Africa making progress in building tax transparency, tackling illicit financial flows

22nd June 2022 By: Schalk Burger - Creamer Media Senior Contributing Editor

Development finance institution African Development Bank (AfDB) says African countries’ requests for information for tax collection purposes increased by 26% year-on-year in 2021, signalling continued progress toward tax transparency in spite of a challenging environment.

The AfDB cited data from the ‘Tax Transparency in Africa 2022’ report published by the Africa Initiative.

Other key findings of the report include that African countries had 4 135 bilateral exchange of information relationships in 2021, up from 913 in 2014, and 15 countries sent requests for tax information in 2021, up from six in 2014.

Further, nine African countries collectively reported having collected €233-million since 2014 as a direct result of exchange of information requests. Since 2009, at least €1.2-billion in additional revenue has been identified in the region through voluntary disclosure programmes, exchange of information and offshore investigations.

Additionally, in 2021, 1 500 African tax officials received training on the use of exchange of information instruments.

The ‘Tax Transparency in Africa 2022’ report covers 38 countries and documents Africa’s progress in tackling tax evasion and other illicit financial flows through transparency and exchange of information for tax purposes.

However, in spite of the report’s positive findings, there is room for African countries to increase their use of tax transparency tools. Although 15 countries sent requests for tax information in 2021, four countries, namely Kenya, Tunisia, Algeria and Nigeria, accounted for 92% of those requests, says Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) secretariat head Zayda Manatta.

African countries continued to suffer significant losses from illicit financial flows, estimated at $50-billion to $80-billion a year.

“Covid-19 has pushed an additional 29-million people into extreme poverty, and effectively curbing illicit financial flows would unlock much-needed resources in Africa,” she highlights.

She urged more countries to use requests for information. She also suggested that a system for automatic exchange of information needed to be put in place.

“More needs to be done in Africa to increase women’s participation in capacity-building activities,” Manatta says.

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

Five non-member countries participated in the study for the report.

"I wish to applaud the members of the Africa Initiative for their commitment and resilience in implementing tax transparency standards during the difficult times occasioned by the Covid-19 pandemic," says Kenya Revenue Authority commissioner general and Africa Initiative chairperson Githii Mburu.

The AfDB, which has been an observer to the Global Forum since 2014, promotes African tax transparency through support to institutions and non-State actors in its regional member countries and by strengthening international cooperation to eliminate illicit financial flows.