Although Africa is experiencing increased growth in trade and investment, the continent should broaden its tax base to create sustainable revenue collection, says Logan Wort of the African Tax Administration Forum (ATAF).
Speaking at the ATAF meeting on the multilateral agreement on exchange of information that began on Wednesday in Pretoria, Wort,? who is the Acting Executive Secretary of ATAF,? said it was important to increase the tax base.
Formed in 2008, the forum’s objectives include the promotion of economic development, good governance and accountability as well as the combating of tax evasion and avoidance, among other things. Thirty-four African countries are party to ATAF. Africa is currently experiencing growth in trade and investment as a result, probably, of jitters coming from Europe.
“But it is probably also because of an increased realisation that Africa is gearing itself for growth and it’s sorting out, not only its relationship between citizens and the state but also, the economic environment that makes investment viable,” noted Wort.
For example in the year 2000, the tax to Gross Domestic Product (GDP) ratio in Rwanda was as low as 7 per cent of the GDP.
This has now increased to around 14 to 16 per cent due to work done by the Rwandan revenue authority. Collected taxes on the continent increased from an average of 17.9 per cent of the GDP in 2000 to the current average of 20.3 per cent.
Though there was growth on the continent, the challenge was to stem the tide of tax and capital outflow out of African economies.
According to a report, illicit capital flight from developing countries is anything between $500 billion and $800 billion per annum.