BIZweek n°297 3 jui 2020
BIZweek n°297 3 jui 2020
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  • Parution : n°297 de 3 jui 2020

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  • Editeur : Capital Publications Ltd

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VENDREDI 03 JUILLET 2020 BIZWEEK ÉDITION 297 GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE 0F INFORMATION FOR TAX PURPOSES Tax Transparency in Africa 2020 Africa Initiative Progress Report  : 2019 LA TOUR TAX TRANSPARENCY IN AFRICA 2020 Mauritius, South Africa and Tunisia dominate the Exchange of Information activity in Africa This annual publication of the « Tax Transparency in Africa » is part of the various efforts of the continent to advance global tax transparency and exchange of information agenda in Africa in order to combat corruption, tax evasion, money laundering, fraud, base erosion and profit shifting and illicit enrichment. In this year’s report, it is highlighted that the more African countries are getting familiar with tax transparency, the more they are sending Exchange of Information (EOI) requests. The number of requests sent increased by 48% between 2018 and 2019. And a group of three countries (Mauritius, South Africa and Tunisia) dominate the EOI activity in Africa being active on both sides, as sender and receiver Although African countries are making significant progressin sending requests for Exchange of Information (EOI), they are still net receivers of requests, unlike developing countries which are generally net senders, according to the recently published ‘Tax Transparency in Africa 2020’report. Over the years, the number of requests received by African countries has always been higher than the number of requests sent. Between 2014 and 2019, overall they sent 1 024 requests and received 2 802 requests. However, there are significant discrepancies among African countries on both incoming and outgoing requests. Five countries (Mauritius, Morocco, Seychelles, South Africa and Tunisia) have received 91% of incoming requests and four countries (Mauritius, South Africa, Tunisia and Uganda) have sent 74% of outgoing requests. A group of three countries (Mauritius, South Africa and Tunisia) dominate the EOI activity in Africa being active EA 115 on both sides. Over the same period, only five countries were net senders of EOI requests (Burkina Faso, Cameroon, Ghana, Lesotho and Uganda). This shows that most African countries are still behind their potential of EOI and more efforts need to be put in the operationalization of EOI. USD 189 million of additional taxes The Tax Transparency in Africa 2020 shows significant progress made on the two pillars of the Africa Initiative  : (i) raising political awareness and commitment in Africa and (ii) developing capacities in African countries in tax transparency and exchange of information. The lessons learned since the 2018 Report are encouraging although important challenges remain. Progressin African countries in the use of tax transparency and exchange of information are uneven. Older members of the Global Forum by African countries rince 2014 150 - 500 790 7017 150 100 30 47/II 199 2011/014 2016 7010 7019 7019 Note The geph reflarls the tituafim fco the. 33 Afton rotin nias whià haio ptarkled data. 209 Source Responiae govided ro queenentuire by Aloicen ceirnoles 190 roi ! NipstH 11(411 puicl monitor [hrir imparlOT1 1110 efurinlInimr, 51111rrlipriiurslImullirri thr, I iprulrsnllo ! In Africw. Union 11.01./e » OECD PCa.lraP4 +zraP erTFRUKI FIGURE 29  : Évolution in the num ber of FOI request& sent f 1GLIRE 2 10:E01 requeuts sens and retemedby African 215 110 1000 rountnes and devdoping countries since 3614 2% hl 090 1 900 al 1000 100 000 500 490 100 11 V E>MI 1 3011) 411 Develop:king conntr les e 2014 2015 2910 2017 2011 11.71inurykspill ranidn4tsreeehoo Africzin maniiez) 016 7017 7010 7416 Cont’d on page 5 4
VENDREDI 03 JUILLET 2020 BIZWEEK ÉDITION 297 FIGURE 21E01 relatIonshIps of African countries (by countryl 250 200 150 100 50 91 ,. u E 1"'07, et.5 03 Z U 5 C E 1'17E t 7 c O 3 u Note  : lie graph reflets Ihe situation foi the 33 African countries which provided data as vieil as Eqypt and *out (Source. Nesporoes provided ta questionnaire by courtines and Chari of jurisdiction5 participariraj h the Multilateral Convention in general are at an advanced stage of implementation of the standards whereas new members look to put in place the basics. The exchange of information networks of African countries has further expanded to reach now 3 262 bilateral relationships compared to 2 523 in 2018. This is mainly due to the growing number of African countries joining the Convention on Mutual Administrative Assistance in Tax Matters (from 15 to 18 since the 2018 Report). More African countries can therefore use cross-border exchanged information in their tax investigations. For instance, the number of exchange of information requests sent increased by 48% between 2018 and 2019. However, four countries have sent 74% of the 318 outgoing requests. One challenge to be addressed is the expansion of the knowledge on exchange of information beyond the exchange of information unit so that it really becomes a tool to support other tax administration functions. The increase in the number of exchange of information requests made by African countries has translated into additional tax revenue. In 2019, five African countries identified nearly USD 12 million additional tax as a direct consequence of the requests sent. In total, between 2014 and 2019, a group ofeight African countries identified USD 189 million of additional taxes. Exchange of Information related revenues continue to rise The increase in the number of EOI requests made by African countries translated into additional tax revenue collected. In 2019, five African countries have identified nearly USD 12 million additional tax as a direct consequence of the EOI requests sent (Burkina Faso, Kenya, Togo, Tunisia and Uganda). Uganda alone has identified over USD 9 million, having sent 32 EOI requests, which means an average of USD 281 000 per request sent. More importantly, while gathering the information requested by an EOI partner, Togo identified unreported transactions carried on by a taxpayer in Togo. This has led to the identification ofe. USD 1.3 million of additional taxes in Togo. For the first time, Kenya has identified additional taxes