OECD releases 2023 report on tax transparency in Africa

• During a recent meeting of the Africa Initiative, the Organisation for Economic Co-operation and Development published a progress report on tax transparency developments in certain African countries.
  
  
• As tax administrations continue to focus on expanding access to information, businesses face heightened scrutiny and the potential for additional inquiries if information they submit is viewed as unclear.
  
  
• Businesses should monitor developments and prepare for new information reporting requirements associated with global tax policy changes.

Executive summary

On 6 July 2023, the Organisation for Economic Co-operation and Development (OECD) released "Tax Transparency in Africa 2023 (pdf)," a progress report in connection with the 13th meeting of the Africa Initiative. The initiative, created in 2014, focuses on improving tax transparency and exchange of information for tax purposes to raise resources for development in Africa. The report provides an update on the progress achieved to date and the impact the Africa Initiative has had on countries' revenue collection. It also describes capacity-building activities carried out by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) and its partners in Africa during 2022 and proposes practical strategies for further progress.

A statement of outcomes (pdf), released in connection with the meeting, welcomes the progress report, calls on other African members to join the automatic exchange of financial account information (AEOI) for tax collection, and recognizes the benefits of new capacity building initiatives.

During the meeting, the OECD also released "A Toolkit for Establishing a Function for Cross-Border Assistance in the Recovery of Tax Claims (pdf)." This toolkit provides guidance on establishing and managing a dedicated function for cross-border assistance in the recovery of tax claims.

Detailed discussion

Background

The Africa Initiative was launched as a partnership between the Global Forum, its African members and several regional and international organizations and development partners. Its objective is to unlock the potential of tax transparency and exchange of information for Africa by ensuring that African countries benefit from improvements in global transparency to better tackle tax evasion. The Africa Initiative is open to all African countries and currently has 37 member jurisdictions.1

Four earlier progress reports on the Africa Initiative have been published, in March 2019,2 June 2020,3 May 2021,4 and June 2022.5

2023 progress report

"Tax Transparency in Africa 2023" incorporates input from 38 African countries, including most Africa Initiative members and several non-member jurisdictions,6 highlighting significant progress across the continent. The report is a joint publication of the African Union Commission, the African Tax Administration Forum and the Global Forum.

The report indicates that in 2022, through the implementation of Exchange of Information on Request (EOIR), four African countries (Kenya, South Africa, Tunisia and Uganda) successfully identified an additional €66 million in taxes. In addition, one of the five African countries (Ghana, Mauritius, Nigeria, Seychelles and South Africa) participating in AEOI reported having identified over €10 million in additional revenue by using data automatically received. According to the report, the revenues identified by African countries as a result of EOIR, other offshore tax investigations, AEOI-related voluntary disclosure programs and the use of data automatically exchanged total at least €1.69 billion since 2009.

The report describes the exchange of information network in Africa as comprehensive, with more than 3,070 relationships in place, of which 80% are relationships created under the Convention on Mutual Administrative Assistance in Tax Matters (MAAC). The report notes that African countries made 531 exchange of information requests in 2022, representing a slight decrease from the previous year. On the other hand, the number of incoming requests increased 9% to 683 in 2022 when compared with the previous year. However, the report indicates that the gap between requests made and received is narrower than pre-2020 levels.

The report acknowledges that progress on exchange of information remains uneven across African countries. Despite the availability of relevant infrastructures, a significant number of countries are yet to effectively use them to improve their domestic resource mobilization efforts. To address this imbalance, the report suggests that members need to adopt new strategies to establish a culture of exchange of information as a tool to promote tax compliance. According to the report, these strategies should include ongoing capacity-building initiatives and awareness-raising campaigns targeted at tax auditors/investigators to enhance their understanding and use of exchange of information tools to complement domestic information.

Statement of outcomes

In the statement of outcomes released following the Africa Initiative meeting, participants called on members of the Africa Initiative to sign up to the AEOI standard and benefit from the capacity-building initiatives available to support the implementation and use of this tool. They also welcomed efforts to strengthen African tax authorities' capacities in cross-border assistance in recovery of tax claims and underlined the need for ongoing capacity building, experience sharing and peer learning. The statement indicates that the delegates agreed to meet again in November 2023.

'Toolkit for Establishing a Function for Cross-Border Assistance in the Recovery of Tax Claim'

The need to enhance knowledge about assistance in cross-border tax claim recovery has been a priority for the Africa Initiative during the 2021–2023 period. To further these efforts, the OECD developed "A Toolkit for Establishing a Function for Cross-Border Assistance in the Recovery of Tax Claims" as a practical resource for tax authorities facing cross-border mobility of tax debtors and their assets.

The objective of the toolkit is to increase awareness and provide guidance on establishing and managing an efficient function for cross-border assistance in tax claim recovery. It is designed to support not only jurisdictions with limited or no prior experience in this type of mutual administrative assistance in tax matters, but also more advanced jurisdictions looking to improve their existing framework.

Implications

Tax administrations around the world continue to focus on exchange-of-information issues as they receive and share an ever-increasing amount of information. Businesses face heightened scrutiny and the potential for additional inquiries if the information available to tax authorities is unclear. It is important for businesses to monitor developments in this area and to prepare for new information reporting requirements associated with global tax policy changes, including the global minimum tax rules under Pillar Two of the OECD/G20 BEPS 2.0 project.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Belastingadviseurs LLP (Netherlands)

• David Corredor Velásquez
• Roberto Aviles Gutierrez

Ernst & Young LLP (United States)

• Barbara M. Angus
• Jose A. (Jano) Bustos

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.