As countries struggle to sustain their tax revenues, it becomes more difficult for multinational corporations to avoid taxes as new rules on exchanging tax information come into play.
The Tax Information Exchange Guide has been published released last month about netting tax fraud. The handbook, published jointly by the World Bank, the African Development Bank, the Organization for Economic Cooperation and Development (OECD) and the Global Forum on Transparency, provides for fines against the disclosure of confidential tax information by employees of affiliated tax authorities around the world.
It also provides for simultaneous tax audits for a taxpayer in different countries. The handbook will go a long way in attracting multinational corporations involved in tax avoidance across multiple borders.
According to Moses Kaggwa, Director of Economic Affairs at the Ugandan Treasury, “A Ugandan doing business in the UK The Uganda Revenue Authority would not be able to provide information about its business operations, but the UK tax authorities would pass information about this person on to their Uganda counterpart without being asked.
The same applies to a UK investor doing business in Uganda. This avoids cases where taxpayers get interest income somewhere and declare it at home as dividend income Countries participated in the automatic exchange of tax information in 2019 in an exercise that involved 84 million financial accounts and total assets of 10 trillion euros ($ 11.7 trillion), according to the latest model manual for information exchange for tax purposes / p>
But there are naysayers who lead the hostile attitude of rich nations when confronted with sensitive tax information from poor countries. Given significant tax losses due to double taxation treaties (DTAs) signed with offshore tax havens in the past, some have decided to abandon the renegotiations.
For example, Zambia and Senegal terminated their DTAs with Mauritius last year after revelations of massive loss of revenue.
Senegal’s previous tax treaty with Mauritius is blamed for the loss of $ 257 million in tax revenue over a 17-year period caused by aggressive tax avoidance activities by foreign multinational corporations based in the West African country and sister company based in Mauritius.
In comparison, Lesotho renegotiated its double taxation treaty with Mauritius earlier this year to allow the former to levy taxes on technical fees through holding companies based in Mauritius against sister Companies operating in Lesotho. In addition to Lesotho, Kenya and Rwanda have recently renegotiated double taxation treaties with Mauritius in a similar manner.
Under existing DTAs, foreign investors enjoy a reduced tax package in areas of corporate income tax levied on profits, with withholding tax applied Dividends and other income taxes levied on management services, technical services and license fees, among others.
For example, shareholders of private companies operating in Uganda, excluding publicly traded companies, are required to withhold 15% withholding tax on dividends, all of which Year compared to 10 percent that was levied against foreign investors based in Mauritius under a double taxation agreement signed in 2005 between Uganda and the offshore tax haven.