ATAF to mitigate revenue shortfalls in AfCFTA
The African Tax Administration Forum (ATAF) has said it will expand its capabilities to support revenue authorities of the African Continental Free Trade Area (AfCFTA) in navigating the trade bloc’s tax and revenue shortfall implications.
Speaking at a 3-day 7th African Tax Research Network (ATRN) Annual Congress in Accra, on the theme ‘The Tax and Revenue Implications of the AfCFTA’, Executive Secretary of ATAF Logan Wort said member-countries of AfCFTA will have to reduce tariffs on 90 percent of goods that are traded within the continent.
This, he said, may result in short-term tariff revenue loss to most African member-countries where trade taxes remain a key source of revenue.
A recent study by the United Nations Conference on Trade and Development (UNCTAD) has estimated that Africa may lose about US$4.1billion in tariff revenues in the short-term due to AfCFTA’s implementation.
Since tariff revenues are currently a vital revenue source for many African countries, we must critically strategize on innovative ways to bridge these revenue gaps, Wort said, adding: “This is where the ATAF proudly comes in to strengthen tax administrations and mobilize the much-needed revenues efficiently and effectively for member-countries.”
He said given the AfCFTA’s importance to Africa and its implications on domestic resource mobilization, tax commissioners on the continent in the next decade will increase focus on Customs and trade by creating a dedicated unit to provide technical assistance on excise taxes and trade-based illicit financial flows (IFFs).
It is anticipated that the creation of a single market by the AfCFTA, wherein goods, services, labor and capital will flow freely, is likely to create loopholes and exacerbate the already existing challenge of illicit financial flows in the short- and long-term.
Already, UNCTAD (2020) has reported that Africa is losing approximately US$88.6billion – which is 3.7 percent of its GDP – to IFFs.
But ATAF assured that its partnership with the African Union will dwell much on supporting the continent to navigate revenue implications of the AfCFTA, while ensuring a smooth implementation to reduce the IFFs.
Commissioner General of the Ghana Revenue Authority (GRA), Dr. Ammishadai Owusu-Amoah, said the need for regional cooperation between tax authorities is now more important than ever.
“As a border control, Customs authorities are key in detecting and preventing smuggling, counterfeit goods and overall illicit trade; but in a future single market, one national authority cannot effectively execute this duty. This calls for extreme cooperation between tax authorities to prevent tax evasion and avoidance,” he indicated.
Dr. Owusu-Amoah called for a deepened engagement between the ATAF, AfCFTA and the AU to protect future revenues of the trade bloc.