20 November 2012

Africa: Experts to Review Africa's Tax Incentives

Photo: Daniel Hayduck/IRIN
Bye Bye money: Africa loses billions that could be used for development.

Pretoria — The African Tax Administration Forum has embarked on a campaign to review tax incentives, which most African countries have agreed with multinational companies.

Logan Wort, executive secretary of the organisation, a platform for 35 African countries' national tax authorities, believes there are more losses than benefits in tax incentives.

He said most tax incentives agreements were entered into without wide consultations as to how they impact on African countries' ability to mobilise domestic resources for development.

"We believe African countries are losing millions of dollars through tax incentives, which are mostly negotiated by the political elite.

"And tax incentives are difficult to quantify in terms of how they benefit the continent and also in terms of lost revenue," Wort explained to African journalists visiting the ATAF secretariat in Pretoria, South Africa.

Zambia, for instance, has given specific tax incentives to companies operating in copper mining, the country's traditional export sector, with conditions varying from one company to another. ATAF thinks this kind of incentive is not necessary.

"We believe investors will come with or without tax incentives, therefore they are not necessary," Thulani Shongwe, a tax expert at the ATAF secretariat, commented. He said the organisation was now on a "crusade" to review the benefits.

Wort also bemoaned the insufficient number of tax experts in specific economic sectors, which he said contributed to a failure to administer tax regimes effectively for enhanced revenue collection.

He cited the commodity extractive sector as one significantly affected.

"Lack of expertise is also undermining our capacity to effectively administer our tax regimes," he said.

"For example Zambia should have developed expertise in the mining sector by now, given the long history of the sector in that country."

Wort said ATAF was also working on tax issues in the growing informal sector, as well as telecommunications, which has been the one of the major economic development drivers in Africa.

He explained that there were a lot of tax-related questions related to mobile phone financial transactions, an activity pioneered in Kenya and growing fast in neighbouring countries.

This story was written under the auspices of the TRF/NORAD Journalism Training project.

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