Africa notches strong progress in building tax transparency, tackling illicit financial flows
African countries’ requests for information for tax collection purposes rose 26% over the previous year, signaling continued progress toward tax transparency in spite of a challenging environment, according to a report by The Africa Initiative launched on Tuesday in Nairobi.
The Tax Transparency in Africa 2022 report, which covers 38 countries, documents Africa’s progress in tackling tax evasion and other illicit financial flows (IFFs) through transparency and exchange of information (EOI) for tax purposes.
The Africa Initiative is a partnership of the Global Forum on Transparency and Exchange of Information for Tax Purposes (The Global Forum), 33 African countries and 16 partners, including the African Development Bank, the African Union Commission, the European Union and the governments of Switzerland and the UK. Five non-member countries participated in the study for the report.
“I wish to applaud the members of the Africa Initiative for their commitment and resilience in implementing tax transparency standards during the difficult times occasioned by the COVID-19 pandemic,” said Githii Mburu, Commissioner General of the Kenya Revenue Authority and Chair of the Africa Initiative, during the launch.
Among other key findings of the 2022 report:
- African countries had 4135 bilateral exchange of information relationships in 2021, up from 913 in 2014.
- Fifteen countries sent requests for tax information in 2021, up from 6 in 2014.
- Nine African countries collectively reported having collected €233 million since 2014 as a direct result of exchange of information requests. Since 2009, at least €1.2 billion in additional revenue has been identified in the region through voluntary disclosure programs, exchange of information and offshore investigations.
- In 2021, 1500 African tax officials received training on the use of exchange of information instruments.
Zayda Manatta, head of the Global Forum Secretariat, presented an analysis of the report’s findings.
She said that African countries continued to suffer significant losses from illicit financial flows, estimated at $50 billion to $80 billion every year. The Covid-19 pandemic has complicated Africa’s achievement of the UN sustainable development Goals.
“Covid-19 has pushed an additional 29 million people into extreme poverty, so effectively curbing illicit financial flows, would unlock much needed resources in Africa,” she said.
In spite of the report’s positive findings, there is room for African countries to increase their use of tax transparency tools, Manatta said. For instance, although 15 countries sent requests for tax information in 2021, 4 countries—Kenya, Tunisia, Algeria, Nigeria—accounted for 92% of those requests.
She urged that more countries should use requests for information. She also urged that a system for automatic exchange of information needed to be put in place.
“More needs to be done in Africa to increase women’s participation in capacity building activities,” She pointed out that around the world an average of 50% of attendees in capacity building training whereas in Africa it was 40%.
The African Development Bank, an observer to the Global Forum since 2014, promotes African tax transparency through support to institutions and non-state actors in its regional member countries and by strengthening international cooperation to eliminate illicit financial flows.
