Countries across Africa collected $38.9 million more in taxes in 2021 as a result of improved information sharing between tax authorities and cooperation to fight tax evasion and illicit cash flows.
A report by the Global Forum on The document “Transparency and Exchange of Information for Tax Purposes” published on May 14th shows that despite hurdles, more and more African countries are giving high priority to the exchange of information (EOI) between governments.
The Tax Transparency in Africa 2022 The report shows that most of the 33 African countries that are members of the Global Forum’s African Initiative are building the necessary infrastructure for information sharing.
According to the report, have 30 countries have already established delegations of competent authorities and specialized units for EOI, 22 have developed EOI manuals and 19 have follow-ups so far systems in place.
Kenya and Uganda are among the countries that have increased their efforts to facilitate the exchange of tax information in 2021 and have generated revenue from EOI over the past three years.
Tanzania and Rwanda are still in the process of establishing competent authority delegations and EOI units and have not reported any significant increase in tax revenues from information exchange in the last three years to 2021.
“The use of standards and tools for the exchange of information will go a long way towards ensuring improved revenue mobilization and will translate into the much-needed economic transformation of our countries and the continent,” said Francis Muthaura, Chair of the Kenya Revenue Service.
However, some challenges prevent African countries from using existing tax cooperation agreements to combat tax evasion education, avoidance and illicit financial flows.
According to Zayda Manatta, head of the secretariat of the Global Forum, an organization that exchanges tax information between 157 member states, Kenya, Tunisia accounted for 92 percent of all 592 exchange requests , Algeria and Nigeria Volume of information to be sent from African countries to other tax regimes in 2021.
Among the main reported hurdles are a lack of knowledge of the appropriate procedures, delays and a tight web of international legal instruments to facilitate EOI.
In total, only 15 African jurisdictions made applications for EOI in 2021, 11 of them made fewer than 10 applications. Seven African countries – Algeria, Kenya, Mauritius, Morocco, the Seychelles, South Africa and Tunisia – accounted for 90 percent of all inquiries received.
“African countries face certain challenges. They have indicated that they lack the capacity to collect and analyze information on the ground to enable them to fully exchange information between themselves,” said Chenai Mukumba, Policy Research and Advocacy Manager at Tax Justice Network Africa.
“The current automatism standard for information sharing requires reciprocal sharing, but as civil society organizations, we have requested that automatic information sharing should be on a non-reciprocal basis,” added Ms. Mukumba.
“The This is because there is a relatively small amount of money flowing from rich countries to poor countries, while huge sums of money are flowing the other way.”
The Automatic Exchange of Financial Account Information (AEOI) adopted in 2014 is welcomed as an important instrument to be in the fight against cross-border tax evasion, “since it allows tax authorities around the world to j to receive details of their residents’ financial assets and income held in other jurisdictions on an annual basis without prior request.”
Kenya has committed to start sharing information through the automated system this year, while Uganda and Rwanda will use the system in 2023 or 2024.