The African Tax Administration Forum (ATAF) technical assistance initiatives could potentially contribute over USD 2 billion in additional corporate income tax (CIT) annually for the African continent. This positive outcome is a result of ATAF’s collaborative efforts with African countries to enhance Domestic Resource Mobilisation (DRM) and combat Illicit Financial Flows (IFF).
In recent years, ATAF has closely collaborated with African members of the OECD/G20 Inclusive Framework on Pillar Two negotiations, particularly on the design of the Amount A Multilateral Convention (MLC). The primary goal of this convention is to reallocate a portion of the global profits of major multinational enterprises to market jurisdictions.
Mary Baine, ATAF’s deputy executive secretary, highlighted that despite concerns about the complexity of the rules, successful negotiations with African countries have led to changes in the design of Amount A MLC, benefiting lower-income jurisdictions. The negotiated design features of the Amount A rules are estimated by the OECD to result in an average 1% increase in CIT for lower-income jurisdictions.
“The other main part of the ATAF work on international tax, in addition to the Inclusive Framework global negotiations, is our long-term transfer pricing technical assistance programmes in many African countries,” said Ms Baine.
According to ATAF’s African Tax Outlook research, this success is expected to generate an additional USD 1 billion in tax revenue annually if all African Inclusive Framework members implement the Amount A rules. In addition to its involvement in global negotiations, ATAF’s long-term transfer pricing technical assistance programs in various African countries have played a crucial role.
Baine emphasized that these programs, running for several years, have witnessed a substantial increase in assessed and collected revenues by African tax administrations. Between 2019 and 2022, the programs have led to an astounding 400% increase in tax collection, reaching over USD 3 billion in assessments and USD 1.37 billion in collected tax.
Baine reported that in the current year alone, ATAF has assisted African countries in assessing an additional USD 966 million in tax and collecting over USD 380 million. While acknowledging the significance of these achievements, she stressed that there is more work to be done to effectively enhance DRM and curb IFFs on the continent.
“There is a need to move from Africa influencing global tax standards to proactively setting the agenda to ensure it meets the needs of Africa and other developing countries,” Baine asserted.
She further emphasized that ATAF plans to scale up its technical assistance work in the coming year, aiming to support its members in setting the global tax agenda and combating corporate tax avoidance in Africa.