Tax Us If You Can: Why Africa Should Stand Up for Tax Justice

Tax Us If You Can: Why Africa Should Stand Up for Tax Justice
Introduction
Tax is the foundation of all civilisations. The act of tracing tax policies and practices reveals the history of the
relationship between the ruler and the ruled, state and citizen.In Africa this relationship can be traced back over millennia. For instance, Egypt’s famed Rosetta Stone, created in 196 BC during the Ptolemaic era, was an agreement granting a tax exemption to priests, and certain reductions to the military and other ruling classes, including traders approved by the king.  it was an early example of the special privileges that continue to proliferate across the continent.Today, 80 per cent of Africa’s exports consist of primary commodities. African governments depend heavily on the resource rents from these commodities but many are exempt from taxation. Tax holidays and other hidden subsidies granted to multinationals in secretive
agreements deprive governments and their citizens of significant tax revenues.Similar exemptions to those that once governed trade along the Anu canal in ancient  Egypt continue today as foreign traders set up shop in the various  Free Zones along Africa’s coastlines where little or no tax is due, or Special Economic Zones (SEZ's) and International Financial Centres (IFC's) along the trade routes that cross the continent.

Tax injustices in Africa prevail for a number of reasons. Key among these are the world’s secrecy jurisdictions which provide services with high levels of confidentiality to facilitate hiding taxable incomes and to shelter criminal activities. It is not without irony then that the Rosetta Stone is housed in London, which is linked to more than a quarter of the world’s secrecy jurisdictions. (Secrecy jurisdictions are defined as places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. See section 3.5) This report aims to help readers understand the issues behind Africa’s struggle for tax justice.

 In Section 1, the report begins by exploring the meaning of  tax justice in the African context before examining some of the main channels for tax leakage from the continent and the impact of these leakages in terms of government revenues.

 Section 2 sets out the key systemic causes of tax injustice in Africa, explaining firstly how decades of selective development or ‘maldevelopment’ in resource-rich states has left government funds depleted and many countries susceptible to conflict. The section goes on to examine the policies that have contributed to making taxes in Africa regressive, and
ends by looking at problems around ineffective tax and customs administrations.

Section 3 presents a ‘who’s who’ of  tax injustice in Africa. The tax avoidance industry is always keen to make a clear distinction between   tax evasion, which is illegal in most countries, and tax avoidance, which usually involves exploiting legal loopholes. This section looks at some of the key players involved in exploiting such loopholes: accountants, lawyers, bankers,  multinational companies and, crucially, secrecy jurisdictions.  It also examines the role of governments, parliaments and taxpayers, and asks what all stakeholders should be doing to help achieve tax justice.

Section 4 discusses how multilateral agencies, such as the World Bank and the International Monetary Fund (IMF), have influenced tax policy in Africa.  it shows how the ‘tax consensus’ promoted by these organisations has led to a reduction in government revenues in many countries. it then looks at some of the international organisations trying to tackle various aspects of tax injustice, particularly the United Nations and the Organisation for Economic Cooperation and Development (OECD), and discusses the role of a range of
African organisations and the growing contribution of civil society.

Section 5 emphasises the importance of taxation for Africa’s future and explores a series of options to help achieve tax justice. Key among these will be: raising awareness around tax issues and promoting a culture of tax compliance; increasing tax transparency among governments and  multinational companies; increasing international cooperation on tax matters; and enhancing international assistance to help African governments improve their tax affairs. Finally, a glossary of tax terms is provided to help readers understand some of the technical terminology around taxation. Tax revenues are necessary for any state to meet the basic needs of its citizens. In Africa, tax revenues will be essential for establishing independent states of free citizens, less reliant on foreign aid and the vagaries of external capital. We hope that many of the ideas presented here will be realised and that tax justice can help all African states achieve a greater degree of self-determination in Ahttp://taxjusticeafrica.net/sites/default/files/Tax%20Us%20If%20You%20Can%20-%20Why%20Africa%20should%20Stand%20up%20for%20Tax%20Justice.pdffrica.

Regards,
Alvin Mosioma,
Director, Tax Justice Network - Africa