From Ugandan President Youweri Kaguta Museveni; Chairman of African Tax Administration Forum, ATAF, Tunde Fowler and Executive Secretary of African Tax Administration Forum, Logan Wort and specialists in the taxation of digital and online arm of African and global economy, came thoughts and insights, yesterday on how Africa could increase its revenue yields and free itself of dependence on foreign aids, loan and handouts.
Museveni rooted against the taxation of production. Rather, he called for the taxation of consumption, property and greater attention to integrity in recruiting the workforce in tax agencies.
Fowler on the other hand, said Africa should pay more attention to how to stem Illicit Financial Flows, IFF, taxing rights of Africans who consume goods produced in different parts of the world, online tracking of all such transactions, and how to sustain capacity building programmes of tax authority staff in order to stem the financial hemorrhaging on the continent which he said the Thambo Mbeki report puts at over $ 60 billion dollars close to seven years ago.
The Chairman of the Federal Inland Revenue Service, FIRS, also called for support from African leaders on how to influence global discussions both through policy formulation, technical inputs and how the continent can navigate new technologies to provide sufficient scope to modernise and increase efficiencies in tax administration.
Wort noted that Africa is and will continue to loose a huge slice of the revenue that should accrue to it if the continent fails to pay attention to almost over 139 million face book and 500 million mobile phone users and the online digital transaction set to contribute US$110 billion to Africa’s GDP, next year.
The trio and a Professor Anne Ogutu of the African Tax Institute, who spoke on the challenge of taxing digital economy, warned that in a world, where the economy is no longer obeying the tax rule of where you reside as a basis for levying tax, where consumers and at times taxpayers and businessmen are stateless, there has to be a radical review of tax policy and practice in Africa if the continent is not to loose out from the global digital economy.
Museveni, spoke last at the opening ceremony and held the audience spellbound will his repertoire of practical experience and witty anecdotes. “ Ï want to speak about our issues”. He said as he commenced his 18-minute speech, which he made in his ex-tempore speech. “”We should know what to tax and why.. I don’t support taxation of production. The point is that if production is not taxed, people will have more money in their pockets to spend. I know that if Ugandans have money in their pockets, in the evening or at weekend, they will go and relax. You can then collect tax when they go and take some drinks”.
He disagreed with his minister of Finance Hon Matia Kasaija that those doing electronic transaction or even crypto currency cannot be traced: It is not difficult to trace electronic transaction. When you do any transaction, you leave some traces, that provides data’. Once you go electronic, it is very easy to trace you. If you don’t want to be traced, you better don’t go electronic. ”Recall that Osama Bin Laden did not use electronic gadget for many years. Still the Americans traced him.
He said it is for tax practitioners to determine how Africa can harness the footprints which exists in online and electronic world for tax purposes.
Fowler told the conference that the emergence of ATAF as a distinctly African tax intellectual and professional house has been yielding quantifiable returns for the continent: “Our contribution as members to a truly African organisation has led to some notable successes at the global level.
“ATAF Council consciously and consistently encourages active participation in standard setting. ATAF regularly participates in OECD and technical committees’ work and as an example was UN able to effect changes to Transfer Pricing Guidelines that give African countries a vital source of revenue.
“ We believe that this engagement not only ensures that solutions relevant to the continent are adopted, but that the subsequent delivery of tailor-made programmes to members help customise these. At the end of 2019, ATAF has 24 active programmes across our membership. They report that these programmes led to the collection of over USD300 million additional tax over the past 2 years; with additional assessments of over USD1 billion. The Council will therefore continue to actively support the secretariat to acquire sufficient human and other resources to sustain these gains going forward.
Fowler noted that the HLP Report estimates that over $60 billion is lost to the continent annually and this figure has since grown from 2014 estimates. Global Financial Integrity (GFI) estimates South Africa alone lost $37-billion, which amounts to $7.4-billion a year – in potential government revenue due to trade mis-invoicing between 2010 and 2014.
The continental association, the ATAF Chairman noted is encouraged by the recognition of the African Union at the Heads of States Meeting in the Republic of Mauritania. “Your excellency, as we celebrate ‘work of the ATAF this needs to be effected by the Heads of State pledged support in strengthening tax authorities through the work of ATAF. This can only be addressed through changes in tax policy and administration, hence a critical nexus is crucial for success at all levels”
“Therefore as we engage on how best to tax the increasingly digitalised economy, let us concentrate on what the best for us in our context. Your Excellency, this is a critical stage in impending global decisions on taxing rights begs for your support and that of your peers in providing leadership on what policy choices are best for our continent.
“While ATAF and individuals countries may be engaged at the highest levels of the debate, there are crucial policy decisions without which technical arguments alone will not suffice. It is a rare opportunity to reset the bias of the global tax system and mobilise domestic resources to achieve SDGs and Agenda 2063
The challenge of tax and revenue growth in Africa, Fowler noted, is a robust deliberation on how best to adopt digitalisation for efficiency gains, grow our tax base and stem revenue loss. Indeed, we are at a crossroads in regard to international taxation, where the world is discussing substantive changes to taxing rights.
