Eight years after the launch of the Africa Initiative, how have the countries of the region progressed in terms of tax transparency? Are they able to exploit the latest advances in transparency? How is Morocco illustrated? The fourth edition of the joint annual report of the African Union Commission, the Forum on African Tax Administration and the Global Forum on Transparency and Exchange of Information for Tax Purposes, informs us on the subject.
With more than 220 exchanges of information for tax purposes, Morocco ranks second on the continent in terms of tax cooperation, after South Africa. In this regard, the Kingdom has been one of the good students since its accession to the Convention on Mutual Administrative Assistance in Tax Matters (MAAC).
By way of illustration, of the 41 countries that have provided data since the first report on tax transparency in Africa, neighboring Algeria, for example, provided data for the first time in 2021, while Guinea and Zambia participated in the 2021 survey but not this year, the 2022 edition of the “Tax Transparency in Africa” report reveals. Published annually, this report is a key product of the Africa Initiative.
It is a unique source of information for policy makers and citizens, providing comparable statistics on tax transparency as one of the responses to the challenge of illicit financial flows, estimated between 50 and 80 billion USD (48 -77 billion euros) per year for the continent.
Given the importance of the issues, in particular the fight against tax evasion and other illicit financial flows and, with a view to improving the mobilization of national resources to support their economic development, the exchange of information on request (ERD) is an effective tool within the reach of African countries.
Indeed, since 2014, the DRE has enabled them to identify 233 million EUR (244 million USD) of additional revenue. In total, since 2009, these countries have identified EUR 1.2 billion (USD 1.3 billion) in additional revenue (taxes, interest and penalties) through international tax investigations, including DRE, and voluntary disclosure programs initiated before the start implementation of the EAR standard.
The results are encouraging, but significant challenges remain, including the fact that progress in the use of tax transparency and RE is uneven. Over the past seven years, the Africa Initiative has been a catalyst for change in the understanding and use of exchange of information (EOI) as a tool to combat tax evasion and other illicit financial flows and contributed to increased tax revenue.
Go even further year after year!
Although solid progress continues to be made in the effective implementation of transparency and EOI standards, much remains to be done for African countries to fully benefit from tax transparency and combat tax evasion. and illicit financial flows, the report points out.
Going forward, the parties commit to continue the effective use of exchange of information on request, expand the implementation of automatic exchange of financial account information, build capacity to consolidate the benefits of tax transparency, or ensuring gender balance in tax transparency.
It is also a question of promoting recourse to cross-border assistance for the recovery of tax debts.
One more membership more widely across the continent
In 2021, the Africa Initiative has intensified its efforts to generate strong political buy-in to utilize the benefits of tax transparency and RE for all African countries. At the continental level, strategic consultations with the African Union Commission, a key partner, were held to advance tax transparency as a tool to combat international tax evasion and increase resource mobilization national among its Member States.
The launch of the Tax Transparency in Africa 2021, in May last year, was the cornerstone of the outreach strategy, showing the progress made and the benefits derived from the implementation and effective use of the standards transparency and RE. For the first time, African countries were net senders of enquiries, a promising signal that RE culture is advancing in the region.
The Africa Initiative has also taken concrete steps to make progress in the use of cross-border assistance for the recovery of tax debts. As a first step in this strategic axis, a dedicated working group delivered a comprehensive report on the current situation and the conditions necessary for successful cooperation in this area.
This report was welcomed by members of the Africa Initiative, paving the way for further work in 2022 to put in place the essential elements to strengthen the use of this form of administrative assistance in Africa.
The year 2021 has been marked by an increased commitment by countries on the continent to the tax transparency agenda. Algeria has joined international efforts to fight tax evasion as the 163rd member of the Global Forum and the 33rd member from Africa.
African countries have continued to take ownership of the tax transparency agenda, with Algeria and Rwanda joining the Yaoundé Declaration, which is now endorsed by 33 countries and the African Union Commission. Two other African countries (Uganda and Rwanda) have pledged to launch automatic exchange of financial account information (AEOI) by 2023 and 2024 respectively.
They will join four other countries (South Africa, Mauritius, Nigeria and Seychelles) who all exchanged information in 2021 on a reciprocal basis, Ghana (which exchanged information in 2021 on a non-reciprocal basis) as well as two other countries (Kenya and Morocco) who have committed to start their first exchanges in 2022.
For its part, the RE infrastructure of African countries has continued to mature. Their RE networks now reach 4,135 bilateral relationships and a 22nd country has joined the Convention on Mutual Administrative Assistance in Tax Matters (MAAC).
Growing use of inquiries
Virtually all African countries that provided information for this report (94%) have delegated powers of competent authority to the tax administration and established RE units. Most of them have formal procedures for handling RE requests (69%) and have monitoring systems in place to ensure that they meet their commitments to the international standard ( 59%). The number of employees fully dedicated to RE also increased in 2021.
On this date, African countries received more requests than they sent, unlike in 2020 when they were net senders. However, the number of requests sent increased by 26%, while the number of countries sending requests increased from 13 to 15. In addition, the gap between the number of requests sent and the number of requests received is narrowing by compared to previous years.
Nevertheless, progress in 2021 remains uneven. Four countries alone account for 92% of applications issued by African countries in 2021, continuing the trend of the previous year. The increasing use of RFIs by these countries has resulted in additional tax revenue.
In 2021, three African countries identified EUR 37.2 million (USD 38.9 million) in additional taxes as a direct result of submitted requests.
Modeste Kouamé / ECO Inspirations