Countries across Africa collected $38.9 million more in tax in 2021 owing to improved information sharing between revenue authorities and co-operation to fight evasion, and illicit flow of funds.
A report by the Global Forum on Transparency and Exchange of Information for Tax Purposes released on May 14 shows that more African countries are giving high priority to exchange of information (EOI) between regimes, despite hurdles.
The Tax Transparency in Africa 2022 report shows that most of the 33 African countries that are members of the African Initiative of the Global Forum are setting up the necessary infrastructure for exchange of information.
According to the report, 30 countries have already set up delegations of competent authorities and specialised units on EOI, 22 have developed EOI manuals and 19 have so far created tracking systems.
Kenya and Uganda are among countries that ramped up efforts to facilitate tax information sharing in 2021 and have realised gains in revenue in the last three years due to EOI.
Tanzania and Rwanda are still in the process of developing competent authority delegations and EOI units, and have not reported significant rise in tax revenue from information sharing in the last three years to 2021.
“Utilisation of exchange of information standards and tools will go a long way in ensuring enhanced revenue mobilisation, translating to the much-needed economic transformation of our countries and the continent,” said Francis Muthaura, chairman of the Kenya Revenue Authority.
Several challenges, however, obstruct African countries from taking advantage of the existing tax cooperation agreements to combat evasion, avoidance and illicit financial flows.
According to Zayda Manatta, head of the secretariat of the Global Forum, a tax information-sharing organisation between 157 member states, Kenya, Tunisia, Algeria and Nigeria accounted for 92 percent of all the 592 requests for exchange of information sent by African countries to other tax regimes in 2021.
The biggest hurdles reported include not knowing the appropriate procedures to follow, delays and narrow network of international legal instruments to facilitate EOI.
In total, only 15 African jurisdictions made requests for EOI in 2021, 11 of them making less than 10 requests. Seven African countries – Algeria, Kenya, Mauritius, Morocco, Seychelles, South Africa, and Tunisia, accounted for 90 percent of all requests received.
“African countries face certain challenges. They’ve indicated they lack capacity to collect and analyse information locally, to allow them full reciprocal information exchange,” said Chenai Mukumba, policy research and advocacy manager at the Tax Justice Network Africa.
“The current automatic exchange of information standard requires reciprocal exchange, but as civil society organisations we’ve been calling that automatic share of information should be on a non-reciprocal basis,” Ms Mukumba added.
“This is because there is a relatively small amount of money moving from rich countries to poor countries, yet vast sums of money are moving the other way.”
The Automatic Exchange of financial account Information (AEOI), adopted in 2014, is hailed to be an important tool in fighting cross-border tax evasion “as it enables tax authorities around the world to receive, annually, without prior request, the details of their residents’ financial assets held and income earned in other jurisdictions.”
Kenya has committed to start sharing information using the automatic system this year, while Uganda and Rwanda to start using the system in 2023 and 2024 respectively.