Africa’s ‘missing billions’
Sars calls on neighbouring countries to help stem illicit outflows and tax evaders
TO STEM the flow of illicit trade and tax evasion – which cost Africa about $60 billion (more than R720bn) a year – the South African Revenue Services (Sars) has convened a forum of commissioners from bordering countries.
The commissioners from countries including South Africa, Botswana, Lesotho, Mozambique, Namibia, Swaziland and Zambia, gathered in Pretoria last week to deliberate on topics such as core tax and customs issues and focus areas linked to illicit financial flows, base erosion and profit sharing, transfer pricing and cross- border enforcement.
This was in order to chart a road map and maximise the respective participating countries’ statutory mandates of revenue collection.
The International Monetary Fund (IMF) recently released a report, saying the cost of multi-national companies deliberately avoiding tax exceeded $ 200bn ( about R2.4trillion) a year, while the Organisation for Economic Capacity and Development (OECD) said developing countries lose three times more to tax havens than what was received in international aid annually.
The Global Financial Integrity report added to this, saying that outright tax dodging was an even bigger problem – with undeclared money transfers and false transfers costing developing countries more than $990bn (over R11.8 trillion) in 2012. The African Union report on illicit financial flows added that $60bn (over R720bn) was tapped from the continent annually.
Furthermore, the G20/ OECD announced a two-year project on base erosion and profit shifting to change existing international tax standards with the aim of ensuring that profits were taxed where economic activities occur and where value was created.
It is against this backdrop of abusive tax practices, that Sars convened the forum, with commissioner Tom Moyane, calling for “collective cross-border strategies to respond to the challenges, which can lead to a continental discussion under the African Tax and Administration Forum”.
Moyane provided context to the meeting in his opening remarks, saying: “Exports out of developing countries are often underinvoiced so that income is accrued abroad, and imports into developing countries are often under-invoiced, so that the excess payment accumulates in foreign accounts.”
Moyane acknowledged the increase in automatic exchange of tax information and posed the question on how this can be leveraged.
Ian Cruickshanks, chief economist at the South African Institute of Race Relations, said it is a good cause. He said it is an indication of financial crime in South Africa.
“All of this provides a base for this sort of activity in the country.”
Dawie Roodt, chief economist at the Efficient Group, said South African and African tax collectors are missing the plot for two reasons.
“The only guaranteed way to get people to pay taxes is to reduce the tax burden. The second reason is to make South Africa and Africa a safe place to invest in.”
Roodt said tax collectors considered the taxpayer to be the enemy, which was not the case.