Streamlining the Tax Incentives Regime to Minimize Revenue Losses – ATRN


The African Tax Research Network and the African Tax Administration Forum have agreed to lobby governments on the continent to streamline tax incentive regimes in Africa.

The move is aimed at helping continental members generate more domestic revenue to offset some expected losses due to the African Continental Free Trade Agreement.

Forum Executive Secretary Logan Wort spoke to reporters after a short closing ceremony of a three-day congress in Accra.

The forum focused on the revenue implications of the continental free trade agreement.

“There will be a need for revision and rationalization of the various tax incentives to multinationals because in Africa, taxes will be more necessary.

Fiscal incentives send huge portions of revenue, continental losses in fiscal incentives are over 3% of the continent’s GDP, but we don’t do any cost-benefit analysis on these incentives.

The proposed global deal on taxing the digital economy is to introduce a global minimum tax which has implications for Africa,” Wort told Joy Business.

The Commissioner General of the Ghana Revenue Authority, who is also the host of the conference, Reverend Amishaddai Owusu Amoah appealed to government officials to ensure that the ideas and agreements reached at the congress are implemented by the latter.

He believes this will be the surest way to improve the continent’s income and take full advantage of the continental free trade agreement.

About the board

Thirty-two African countries were represented by more than 230 participants from Ministries of Finance, African Tax Administrations, the African Union Commission, the AfCFTA Secretariat, Members of Parliament, Civil Society, Academia, Nations United Nations, OECD, IMF, WCO, WBG, development. Partners, captains of industry, media professionals and other key partners and tax policy experts.

Participants underscored the importance for countries to maximize gains from the AfCFTA, and welcomed the opportunity provided by the ATRN to further deliberate on how any potential revenue decline due to tariff liberalization can be mitigated, and increased intra-African trade harnessed to not only increase countries’ tax bases, but improve economic development.

The purpose of the congress was to deliberate on the tax and fiscal implications of the African Continental Free Trade Agreement. In particular, participants discussed the short-, medium-, and long-term implications of the AfCFTA, steps member states could take to adjust policies to counter the effects of estimated short-term revenue losses, and questions broader tax policy issues raised by the AfCFTA.

Here is a summary of the dialogues agreed at the end of the three-day session in Accra

The meeting observed that, based on data from 35 members of the African Tax Outlook, import duties contributed 6.41% of total tax revenue in 2020. Of the top five types of taxes, import duties import occupied the lowest position, while the top 3 were VAT, personal income. Income tax and corporate income.

Imports from Africa are very low compared to those from the rest of the world, averaging 13% between 1995 and 2020. Therefore, although tariff revenue losses are expected in the short term, they will be marginal.

Streamlining the Tax Incentives Regime to Minimize Revenue Losses - ATRN

Regarding the long-term effects of the AfCFTA, the meeting agreed that the AfCFTA would increase the overall income and welfare of most African countries. The long-term benefits of the AfCFTA, including reducing trade costs, promoting regional value chains, and providing greater variety to consumers, can offset short-term losses. GDP and consumption growth are expected to have a positive impact on domestic tax performance.

Participants agreed that trade and investment opportunities require both technical and infrastructural capacity building. Greater cooperation is also needed at the regional level for successful implementation of trade facilitation measures.

At the national level, short-term losses could be minimized through various measures, including streamlining tax incentive schemes, improving efficiency within tax administration through the use of technology, stepping up the fight against illicit financial flows and broadening the tax base.

The meeting recognized that while the frameworks of multilateral trade, international investment agreements (IIAs) and international taxation have developed in parallel, governed by different rules and principles, they continue to overlap.

The growing trend of Investor-State Dispute Settlement (ISDS) under the IIA should be of concern to tax authorities around the world.

If cooperation and integration is the real desire, it is time to discuss a common approach on the use of tax incentives, at the very least to protect or support less developed nations in the community.

A common approach to the fight against IFFs will be crucial to protect the financial integrity of the future customs union and single market.

States Parties, the African Union and the AfCFTA Secretariat should take immediate action in this regard by introducing the fight against IFFs as an overall objective of the Agreement and prepare a strategy for rapid harmonization, inter-regional cooperation -agencies and identification of capacities or reinforcement of the framework. Needs.

The Regional Economic Communities are the building blocks of the African Economic Community and have an important role to play in the implementation of the AfCFTA and trade facilitation programs. We need to strengthen inter-agency collaboration, ensure the inclusion of non-technical issues in all trade and transport projects (e.g. ICT), consultation with all stakeholders, harmonization of policies, strengthen the trade governance and relevant institutions, develop regional value chains to ensure that no country feels left behind in the integration process and institutionalize public-private dialogue on regional integration issues.


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