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Tax justice experts called upon civil society organisations in Africa to raise their advocacy efforts in shaping domestic resource mobilisation policies that promote a transparent and equitable tax system in Africa considering the emerging issues in the international tax agenda.
This call was made at the 2024 Summer School organised by the Vienna University of Economics and Business, Global Tax Policy Centre (WU GTPC), the African Tax Institute (ATI) and TJNA on 2nd and 3rd May 2024.
“One of the key factors contributing to the poor economic development across African countries is the lack of effective domestic resource mobilisation. This year’s summer school seeks to find solutions to enhancing domestic resource mobilisation and identify the role that civil society organisations can play in tax policy reform,’ Ms. Chenai Mukumba, Executive Director, TJNA.
While giving her opening remarks, Prof. Annet Oguttu, Director of the African Tax Institute at the University of Pretoria, noted that the current progress in reforming the international tax cooperation came as a result of a fire that was ignited by advocacy groups. She underscored that tax advocacy needs to start at the grassroots level.
“Civil society organisations have played a pivotal role in the progress towards tax policy reform such as the process towards the UN Framework Convention on international tax cooperation. This summer school will, therefore, enhance the capacity of CSOs to continue conducting advocacy on tax issues,” ~ Prof. Oguttu.
The summer school featured high-level presentations and discussions on emerging issues such as the taxation of high net-worth individuals, emerging technologies in the tax space, potential benefits and risks of the Africa Continental Free Trade Area and the ongoing efforts on global tax reforms.
In his presentation, Prof. Jeffrey Owens, Director of the WU GTPC, highlighted that taxation of high net-worth individuals has gained momentum in light of new tax transparency rules and emerging technologies. It therefore serves as a useful tool for expanding domestic resource mobilisation while reducing inequalities and promoting social cohesion.
There is a broad agreement that the rich need to pay their fair share of taxes. The question then remains on which is the most effective way to achieve this, particularly in an African context.
Prof. Owens noted that high net-worth individuals are those who have at least USD 1 million in liquid financial assets. Africa has a record 138,000 millionaires, each with USD 1 million or more, 328 centi-millionaires with a wealth of USD 100 million or more and 23 billionaires with wealth amounting to USD 1 billion or more. Countries with the largest share of high net-worth individuals are South Africa, Egypt, Nigeria, Kenya, and Morocco.
He underscored that tackling wealth inequalities requires a broad strategy, and tax can be a tool to help with wealth redistribution while also increasing revenue and building trust and the perception of fairness of the tax system.
“Tax supports the ability of governments to provide much-needed public services. Therefore, African countries must invest in their tax administrations to enhance domestic resource mobilisation and raise enough revenue,” Prof. Owens noted.
He called on CSOs to consider a holistic advocacy approach that would also reflect tools or policies that should be adopted by tax administrations to ensure any taxes introduced are effective in meeting their objectives.
Speaking on the ongoing global tax reforms, Mr. Isaac Agyiri, TJNA’s Policy, Research and Advocacy Manager, noted that the two-pillar proposal to combat tax evasion and other tax challenges associated with the also known as Base Erosion and Profit Shifting Project (BEPS) do not adequately address the needs and priorities of developing countries and are beyond their capacities to implement.
He called on CSOs to engage in the processes of developing the UN Framework Convention on International Tax Cooperation and make a case for the potential revenue benefit of digitalised global economy to African countries.
“As CSOs, you have the crucial responsibility of developing and simplifying tax terminologies in order to mobilise grassroots engagement,” he emphasised.
The training also featured presentation on the benefits and risks of the Africa Continental Free Trade Area (AfCFTA). In his presentation, TJNA’s Policy Officer, Ishmael Zulu, noted that AfCFTA is the world’s largest free trade area, as measured by the number of countries participating, having 55 signatories and 47 ratifications. AfCFTA, whose goal is to establish a single continental market, is expected to eliminate trade barriers and boost intra-African trade. This will establish regional value chains and establish Africa as a key player in the global value chain.
However, the implementation of AfCFTA is faced with the challenge of overlap in the rules and principles governing frameworks for multilateral trade, international Investment Agreements (IIAs), and international taxation. Experiences of other regional trade and investment frameworks demonstrate that a failure to address these overlaps will place countries at risk of expensive and lengthy disputes that can constrain their ability to design, administer or even withdraw tax and illicit financial flows (IFFs) policies.
Mr. Zulu called on the CSOs to fully evaluate, identify and reflect on the steps that can be taken to avoid disputes concerning taxation and IFFs and facilitate integration. He emphasised the need for a coordinated advocacy strategy across African CSOs for a harmonised approach to curbing IFFs.
The final emerging area covered by participants was the opportunities and risks of new and emerging technologies in the tax area. Emerging technologies such as big data, artificial intelligence, data analytics and crypto technology present an opportunity for tax administrators to effectively mobilise revenue. They present opportunities such as more speed and efficiency through digitised data collection flows, increased precision, and improved risk management.
In his presentation, Mr Ruddy Kabwe, Lecturer at the University of Pretoria noted that these emerging technologies are also used by tax avoiders and tax evaders. He emphasised that more sophisticated risk management systems are needed to curb the use of emerging technologies for enabling IFFs.
He further underscored that CSOs need to interact and understand new and emerging technologies and use this knowledge to develop advocacy and policy development. Further, there is a need to understand who the key players are to promote the right balance between the rights of taxpayers and the needs of tax administrations.
For more details about the 2024 Summer School, please contact gsirima [@] taxjusticeafrica.net.