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 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 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:
The Yaoundé Declaration marks the beginning of the next stage in the effort to improve international tax co-operation to combat IFFs in Africa. Originally signed by four countries in November 2017, during the Global Forum plenary meeting held in Yaoundé, Cameroon, the Declaration encouraged the African Union to begin a high-level discussion on tax co-operation, the fight against IFFs and their link to domestic resource mobilisation. Less than five years later, 33 African ministers of Finance and the African Union Commission now back the Declaration.
In the declaration released at the ministerial segment of the second AU Specialised Technical Committee on Finance, Monetary Affairs, Economic Planning and Integration, which was held in Addis-Ababa on 16-17 April 2018, ministers called upon the African Union “to lead in the tax transparency and information exchange agenda for Africa, and foster stronger collaboration among countries and regions to stem illicit flows and enhance domestic resource mobilisation on the continent”.
“Africa needs to take bold and tangible actions to consolidate its tax base. Some of the measures include strengthening capacities for raising domestic taxes and significantly reducing illicit financial flows from the continent. These, among others, are critical to achieving the targets and aspirations of the African Union Agenda 2063 as well as the United Nations Sustainable Development Goals. In this respect, the Africa Initiative on tax transparency is a step in the right direction in reducing tax evasion or avoidance as well as all other forms of illicit financial flows from Africa."
Albert M. Muchanga, Commissioner for Economic Development, Trade, Industry and Mining, African Union Commission
More African countries are expected to join the Declaration and all are encouraged to do so. The ultimate goal is to ensure that African countries and organisations take ownership of the tax transparency agenda promoting it to serve African interests in fighting against tax evasion and IFFs.