“The global tax agenda has shifted once again. Not only is this a challenge, as we come to grips with implementing the recommendations from the BEPS Project with limited resources, but additionally, it is critical that we form positions relevant to Africa on how best to adapt to the 4th industrial revolution. We have the opportunity to influence the global discussions both through policy formulation and technical inputs. Additionally, the opportunities presented by new technologies provide sufficient scope to modernise and increase efficiencies in tax administration.
The ATAF Chairman, who is also the Chairman of the Joint Tax Board (JTB) noted that many African countries are working on improving tax-to-GDP ratios, and according to the African Tax Outlook aim for an average of 18%. However, increasing tax rates is challenging from a policy and social development perspective. Therefore a strong mix of tax policy and tax administration decisions remains relevant in order to leverage these technological advancements.
Wort, who had served as Secretary of ATAF since inception noted that the ongoing debate on taxing the digital economy, offers Africa an opportunity to rethink and redefine past inefficiencies and questionable policies where African countries have experienced the highest amounts of base erosion and profit shifting.
“It is worth noting that the notion of digitalised economies is getting more prevalent in Africa. Our countries continue to innovate mobile technologies like the more developed countries. The bulk of our revenue authorities have introduced mobile apps to allow for payment of taxes, and it is in Kenya, where a young student invented a money transfer system. Central Bank of Kenya (CBK) data shows that mobile money transactions stood at US$38.5 billion in 2018, have increased by 10% from 2017, meaning that on average US$108 million is transacted through mobile cash per day.
“Keeping with the trend of mobile users, in September 2019, the Global Stats Counter for Social Media measured that up to 69% of Africans used Facebook, 17% where watching videos on YouTube, 7% peaked their interests in photos on style and consumer trends through Pinterest, while 4% used Twitter and 1% Instagram. The popularity of Facebook on the continent is illustrated by the 139 million users of the platform in 2018, of which 95% used the service through their mobile phones.
“GMSA estimates that by 2020, which is a few weeks away that sim connection to the mobile phone will reach 1 billion. That represents almost every African having a mobile phone. Sub-Saharan Africa is expected to have 500 million mobile phone subscribers by 2020 and is the fastest-growing region in terms of mobile uptake. The mobile industry also has an important role to play in Africa’s GDP, contributing up to US$110 billion by 2020.
“The global economy has and continues to force us to rethink what it means to trade within the continent. The growth in digital platforms and, consequently, digital trade has introduced challenges, which would have been considered as ‘remotely possible’ 30 years ago. Digitization continues to provide an impetus for members to examine and re-examine both their economic positions and interrogate whether they obtain their fair share of taxes.
In fact, Agenda 2063 views DRM as an important enabler of its inspirations, specifically sighting, “Build effective, transparent, and harmonized tax, revenue collection, and public expenditure systems” as one of the key pillars. Therefore, it is important for African countries to voice their take on the taxation of the digitalised economy. This, ladies and gentlemen is an ongoing debate that is slated to conclude next year-2020! My emphasis here, is that African countries cannot defer the debate, it must happen now and fast!
“Digital platforms and the supply of digital intangibles has produced a mixed bag of risks, as well as opportunities for revenue enhancement and mobilisation. It also provides the opportunity to take advantage of digital intelligence, in order to police and encourage tax compliance. In equal measure, the growth of this sector has occasioned new, decentralized forms of currency which are no longer linked to or regulated by central banks. All this impacts tax collection in different ways, hence the need to debate these and rethink how best to benefit from this.
“It is important to emphasise that the current rules provide an inappropriate balance between the taxing rights of residence jurisdictions and source jurisdictions, and are inappropriately skewed in favour of residence jurisdictions. This is encouraging Illicit Financial Flows (IFFs) out of developing countries and Africa in particular, through artificial profit shifting to non or low tax jurisdictions hence the continued loss of taxes Africa needs for vital development.
Present at the event are Nigerian Ambassador to Uganda & members of the Diplomatic Corps, Representatives of Donor Agencies and our development partner former Executive Chairman, FIRS, (Nigeria) Alhaji Kabir M. Mashi and former Heads of Tax Administrations in Africa and former ATAF Council Members, Chairman of Chartered Institute of Taxation of Nigeria, CITN Mrs Dame Olajumoke Simplice, Executive Secretary Joint Tax Board, Chief Oseni Elamah, Special Advisor to the Executive Chairman FIRS and Coordinating Director, Domestic Tax Group, Abiodun Aina, Secretary- General of the We African Tax Administration Forum, WATAF, Olatunde Oladapo, tax professional from the IMF, OECD, UN, captains of Industry, tax professionals and associations.
Established exactly 10 years ago, with former Executive Chairman, FIRS, Ifueko Omoigui playing a pivotal role along with other tax administrators in Africa, in its establishment, ATAF has grown to become a very strong voice for tax in Africa on the global stage.
It is providing a distinctly African perspective on tax matters and tax policy issues on the global tax and financial forums.
Fowler is serving his second term as its chairman.