Africa tax centre on the way

14 January 2008

The creation of an international tax centre in Africa to assist countries’ tax administrations with capacity building has emerged from a two-day meeting of the Forum on Tax Administration of the Organisation for Economic Cooperation and Development (OECD), held in Cape Town last week.

The centre will help the continent’s tax authorities shift their traditional dependence on customs duties for revenue collection toward a greater reliance on individual and corporate taxpayers.

Though the location of the International Tax Centre in Africa is as yet decided, Uganda Revenue Authority commissioner-general Allen Kagina assured BuaNews this week that the centre was “definitely going to happen”.

The international tax centre would enable African countries to handle the challenges of tax administration that are similar to those faced by the OECD countries, which themselves have far greater capacity.

The centre would pool resources, information and research, share best practices and would also assist with the training of staff of the various African tax administrations that would constitute its members, Kagina said.

Such a centre would then better be able to take advantage of the advice of the OECD’s Forum on Tax Administration and other multilateral institutions whose advice and practices could be relevant to the mandate of Africa’s tax administrators, she said.

She expected that the decision as to where the international tax centre would be located, and other logistical details, would emerge in May at the African conference of tax administrators that will be held in South Africa, which will bring together most of senior officials of Africa’s tax administrations.

Improving capacity
The OECD itself – which represents 30 of the world’s richest countries – has expressed “a very strong commitment” to help Africa develop efficient tax administrations, said OECD Centre for Tax Policy and Administration director Jeffrey Owens.

The centre would help African nations put in place a modernisation programme and assist them to deal with the “enormous burden” of increasing revenue for government programmes as their revenue base “disappears”, he said.

Delivering the opening address to forum, Finance Minister Trevor Manuel said sources of revenue for most countries – including South Africa – are largely from direct sources such as the profits of corporations or the earnings of individuals, or from indirect sources such as imports on sales, and in some instances royalties or capital gains.

However, poorer countries – including many African nations – still depend on customs duties for the bulk of the revenues, he said.

Manuel called on the OECD to extend the beneficial effects of partnerships between nations to the world’s poorer countries, “who are often victims of organised efforts to undermine their tax bases”.

South African Revenue Service Commissioner Pravin Gordhan told reporters that his institution was already working with its peers on the continent to see how to improve capacity for revenue collection and strengthen tax administrations.

Gordhan mentioned that a very significant number of African countries get money from customs duties rather than directly from taxpayers and free trade agreements with trading partners – which are on the increase – would likely further undermine their traditional revenue bases.

This emphasised the need for building capacity to widen the tax bases of South Africa’s peers on the continent, he said, adding that the OECD is strongly committed, as is South Africa, to the establishment of an international tax centre for Africans.

Source: BuaNews