as a direct consequence of EOI. EOI has a huge potential for Kenya and it has been putting a lot of effort to buildup an effective EOI programme over the past two years. One concrete result is the sending of 19 EOI requests with already USD 1.3 million identified. With the ratification of the Multilateral Convention late in 2019, it is expected that Kenya will be sending more requests as the entry into force of the Convention will open avenues for exchanges with over 135 jurisdictions. In total, between 2014 and 2019, a group ofeight African countries have identified USD 189 million. This is relevant for African countries as the expenditure needs are significant in the continent. Huge gap The breakdown of the number of EOI relationships by countries shows a huge gap between countries which have signed the Multilateral Convention (Bénin ; Burkina Faso ; Cabo Verde ; Cameroon ; Gabon ; Ghana ; Liberia ; Kenya ; Mauritius ; Mauritania ; Morocco ; Nigeria ; Senegal ; Seychelles ; South Africa ; Togo ; Tunisia ; Uganda) and those which have not. Except Egypt, which has a network of over 50 EOI partners through bilateral agreements, non-signatories to the Multilateral Convention have a limited number of EOI partners, generally below 10. The group of non-signatories to the Multilateral Convention is not homogeneous. It comprises all non-members of the Global Forum, new members and some other members which joined the Global Forum over the past five years. In fact, the decision to join this Convention is a political decision that needs to be taken by the government. This has not been the case for some older members. For some others, the decision to join the Convention has been taken, however, some gaps have been identified in the legal framework of the country which needs to be addressed before the approval processis completed. This reinforces the correlation between the political and the technical spheres in the implementation of EOI. LA TOUR EUR 17 billion loss of tax revenue TABLE 2.4 Status of African countries participation In AE01 Al ready exchanging Starting in 2020 Seychelles South Africa Mauntius Ghana 2017 2017 2018 2019 Ngena 2020 Advanced preparations, consideration for a date of first exchanges Morocco Pilot project with France Cameroon Preparations launched, consideration for a date of first Kenya « changes 5enegal [gYPI Pilot project with UK Tunisia 1J ganda Of MU Number el panners that cadi juridiction sent Information to in 2019 All members of the Global Forum, including the current 32 African countries, are committed to the implementation of the Automatic Exchange of Information (AEOI) standard for Economic Co-operation and Development (OECD). AEOI on financial accounts has a huge potential for Africa. The amount of African wealth held offshore is proportionately much greater than that of developed countries – 44% of Africa’s financial wealth is estimated to be held offshore with a corresponding EUR 17 billion loss of tax revenue (Zucman, 2017). South Africa is one of the « early adopters » of the Common Reporting Standard (developed by the OECD) and started AEOI in 2017. In 2018, South Africa received CRS data on foreign financial accounts held by South African tax residents. The total account balances (aggregate value) amounted to over EUR 17 billion. The implementation of AEOI by African countries is the next step on the tax transparency agenda in Africa. It is one of the main objectives of the renewed mandate of the Africa Initiative. Five African country are currently implementing AEOI, two are working with partners in pilot projects and five are at their preliminary stage of preparations. Drain large amounts of financial resources Africa wishes to put an end to the policy of the outstretched hand and to take charge of its own destiny by changing the paradigm for the financing of its own development. To achievethis, Africa needs innovative mechanisms for financing, including tax revenue (currently around 17.2% over its GDP in most countries, lower than that of Latin American countries (22.8%) and OECD countries (34.2%) (OECD/ATAF/AUC (2019), Revenue Statistics in Africa 2019). This is too low to finance the basic social services that are required to reduce poverty on the continent. Also, African countries must endeavour to fight against corruption and illicit financial flows. Illicit financial flows continue to drain large amounts of financial resources from the continent, with a severe and negative impact on the fulfilment of the African development agenda. The resultant effect is the non-recovery and non-repatriation of African assets consigned to foreign jurisdictions. In an effort to intensify the fight against corruption and stem illicit financial flows from Africa, the African Union adopted the recommendations of the Report of the High-Level Panel on Illicit Financial Flows and the Nouakchott Declaration on the African Anti-Corruption Year (Assembly/AU/Decl.1(XXXI)) in the context of the 2018 African Union theme « Winning the Fight Against Corruption – A Sustainable Path to Africa’s Transformation ». 66 The Africa Initiative Given the high levels of illicit financial flows from African countries and recognising the potential of tax transparency and exchange of information to raise resources for development, African members of the Global Forum on Transparency and Exchange of Information for Tax Purposes attending its plenary meeting on 28 October 2014 in Berlin decided to create an African focused programme  : the Africa Initiative. The objective was to unlock the potential of tax transparency and exchange of information for Africa by ensuring that African countries are equipped to exploit the improvements in global transparency to better tackle tax evasion. The Africa Initiative is open to all African countries and currently has 32 African member jurisdictions. It is supported by 11 partners and donors. The Africa Initiative members meet every year to take stock of the progress made and reflect on the remaining challenges. Members of the Africa Initiative are  : Bénin, Botswana, Burkina Faso, Cameroon, Cabo Verde, Chad, Côte d’Ivoire, Djibouti, Egypt, Eswatini, Gabon, Ghana, Guinea, Kenya, Lesotho, Liberia, Madagascar, Mali, Mauritania, Mauritius, Morocco, Namibia, Niger, Nigeria, Rwanda, Senegal, Seychelles, South Africa, Tanzania, Togo, Tunisia, Uganda. 63 56 5

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