African countries have generated $1.9 billion in tackling tax evasion and illicit financial flows within the continent.
According to the 2023 Tax Transparency in Africa progress report unveiled at the 13th Meeting of the Africa Initiative in Cape Town, African countries realized the additional revenues following voluntary disclosures, the implementation of information exchange mechanisms, and rigorous offshore investigations.
From 2009 through 2022, these measures have effectively boosted tax revenue, interest, and penalties, underscoring substantial progress in tax transparency across the continent.
The report—co-produced by the Global Forum on Transparency and Exchange of Information for Tax Purposes, the African Union Commission, and the African Tax Administration Forum presents the progress of 38 African countries in tackling tax evasion and other illicit financial flows (IFFs) through transparency and exchange of information. Five non-member countries participated in the study.
The release of the report comes as African governments continue to step up efforts to bolster domestic resource mobilization in the face of economic headwinds that include global inflation and mounting debt levels.
The Organization for Economic Co-operation and Development (OECD) estimates that Africa loses as much as $60bn each year in illicit financial flows.
Enoch Godongwana, South Africa’s Minister of Finance, disclosed that during the past eight years, the Africa Initiative has changed the tax transparency landscape in Africa and aided the mobilization of more domestic resources.
Stressing the importance of political will in efforts to increase tax transparency, Godongwana said, however, that more could be done. He called for the Africa Initiative to strengthen African countries’ capacity to leverage the exchange of information standards and protocols.
Among the key highlights of the report is for the first time, one African country reported collecting additional taxes—worth €10.6 million— through the use of common reporting standard data.
The Republic of the Congo, Angola, Zimbabwe, and Sierra Leone have joined the Global Forum as 165th, 166th, 167th and 168th members since June 2022.
23 African countries are now parties to the multilateral Convention on Mutual Administrative Assistance in Tax Matters, the most comprehensive instrument for all forms of cooperation to tackle tax evasion, thus substantially expanding their Exchange of information networks.
Manatta cited a World Bank study that projected that participation in the exchange of information mechanisms could increase African countries’ tax revenues from 5% to 19% of Gross Domestic Product (GDP).
“The more familiar countries are with this tool, the more they exploit this tool, the more revenue should be collected. And if you manage to monitor this link between revenue collection and exchange of information, we would be able to further demonstrate the benefits countries are getting from this tool,” she said.
Edward Kieswetter, Commissioner of the South African Revenue Service (SARS) and co-chair of the Africa Initiative said collaboration was essential to serve our shared ambition for effective resource mobilization. “A tax risk anywhere is a tax risk everywhere. Tax administrations are called to serve a transformative and higher purpose in the interest of society, Kieswetter said.
Launched in 2014, the Africa Initiative is a partnership of the Global Forum, 33 African countries, and 16 partners, including the African Union Commission, the European Union, and the governments of Switzerland and the United Kingdom.
The Africa Initiative seeks to ensure that African countries are equipped to participate in advances in global transparency, to better fight tax evasion and other illicit financial flows, and ultimately improve domestic resource mobilisation.