VP urges Africa to adopt foreign initiatives to develop local tax policies, regulations
Vice-President Osinbajo gave the advice while declaring open the three-day African Tax Administrators Forum (ATAF) in Abuja
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Osinbajo gave the advice while declaring open the three-day African Tax Administrators Forum (ATAF) in Abuja with the theme “Building Strong Domestic Tax Regimes in Africa: Strengthening VAT, Personal Income Tax and Companies Income Tax’’.
He observed that although the immediate outcomes would benefit the OECD, EU and BRICs countries more, African Tax administrators must see the great opportunities in the initiatives and take maximum advantage in developing domestic tax policies and regulations.
Osinbajo remarked that the country had taken advantage of such initiatives by recently launching a Voluntary Assets and Income Declaration Scheme (VAIDS), backed by an executive order.
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He said the programme was to provide an opportunity for taxpayers in default under all relevant statutes to within 90 days voluntarily declare their assets and income and pay taxes on them while being forgiven payments of interests and penalties.
The Vice President noted that although the scheme targeted local tax evasion, the country was also interested in the large number of Nigerians who owned property abroad and had not been paying taxes on incomes from the assets.
He acknowledged that the British Government’s initiative on transparency in beneficial ownership of properties would greatly assist the country in such drive.
“I think it is important to emphasise that almost across Africa, tax administrators are actively engaged in extensive reforms and battling the resource difficulties that hamper those reforms.’’
He said the issues of cost of collection and the appropriate technologies that could bring down those costs, developing relevant skills and management needed to effectively create and run efficient and transparent tax administrations stretched creativity and resourcefulness of tax administrators.
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He also mentioned issues around institutional structure, the wisdom of ensuring autonomy of institutions of tax administration.
He noted that enforcement was another major issue that practically all tax authorities, especially in sub-Saharan Africa, should deal with, adding however, that surveys showed increasing innovation and creativity by administrators in that regard.
Osinbajo remarked that the equivalent of the invention of electricity for tax administration in Africa was inventing the solution to effectively collect taxes from our huge informal economies.
“The easy argument is to suggest that we should wait until economic growth and development brings them into the formal systems. This is unhelpful.
“It has kept us on the same spot for decades. It seems to me that we must find a way of fixing this car while the engine is running.
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“I would urge that this conference consider some solutions to this problem along with the so many huge issues that will occupy your attention in the next few days,’’ he advised.
He hailed ATAF for the timely conference, noting that the forum had committed to the theme since August 2008 after the international conference on a somewhat similar theme: Taxation, state building and capacity development in Africa.
He said that then senior tax administrators and policy makers from 39 African countries agreed to work towards the “establishment of the forum as a platform for sharing best practices in taxation matters in the region”.
“It is remarkable indeed that forum has through the years been unwavering on its founding mission and ideals.
“But it is worth noting also that the tax problems of African states have remained much the same in complexity and character since.
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“The elephant in the room in most discussions on tax in developing countries remains the problems of domestic resource mobilization, addressing the tax gap, or the difference between what we collect and what we could collect’’.
The Vice President hinted that the constraints across the continent were similar although in varying degrees.
He mentioned them as large informal sector, including large subsistence agricultural sectors, tax evasion and avoidance, tax exemptions, and inequitable and opaque rent-sharing arrangements in the extractive sector.
“Significantly also, by the use of aggressive and often suspicious tax planning and transfer mis-pricing, multinationals minimize their tax payments or, put more graphically, dodge taxes.
“The Thambo Mbeki report on illicit financial flows discloses shocking details of tax losses to African economies by these practices of multinationals and their local collaborators.
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“Paradoxically, the report shows that these practices lead to an estimated revenue loss for developing countries that is three times greater than the amount they receive in foreign aid each year."
Osinbajo observed that the trend of the international debate on global tax issues was favourable to African economies.
“There are two main agendas; the first is increasing transparency and information exchange while the second is base erosion and profit-shifting (BEPS).
“The former involves establishing automatic information exchange as the new global standard for cooperation in tax matters and ending legal secrecy of ownership of companies and trusts, especially those based in tax havens.
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“On Base Erosion and Profit shifting which has also done significant damage to domestic resource mobilization in Africa, a range of potential actions are planned by OECD countries.
“These include checking transfer mis-pricing, country-by-country reporting by transnational companies, international tax law, standards for international tax treaties, limits on tax planning activities and the tax treatment of the digital economy.
“These agendas have been endorsed by the G8 and the G20, thus giving them high-level support and momentum,’’ he added.
Osinbajo further commended ATAF for the most relevant knowledge exchange opportunity and the country’s FIRS which is proving to be one of the most innovative and forward looking tax administrators in Africa.
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