AfCFTA brings exciting new prospects, but . . .

AS the drive towards operationalising the African Continental Free Trade Agreement ( AfCFTA) gathers momentum, revenue authorities within the region are apprehensive of the potential compromise on domestic revenue collections mainly on the customs front.

Africa is in dire need of a strong domestic revenue base to meet its development needs as part of a wider long- term desire to wean itself off the donor aid syndrome.

Speaking at the ongoing 4th International Conference on Tax in Africa here, revenue administrators and their stakeholders stressed the need to boost domestic revenue through expanding the tax base in a manner that will notably increase their tax- to- GDP ratios, while ensuring stability in revenue.

They expressed fear that the AfCFTA deal, which has already been signed by many African governments and is due for implementation in July 2020, might offset customs revenue gains.

The African Continental Free Trade Area brings exciting new prospects for the continent, but immediately means a loss in customs revenue, meaning it is imperative to tap into efficiency in collecting revenue, said Mr Logan Wort, executive secretary for ATAF, a 38- country member regional advocacy organisation on tax administration issues in Africa.

Moreover, given that the notion of digitalised economies is getting more prevalent in Africa, Mr Wort said policy and administrative action needed to be considered “to counter the decreasing contribution of corporate income taxes relative to total tax revenue .

Head of the Federal Inland Revenue Service, Nigeria Mr Tunde Fowler said the possible customs revenue loss from embracing the AfCFTA would be for a short while and that states needed to put interim interventions to ease the impact.

He said many countries had signed and ratified the AfCFTA.

While spelling exciting news for intra- Africa trade, it could lead to a reduction in the customs revenue in the short term, thus requiring stop- gap measures not to affect development plans.

Mr Fowler said in the long- run, the AfCFTA would yield positive dividend that will cushion economies as members will realise benefits of trading in a wider market.

The African Tax Outlook calculates customs revenue as contributing about 14 percent to the total tax basket in the continent.

This requires Africa to develop more efficient and effective ways of collecting revenue, with technology as a prime instrument.

Africa’s Agenda 2063 views domestic resources as an important enabler of its aspirations.

In fact, the regional blueprint specifically stresses the need to “build effective, transparent and harmonised tax, revenue collection, and public expenditure systems” as one of the key pillars.

President Mnangagwa was part of the African Heads of State and Government who signed the historic continental trade agreement establishing the AfCFTA on March 21, 2018 in Kigali, Rwanda at the African Union Extraordinary Assembly.

The country has since ratified the agreement, with both the National Assembly and Senate duly endorsing the move in March this year.

Zimbabwe further deposited the instrument of ratification with the Depository ( chair of the AU Commission) in May this year, becoming the 23rd country to do so.

AFRICA needs to nurture its budding entrepreneurs and ensure that taxation levels do not frustrate new innovations and domestic production, which form the base of job creation and solid economic growth, Ugandan President Yoweri Museveni said on Tuesday.

Officially opening the 4th International Conference on Tax in Africa here, he said due diligence was needed when levying tax, as he challenged tax administrators and policymakers to constantly evaluate the impact of tax decisions on national production.

“We need to carefully determine what to tax and how. Let us stop taxing production.

“If we want our economies to grow as Africa, we should remove taxation on production,” said President Museveni.

He noted that the productive stage of an economy was critical as it determines the ability of citizens to generate income, which affects consumptive spending and aggregate demand.

“Let the people earn some money and have it on their pockets. When they go to the bar, they’ll pay tax.

“When you tax them at production stage, you discourage growth, but when they go to the bar, it is voluntary and they’ll share their money with government through tax,” he said.

“This taxation of production is a big mistake, it’s better to tax more on consumption and this is the gospel I want to preach to the rest of Africa.”

The ongoing conference runs under the theme: “Innovation — Digitalisation and Harnessing Technology to Improve Tax Systems” and is being attended by policy

Kariba Bureau

ZIMBABWE is participating at this year’s China International Travel Mart (CITM) in Kunming, China where technology through translation applications to bridge the language barrier has taken centre stage.

The country is angling to get a share of the more than 400 million middle and upper class of the 1,4 billion population which has high disposable income and a penchant for travel.

This comes as the Zimbabwe Tourism Authority ( ZTA) has opened offices in Shanghai and Beijing to maintain a presence in the source market with vast potential to unleash a swell of visitors.

To break the language barrier at the CITM, Zimbabwean officials have adopted Youdao, a translation app which enables the seamless translation of languages on demand.

Deputy director in the Ministry of Environment, Climate Change, Tourism and Hospitality Industry Mr Douglas Mavhembu said using the app was a cost effective way of penetrating the Chinese market.

“Youbao is an amazing and cost effective application which has made it easy for us to communicate with the Chinese Market,” he said.

“We anticipate an increase in patronage by the Chinese market after this show. It is, makers, academia and regional revenue authority heads, who include Zimra commissioner-general Ms Faith Mazani and her team.

President Museveni stressed the need for the continent to embrace digitalisation to improve tax administration efficiency and devise measures to improve compliance as well as weed out corruption.

He said the continent has adequate resources in its disposal, and that these, aided with prudent revenue measures, can sustain regional economies without the need for external aid.

He called on technocrats to play their role in assisting governments in drafting sound policies and negotiating deals that best serve Africa’s interests.

President Museveni also reiterated the need for African economies to scale up value addition to realise high value earnings from global trade.

Chairman of the African Tax Administrators Forum ( ATAF) Council Mr Tunde Fowler concurred with President Museveni on the need to protect the productive sector from excessive tax burden, saying doing so not only threatens jobs, but scares away potential investors.

However, ATAF executive secretary Mr Logan Wort said the President’s views must be understood in the context of assisting growth of budding businesses and subsistence producers.

He said small businesses have limited capacity when compared to established industries that have huge capacity, but have often been implicated in tax evasion despite making huge profits so as to maximise profits. therefore, critical that in our preparations to host, our tourism industry needs must seriously consider adopting communication applications.”

With the Chinese market being advanced technologically, adoption of social media and communication enhancement application is key in bolstering Zimbabwe’s tourism resurgence.

Some of the popular communication and transaction-oriented platforms in China include WeChat at 1 billion users (2019), Weibo (290 million) and QQ with 807,1 million active users (2019).

Mr Gordon Mukanganwi of Batoka Safaris, who is part of the Zimbabwe delegation, said Zimbabwe needed to assimilate globally trending applications to keep up with the rest of the world.

“We are excited about Youbao and WeChat and these will go a long way in breaking communication barriers and facilitating payments between my company and our Chinese clients. I urge all operators interested in the same market to adopt the same,” he said.

With an outbound expenditure of US$115 billion, China is the largest outbound source market and is anticipated by the United Nations World Tourism Organisation to double its current outbound trips and notch up a US$200 million spend by 2020.