Finance Minister Enoch Godongwana has urged African countries to focus on tax transparency to counter tax evasion and illicit financial flows which continue to bleed the continent billions of dollars every year.
This comes as South Africa has recently been greylisted by the Financial Action Task Force (FATF) due to certain deficiencies in its anti-money laundering (AML) and combating the financing of terrorism (CFT) and proliferation financing (CPF) framework.
Godongwana yesterday said the African Union Commission estimated the amount of illicit financial flows from Africa ranged between €48 billion and €77bn, in its domestic resource mobilisation report of 2019.
The minister yesterday delivered an address at the 13th Meeting of the Africa Initiative, hosted by the South African Revenue Services (Sars) in Cape Town yesterday.
He emphasised the importance of tax transparency tools in the armour of tax administrations to counter tax non-compliance.
“The international tax transparency standards have proven to be an effective tool in curbing tax evasion and other illicit financial flows and generating additional revenue ready to be invested in the development and provision of public services,” he said.
Godongwana also urged the Global Forum to continue to serve African countries and to support the Africa Initiative in its efforts to build and enhance their capacities to use the Exchange of Information (EOI) standards at their full potential on the continent.
He said tax administrations were tasked with the imperative responsibility of collecting what was due to governments in a timely and efficient manner.
“However, this task is not easy where tax evasion, tax crimes and illicit financial flows continue to spirit away revenues due to the State,” Godongwana said.
“A means to counter this scourge is by enabling Tax Administrations with the requisite tools and capabilities – measures such as tax transparency through EOI, as facilitated by the Global Forum and its regional partners.”
The 2-day Africa Initiative brought together Commissioners-General of revenue authorities across Africa, high-ranking representatives, experts, as well as regional and international organisations and civil society.
The Africa initiative meeting coincided with the launch of the Tax Transparency in Africa 2023 which presents African countries’ latest advances in tackling major issues of tax evasion and other illicit financial flows through the increased use of tax transparency and EOI for tax purposes, as well as the Global Forum’s toolkit on cross-border assistance recovery of tax claims.
Covering 38 African countries, the report showed that African countries collectively reported collecting over €310 million as a direct result of exchange of information on request since 2014.
African countries have also identified at least €1.69bn additional revenues in tax, interest and penalties since 2009, through voluntary disclosure programmes, EOI and investigations of offshore income and assets.
For the first time, one African country reported collecting additional taxes of €10.6m in 2022 through the use of Common Reporting Standard data.
Sars Commissioner and co-chair of the Africa Initiative, Edward Kieswetter, also emphasised the importance of tax transparency standards and collaboration among African countries to boost governments’ revenues.
“A tax risk anywhere, is a tax risk everywhere. Tax administrations are called to serve a transformative and higher purpose in the interest of the African continent specifically,” Kieswetter said.
“Collaboration is essential if we are to serve our shared ambition for effective resource mobilisation to fight poverty, unemployment and inequality.”