo regretted that through the use of “aggressive and often suspicious tax planning and transfer mis-pricing multinationals minimize their tax payments or, to put more graphically, dodge taxes.”
ATAF came into existence in 2008 following an international conference that year on a theme,

“Taxation, State building and Capacity development in Africa”. Senior tax administrators and policy makers from 39 African countries, had after that conference agreed to work towards the establishment of the forum as a platform for sharing best practices in taxation matters in the region.

In his address at this year’s conference, Osinbajo said, “It is remarkable indeed that the forum has through the years been unwavering on its founding mission and ideals. But it is worth noting also that the tax problems of African states have remained much the same in complexity and character since.

“The elephant in the room in most discussions on tax in developing countries remains the problems of domestic resource mobilization, addressing the tax gap, or the difference between what we collect and what we could collect.

“The constraints are similar though in varying degrees across the continent. They include, a large informal sector, including large subsistence agricultural sectors, tax evasion and avoidance, tax exemptions, and inequitable and opaque rent-sharing arrangements in the extractive sector.

“Significantly also, by the use of aggressive and often suspicious tax planning and transfer mis-pricing multinationals minimize their tax payments or, to put more graphically, dodge taxes.”
Making reference to the Thabo Mbeki report on illicit financial flows, he said the report disclosed

“shocking details of tax losses to African economies by these practices of multinationals and their local collaborators.”

He added, “Paradoxically the report shows that these practices lead to an estimated revenue loss for developing countries that is three times greater than the amount they receive in foreign aid each year.”

He however noted that the trend of the international debate on global tax issues is favourable to African economies. He advised that most African tax administrators must be following the debate closely.

“There are two main items; the first is increasing transparency and information exchange, while the second is Base Erosion and Profit-Shifting (BEPS).

“The former involves establishing automatic information exchange as the new global standard for cooperation in tax matters and ending legal secrecy of ownership of companies and trusts, especially those based in tax havens,” he said.

Read also: 2017 BUDGET: Pressured by Senate’s summon, Adeosun swiftly reacts, gives breakdown of capital funding

On Base Erosion and Profit Shifting, which has also done significant damage to domestic resource mobilization in Africa, he said a range of potential actions are planned by OECD countries which include checking transfer mis-pricing, country-by-country reporting by transnational companies, international tax law, standards for international tax treaties, limits on tax planning activities and the tax treatment of the digital economy.

“These agendas have been endorsed by the G8 and the G20, thus giving them high- level support and momentum.

Although the immediate outcomes will benefit the OECD, EU and BRICs countries more African tax administrators must see the great opportunities in these initiatives and take advantage in developing domestic tax policies and regulations,” Osinbajo said.

 

RipplesNigeria… without borders, without fears

Click here to join the Ripples Nigeria WhatsApp group for latest updates.

Join the conversation

Opinions

About the author

Ripples Nigeria

We are an online newspaper, very passionate about Nigerian politics, business and their leaders. We dig deeper, without borders and without fears.
www.ripplesnigeria.com

/* ]]> */