Tag: ATAF

The African Tax Administration Forum (ATAF) has declared its support for Nigeria’s new tax laws, describing them as vital for economic growth and sustainable development across the continent.

In a statement issued by Dare Adekanmbi, Special Adviser on Media to the Chairman of the Federal Inland Revenue Service (FIRS), Dr. Zacch Adedeji, ATAF pledged technical assistance to ensure Nigeria reaps the benefits of its tax reforms.

The Executive Secretary of ATAF, Ms. Mary Baine, who assumed office recently, made this known during a courtesy visit to the FIRS chairman in Abuja on Tuesday.

Baine recalled ATAF’s intervention in Zambia’s mining sector, where the organisation helped the country improve its capacity to generate revenue. She assured that Nigeria could expect similar support in key sectors of its economy.

“When you look at the strategic vision of FIRS, we see the things you are doing and the way you’re changing the tax system, the kind of reforms and the time that it has taken and of course the movement forward.

“So, we applaud you, and I wanted to say that ATAF is here to say that we stand with you, we applaud you, and we’re ready to provide whatever support that could lead to its success.

“In terms of your strategic vision—people, technology and data—we find that this is something that is really critical for the rest of the continent and that it is an area where ATAF will be happy to support as well,” she said.

Baine also said ATAF would leverage Nigeria’s influence on the continent and beyond to mobilise other member countries towards strengthening the organisation’s work.

In his remarks, Adedeji praised Baine’s leadership qualities and expressed optimism that her tenure would advance the forum’s objectives. He urged African countries to devise their own solutions to pressing challenges rather than rely on external assistance.

“My belief has always been that solutions to Africa’s challenges can only come from Africa. There is no free lunch anywhere. I have said that I don’t believe in aids; I believe in cooperation.

“There is a saying that when you are not on the table, you are definitely on the menu. So, Africa must be on the table and that is it. We should stop being on the menu. That is my charge to you.

“So, the expectation from us as a continent is also to bring what we can contribute to the work, most especially in tax matters. For us, we have to evolve our own fiscal policies which is what Nigeria has done with the new tax laws,” he stated.

Adedeji noted that Nigeria’s new tax regime replaced colonial-era legislation that had long outlived its relevance.

“Before now, we had tax laws that were colonial relics. We had the Stamp Duties Act of 1939 which was enacted when there was no internet,” he added.

The new tax laws, he explained, were crafted to align with Nigeria’s current realities and position the economy for sustainable growth.

African nations, including Nigeria, lose approximately $50 billion every year due to tax evasion, according to Mr. Logan Wort, Executive Secretary of the African Tax Administration Forum (ATAF).

This alarming revelation was made during the ATAF Annual Meeting in Kigali, Rwanda, where leaders and experts convened to address this pressing issue.

Mr. Wort noted that tax evasion constitutes a significant portion of illicit financial flows on the continent.

“It is a big driver of money loss in Africa,” he said, stressing its disproportionate impact on economic stability.

He disclosed that 60 percent of tax evasion losses stem from corporate activities, where businesses manipulate their tax obligations through aggressive strategies.

Additionally, 10-15 percent of these losses arise from corruption and aggressive tax planning, often facilitated by weaknesses in existing tax policies and enforcement mechanisms.

A particular focus was placed on the extractive industries, such as mining and oil exploration, where tax evasion is rampant. Mr. Wort explained the common practice: “Typically, companies in extractive industries receive tax-free concessions, such as a 10-year tax holiday, to incentivize exploration. However, some companies exploit this by under-declaring their discoveries.”

In many cases, companies may strike oil or find minerals within the early months of their tax-free period but delay reporting their findings until the holiday period ends. “This results in governments losing up to a decade’s worth of taxes,” he noted.

To combat such practices, Mr. Wort stressed the need for robust tax policies, solid legislation, and significant technological investment.

Read Also: How to bridge Africa’s $402b financing gap, by ATAF

“As a government, as a ministry of finance, as tax officials, you avoid this through good and solid policy and legislation. Part of the problem is that many countries on the continent lack strong enough tax frameworks to counter aggressive tax planning,” he stated.

Cross-border transactions, particularly those involving multinational companies, exacerbate the problem. He stressed the importance of adopting technological solutions that enable real-time monitoring and information exchange between key stakeholders, including central banks, commercial banks, and tax authorities.

Mr. Wort noted the challenges posed by global businesses that exploit loopholes in weak tax systems.

