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Tighter tax to save Africa from debt

Published Jun 9, 2011


African states would tighten tax administration methods to advance tax collections, an initiative that the SA Revenue Service (Sars) said would help Africa move away from debt.

Sars told Parliament in Cape Town yesterday that it would spend R8.7 million in the 2011 financial year to run the secretariat of the African Tax Administration Forum (Ataf) after an agreement that was adopted in November last year to lay a strong basis for a new approach to African taxation.

The organisation argued that better tax administration would enhance the continent’s economic growth and tighten the social contract between citizens and states.

“The tax to gross domestic product (GDP) ratio in Africa is very low. A number of African states had less than 10 percent ratio three to five years ago, while the world average is 30 percent to 35 percent,” said Logan Wort of Ataf.

Wort said South Africa’s tax to GDP ratio stood at about 27 percent while those of countries such as Rwanda and Kenya were at less than 10 percent three years ago.

The establishment of Ataf was mooted at the International Conference on Taxation, State Building and Capacity Development in Africa held in Pretoria last year.

Ataf has a council of 10 African member states with South Africa as a host country.

Varsha Singh, the manager of international customs at the international relations unit at Sars, said 31 other African countries had pledged membership to the organisation.

South Africa was paying a membership fee of $32 000 (R215 800) a year and all administration costs had been carried by Sars.

In 2010, the organisation spent R2.5m and Wort said it was yet to be discussed with the Sars commissioner whether the organisation would also carry the running costs for 2012.

“The total membership contribution from the countries will never be enough but that does not envisage that Sars will continue to fund Ataf,” said Wort. Ataf will host its first donor conference in November where it hopes to raise two to three years’ administration costs. Donor agencies already committed R16.6m last year for the development of Ataf over a period of three years.

Singh said Sars hoped to combat tax evasion and avoidance with mutual co-operation between countries’ administrations and international institutions that would attend.

Wort said through its association with Ataf, Sars’ capacity and that of other South African institutions involved in tax policy had been strengthened. He said it had also helped in defending and extending the country’s tax base and had secured the supply chain for lawful trade and prohibit the entry of illicit goods.

“Sars’ profile has significantly increased in the tax and development arena,” he said.

Thabadiawa Mufamadi, the chairman of Parliament’s standing committee on finance, said the initiative was long overdue.

“With this intervention, we will take our development agenda forward,” he said. - Londiwe Buthelezi

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