Africa collects $2bn more in corporate income tax annually

The Pan-African tax body, African Tax Administration Forum (ATAF), says its impact of the technical assistance work, in close collaboration with African countries, is starting to yield significant tax revenue results.

As a result, the partnership is moving African countries in the right direction in enhancing Domestic Resource Mobilisation (DRM) and combatting Illicit Financial Flows (IFF) on the African continent.

Over the past few years, ATAF has been working in close collaboration with African members of the OECD/G20 Inclusive Framework on the Pillar Two negotiations, including the design of the Amount A Multilateral Convention (MLC), which aims to reallocate part of the global profits of the largest and most profitable multinational enterprises to market jurisdictions.

“Although we have many concerns with the rules in the Amount A MLC in terms of complexity and not resulting in the appropriate reallocation of taxing rights between residence and source jurisdictions,” ATAF deputy executive secretary, Mary Baine said.

“ATAF and African countries working together have successfully negotiated changes to the design Amount A MLC to benefit lower-income jurisdictions.”

The OECD estimates on the impact of the Amount A rules note that certain design features of the rules that ATAF and African countries successfully negotiated will result in an average one percent increase in CIT for lower-income jurisdictions.

Based on the ATAF African Tax Outlook research, these successful negotiations will result in an estimated additional tax for the African Inclusive Framework members of over $1 billion per annum if they all implement the Amount A rules. “The other main part of the ATAF work on international tax, in addition to the Inclusive Framework global negotiations, is our long-term transfer pricing technical assistance programmes in many African countries,” Baine said.

“These programmes have been running for several years now and we are seeing the amount of additional revenues assessed and collected by Africa n tax administrations rising exponentially as the benefits of these programmes start to fully crystalise.”

Between 2015 and 2018, ATAF’s technical assistance programmes helped African countries assess over USD 1,27 billion tax and collect USD 355 million tax. In the four years from 2019 to 2022, this has risen to assessing over USD 3 billion and collecting USD 1.37 billion additional tax -- an increase in collection of nearly 400%.

“This year we have assisted African countries assess additional tax of over USD966 million and collect additional tax of over USD380 million,” said Ms Baine.

“These results are very significant gains for African countries both in terms of Africa starting to influence global tax standard setting and in increasing tax collection.

However, this is just a start for Africa and there is much more that needs to be done if Africa is to effectively enhance DRM and stop IFFs on the continent,” she said.

“There is a need to move from Africa influencing the global tax standards to proactively setting the agenda to ensure it meets the needs of Africa and other developing countries. In addition our technical assistance work is only scratching the surface in tackling corporate tax avoidance by many multinational firms.”

Over the next year, ATAF plans to extensively scale up its technical assistance work to both provide the support our members need to start setting the global tax agenda and to stamp out corporate tax avoidance in Africa.