“When you have technology and legislation that allows the central bank, businesses, and commercial banks to exchange taxpayer information, you can accurately track money flows, identify beneficiaries, and ensure that requisite taxes are paid before funds leave the country,” he said.

Such measures, he added, enable authorities to understand the flow of money, detect irregularities, and recover unpaid taxes, whether from individuals or corporations.

Mr. Wort pointed out the importance of international tax agreements in combating evasion. Countries can legally share taxpayer information between authorities by signing information exchange agreements.

“This ensures that tax information remains private while allowing authorized officials to access the necessary data to collect the correct taxes,” he explained.

ATAF has been instrumental in helping African countries strengthen their laws and auditing capabilities to curb tax evasion. “With the right legal frameworks and technology, African nations can significantly reduce losses and enhance their revenue generation,” Mr. Wort concluded.

The ATAF Annual Meeting in Kigali continues to explore strategies for addressing tax evasion. Key discussions focus on implementing stronger legislation, leveraging advanced technology, and fostering cross-border cooperation among Africa

Developing countries face a staggering $4 trillion financing gap annually, with Africa accounting for $402.2 billion of this shortfall, according to data revealed at the ongoing African Tax Administration Forum (ATAF) Annual Meetings in Kigali, Rwanda.

The Executive Secretary of ATAF, Logan Wort, stressed the need for African nations to enhance domestic resource mobilization (DRM) to close this gap and finance socio-economic development sustainably.

Drawing from reports by the United Nations (UN) and the African Development Bank (AfDB), Wort outlined key strategies for boosting DRM, including adopting technology and digital solutions for tax administration, curbing illicit financial flows (IFFs), and fostering intra-African investments.

“Enhancing domestic resource mobilization requires targeted strategies that leverage technology for effectiveness and efficiency,” he said.

Despite modest progress, Africa’s tax systems lag behind other regions. The 2023 African Tax Outlook (ATO) report revealed that the continent’s average tax-to-GDP ratio was 15.43 percent in 2022, slightly higher than 14.80 per cent in 2021 but still far below the global average.

Comparable regions such as Latin America and the Caribbean reported an average tax-to-GDP ratio of 21.7 percent, while OECD countries reached 34.1 percent. Wort stressed the importance of bridging this gap through measures like expanding the tax base, utilizing exchange of information (EOI), and adopting innovative taxation approaches such as environmental and health taxes.

Wort noted the transformative potential of technology in tax administration. “Taxation of High-Net-Worth Individuals (HNWI) and the informal sector requires data-driven solutions,” he explained, advocating for frameworks that use data science and artificial intelligence (AI) to improve compliance and identify non-compliant taxpayers.

Adopting digital solutions he said could also enhance fairness and equity in tax systems, facilitating targeted compliance measures. The ATAF Executive Secretary then urged African political leaders to champion EOI as a tool for DRM and participate in the ATAF Agreement on Mutual Assistance in Tax Matters (AMATM).

Equitable allocation of taxing rights Wort argued remains a contentious issue, with current frameworks favoring developed countries. Wort expressed ATAF’s support for efforts led by the United Nations to establish a Framework Convention for International Tax Cooperation. This initiative, supported by the African Union Commission, aims to ensure inclusivity and fairness in global tax governance.

Read Also: ATAF unveils guide to help African nations boost tax revenue

Commissioner General of the Rwanda Revenue Authority, Ronald Niwenshuti, noted positive revenue performance despite global economic challenges. The 2023 African Tax Outlook reported a 20.95 per cent growth in revenue collections in 2022, up from 16.34 per cent in 2021.

This growth exceeded pre-COVID averages, with 69 percent of African countries recording increased tax-to-GDP ratios. However, Niwenshuti cautioned that Africa still lags behind developed nations, whose tax-to-GDP ratios averaged 33.9 percent in 2023.

Niwenshuti emphasized the importance of collaboration among African tax administrators. “Structured development programs and continuous capacity building for tax officers are essential,” he said, urging stakeholders to harness advancements in AI, data analytics, and global taxation practices.

ATAF remains committed to addressing DRM challenges and tackling IFFs. Wort announced plans to advocate for sustainable financing solutions at the 4th Financing for Development Conference in 2025, underscoring the need for innovative, African-led solutions to close the continent’s financing gap.

While the challenges are immense, the progress made in enhancing tax systems and revenue collections is a testament to Africa’s potential to achieve financial independence. “By leveraging technology, fostering collaboration, and adopting innovative taxation strategies, African nations can rewrite the narrative and build robust tax solutions tailored to the continent’s unique challenges” he said.