The fight against tax evasion and tax avoidance has progressed substantially over the last few years. International co-operation and exchange of information (EOI) have emerged as vital tools in tackling illicit financial flows (IFFs). Countries that are destinations for these flows, including financial centres in Europe, Asia, America, the Caribbean and the Pacific, now participate in the global effort to improve tax transparency and EOI for tax purposes, thus helping developing countries to prevent the outflows and identify the people involved.
A recent report from the High-Level Panel on illicit financial flows from Africa focused attention on the scale of IFFs from Africa. It is estimated that Africa loses USD 50 to USD 60 billion each year through IFFs. This includes money from tax evasion and other criminal activities (corruption, money laundering, etc.), which undermine Africa’s development and governance agenda. The report also identified ways to tackle IFFs, including through EOI and improved international tax co-operation.
While important progress has been made through the framework of the Global Forum’s Africa Initiative, African countries are still not fully exploiting recent advances in international tax co-operation and EOI:
- 39 of the 54 African countries participate in the international work on tax transparency and EOI, and 12 are committed to starting automatic exchange of information (AEOI) by a specific date.
- Many African countries lack an appropriate legal framework or the administrative organisation and processes needed to use EOI effectively and benefit from tax co-operation in their domestic revenue mobilisation efforts.