On 19 to 22 November 2019 the African Tax Administration Forum (ATAF) held its the fourth International Conference on Tax in Africa. The theme of the conference was “Innovation — Digitalization and Harnessing Technology to Improve Tax Systems.”
Illicit financial flows (IFFs)
IFFs are a major problem that hinders domestic resource mobilisation and development. A report of the High-Level Panel of IFFs estimated that the illicit financial flows out of Africa amounted to around USD 60 billion annually. The conference noted that African countries have been helped by ATAF to curb IFFs, including through the ATAF Double Taxation Agreement (DTA). This model DTA can be used as a basis for tax agreements that favor revenue mobilization for the African countries by combating illicit financial flows resulting from transfer pricing, profit shifting double non-taxation.
Use of digital technology in tax collection
The conference also considered innovation through the use of technology to strengthen tax systems. As the digitalisation of the global economy increases Africa should make use of innovations in technology to improve the administration of tax and tax collection. Many African countries are currently planning to simplify tax collection by using mobile apps, mobile tax payment and electronic filing. Countries could also introduce measures to broaden the tax base such as more efficient taxation of high net worth individuals.
Tax challenges of the digital economy
The policy challenges presented by taxation of the digital economy require innovative solutions. Businesses using e-commerce can abuse the system and erode the tax base of the host country. Owing to difficulties in the identification and location of taxpayers, difficulties in identifying and verifying taxable transactions and problems in demonstrating a link between taxpayers and their taxable transactions there is room for tax avoidance.
There is therefore a need to discuss strategies to tax the growing digital economy and access the tax revenue that is currently not being collected. Attention needs to be given to increasing the capacity of the tax authorities to deal with the problems presented.
According to the Central Bank of Kenya mobile money transactions amounted to USD 38.5 billion in 2018, representing an increase of 10% on the previous year.
Africa needs to positively influence the global discussion on taxation of the digital economy and this is becoming more necessary as the use of innovative mobile technologies is increasing in Africa.
Other
The conference also discussed African policy challenges including international and domestic aspects and the taxation of key sectors.