African countries generated €1.7bn in additional revenues from tackling tax evasion, illicit financial flows

10th July 2023

By: Schalk Burger

Creamer Media Senior Deputy Editor


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African countries have realised additional revenues totalling €1.69-billion owing to voluntary disclosures, the implementation of information exchange mechanisms, and rigorous offshore investigations, the '2023 Tax Transparency in Africa' progress report, published by the Africa Initiative, shows.

From 2009 to 2022, these measures have effectively boosted tax revenue, interest and penalties, underscoring a substantial progress in tax transparency across the continent, development finance institution the African Development Bank (AfDB) reports.

The release of the report comes as African governments continue to step up efforts to bolster domestic resource mobilisation in the face of economic headwinds that include global inflation and mounting debt levels. Developed economies bloc the Organisation for Economic Cooperation and Development (OECD) estimates that Africa loses as much as $60-billion each year in illicit financial flows.

“During the past eight years, the Africa Initiative has changed the tax transparency landscape in Africa and aided the mobilisation of more than €300-million in domestic resources,” South Africa's Finance Minister Enoch Godongwana remarked during the thirteenth Meeting of the Africa Initiative, in Cape Town, on July 7.

Stressing the importance of political will in efforts to increase tax transparency, he added that more could be done and called for the Africa Initiative to strengthen African countries’ capacity to leverage exchange of information standards and protocols.

The Africa Initiative seeks to ensure that African countries are equipped to participate in advances on global transparency, to better fight tax evasion and other illicit financial flows, and improve domestic resource mobilisation.

The report presents the progress of 38 African countries in tackling tax evasion and other illicit financial flows through transparency and exchange of information. Five non-member countries also participated in the study.

A key finding of the report is that, for the first time, one African country reported collecting additional taxes, worth €10.6-million, through the use of common reporting standard data.

Further, 23 African countries are now parties to the multilateral Convention on Mutual Administrative Assistance in Tax Matters, which is a comprehensive instrument for all forms of cooperation to tackle tax evasion, thus substantially expanding their exchange of information (EOI) networks.

Ten African countries have committed to automatic exchange of financial account information by a specific date and more are expected to do so in the near future, with the assistance of the Global Forum and its partners.

Additionally, 1 170 officials from 37 African countries received training in the effective use of EOI instruments in 2022. A further 1 800 officials were trained by local trainers who had participated in the Train the Trainer programme.

The Africa Initiative is a partnership of the Global Forum, which comprises 33 African countries and 16 partners, including the AfDB, the African Union Commission, the European Union and the governments of Switzerland and the UK.

Global Forum secretariat head Zayda Manatta cited a World Bank study that projected that participation in EOI mechanisms could increase African countries’ tax revenues from 5% to 19% of gross domestic product.

“The more familiar countries are with this tool, the more they exploit this tool, the more revenue should be collected. If countries manage to monitor this link between revenue collection and exchange of information, we would be able to further demonstrate the benefits countries are getting from this tool,” she said.

South African Revenue Service Commissioner and Africa Initiative co-chairperson Edward Kieswetter said collaboration was essential to serve shared ambitions for effective resource mobilisation.

“A tax risk anywhere is a tax risk everywhere. Tax administrations are called to serve a transformative and higher purpose in the interest of society,” he said.

The Africa Initiative also published a new toolkit to help tax administrations set up and benefit from initiatives such as the Global Forum.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online



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