On 21 May 2021 the OECD published a Tax and Development Case Study entitled “Fighting International Tax Avoidance and Evasion to Finance the Emergence of Senegal”.
Senegal aims to be an emerging economy by 2035, and a ten-year development strategy (2014-2023), the Plan Sénégal Emergent (PSE) is in place to achieve the first steps in the process. The priorities are to structurally transform the economy, increase living conditions and put in place good governance. Economic growth under the PSE has been above 6% although growth has been reduced during the crisis arising from the pandemic. In 2022 the exploitation of offshore oil and gas fields is scheduled to start and this should help growth to recover.
The PSE aims to raise more revenue from domestic resource mobilisation and to improve the tax-to-GDP ratio which was 16.5% in 2018. A Medium-Term Revenue Strategy (2020-2025) was adopted in 2020 with the assistance of the IMF and World Bank, with planned reforms to tax policy, tax administration and institutions aiming to raise the tax-to-GDP ratio to 20%.
Since 2014 Senegal has participated in the OECD/G20 project on base erosion and profit shifting (BEPS), joining the OECD/G20 Inclusive Framework on BEPS in 2016. With technical support from the OECD, BEPS measures have been taken in relation to limiting interest deductions and other financial payments; countering harmful tax practices; preventing tax treaty abuse; preventing the artificial avoidance of permanent establishment status; the introduction of country-by-country reporting and improving tax dispute resolution.
Senegal’s tax treaty policy and model tax convention have been revised and an impact assessment must be completed before starting negotiations for a tax treaty. Senegal’s model tax convention includes measures to combat BEPS, taking into account the need to preserve mining and hydrocarbon resources.
Senegal has improved its transfer pricing framework with input from the OECD and World Bank, aligning the transfer pricing system with international standards. The transfer pricing documentation requirements have been strengthened in line with BEPS Action 13, to facilitate the selection of cases for on-site tax audits.
The legislation on the indirect transfer of assets has been amended to protect the country’s mining and hydrocarbon resources, based on the guidance in the toolkit on taxation of offshore indirect transfers published by the Platform for Collaboration on Tax.
In relation to transparency and exchange of information on request, Senegal has aligned its legal framework with international standards of tax transparency, ensuring availability and access to ownership, accounting and banking information of companies located in or with close ties to Senegal. An Exchange of Information Unit has been set up within the tax administration to deal with requests for information. Also, Senegal has signed and ratified the Convention on Mutual Administrative Assistance in Tax Matters.