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Africa Should Broaden Tax Base

by Lorys Charalambous, Tax-News.com, Cyprus

25 May 2010


The African Development Bank, the Organisation for Economic Cooperation and Development, and the UN Economic Commission for Africa, have published a joint report focusing in particular on the continent’s fiscal resilience to the financial crisis, and an analysis of appropriate tax policy going forward.

The report observes that the continent is more resilient to the crisis in terms of government tax receipts and debt than many observers first anticipated. In addition, the continent is expected to rebound strongly from the downturn with average growth expected at 4.5% in 2010 and 5.2% in 2011. Against this background, the report focuses on long-term tax policy, in particular making longer-term recommendations to enable African governments to reduce their ongoing dependence on aid.

The report notes that there are significant differences in tax-raising performance amongst countries. Annual taxes per capita ranged in 2008 from between USD20 to USD40 in Burundi, Guinea-Bissau, Congo, Sierra Leone and Ethiopia, to USD4,866 in Equatorial Guinea, and USD11,725 in Libya.

In fact, tax effort estimates confirm that some countries collect as little as half of what would be expected, given their living standards and economic structures, while others collect two to three times what is expected. In particular, resource-rich countries have made little effort to broaden their tax base, the report said. By contrast Kenya, Morocco, Ghana and Cape Verde have shown that it is possible to collect taxes effectively from diversified sources.

Summarizing the report’s recommendations, the African Development Bank said that to achieve more effective, efficient, and fair taxation in Africa, countries’ tax bases should be broadened. The report says that policy options should include cracking down on fraud and evasion, removing tax preferences, particularly for large corporations and traders, dealing with abuses of transfer pricing techniques by multinationals and taxing extractive industries more fairly and more transparently.

The 2010 African Economic Outlook report’s findings will be debated by African ministers and CEOs of companies investing in the region at the 10th Annual International Economic Forum on Africa on June 11, 2010, at the French Economy, Industry and Employment Ministry.

TAGS: Morocco | South Africa | tax | Niger | Nigeria | Swaziland | Zimbabwe | mining | corporation tax | Cape Verde | Ethiopia | Libya | Mozambique | Sudan | Western Sahara | oil and gas | multinationals | Egypt | Equatorial Guinea | Guinea | Kenya | Namibia | Senegal | Sierra Leone | Uganda | Zambia | standards | Burundi | Ghana | Guinea-Bissau | Africa

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