African countries generated €1.7 billion in additional revenues from tackling tax evasion and illicit financial flows – new report

African countries have realised additional revenues totalling €1.69 billion thanks to voluntary disclosures, the implementation of information exchange mechanisms, and rigorous offshore investigations according to the 2023 Tax Transparency in Africa Progress report unveiled at the 13th Meeting of the Africa Initiative in Cape Town recently.

The release of the report comes as African governments continue to step up efforts to bolster domestic resource mobilisation in the face of economic headwinds that include global inflation and mounting debt levels. The Organisation for Economic Co-operation and Development (OECD) estimates that Africa loses as much as $60 billion each year in illicit financial flows.

South Africa’s Minister of Finance Enoch Godongwana commended the Africa Initiative in his opening remarks. “During the past eight years, the Africa Initiative has changed the tax transparency landscape in Africa and aided the mobilisation of more than €300 million in domestic resources,” he said. Stressing the importance of political will in efforts to increase tax transparency, Godongwana said, however, that more could be done. He called for the Africa Initiative to strengthen African countries’ capacity to leverage exchange of information standards and protocols.

Zayda Manatta, Head of the Global Forum Secretariat, presented the report to participants.

23 African countries are now parties to the multilateral Convention on Mutual Administrative Assistance in Tax Matters, the most comprehensive instrument for all forms of  co-operation to tackle tax evasion, thus substantially expanding their Exchange of information networks.

Ten African countries have committed to automatic exchange of financial account information (AEOI) by a specific date and more are expected to do so in the near future, with the assistance of the Global Forum and its partners.

1170 officials from 37 African countries received training in the effective use of EOI instruments in 2022. A further 1 800 officials were trained by local trainers who had participated in the Train the Trainer programme.

In her presentation, Manatta cited a World Bank study that projected that participation in exchange of information mechanisms could increase African countries’ tax revenues from 5% to 19% of GDP.

“The more familiar countries are with this tool, the more they exploit this tool, and the more revenue should be collected. And if you manage to monitor this link between revenue collection and exchange of information, we would be able to further demonstrate the benefits countries are getting from this tool,” she said.

Commissioner of the South African Revenue Service (SARS) and co-chair of the Africa Initiative Edward Kieswetter said collaboration was essential to serve our shared ambition for effective resource mobilisation. “A tax risk anywhere, is a tax risk everywhere. Tax administrations are called to serve a transformative and higher purpose in the interest of society, Kieswetter said.

Representatives of the two new African members of the Global Forum, Zimbabwe and Angola, attended the meeting. The event also featured the publication of a new toolkit to help tax administrations set up and benefit from initiatives like the Global Forum.

Launched in 2014, the Africa Initiative is a partnership of the Global Forum, 33 African countries and 16 partners, including the African Development Bank, the African Union Commission, the European Union and the governments of Switzerland and the United Kingdom. The Africa Initiative seeks to ensure that African countries are equipped to participate in advances on global transparency, to better fight tax evasion and other illicit financial flows and ultimately improve domestic resource mobilisation.