Finance and economic planning ministers of African countries are set to meet in Addis Ababa to discuss on how to deal with tax related matters and other means of domestic finance mobilization including fighting against corruption, an African Union official said.
“We will be hosting the 2nd African Union Specialized Technical Committee on Finance, Monetary Affairs, Economic Planning and Integration meeting that focuses on domestic resource mobilization, fighting against corruption and illicit financial flows,” said Dr. Rene N’Guetta Kouassi, Director for Economic Affairs at the African Union Commission.
“One of our mandates is to deal with financing for development. From Addis Ababa Declaration that came out of the global meeting financing for development, it has been recommended that countries have to focus on domestic financial resources,” Dr. Kouassi said.
“If we take for instance Africa’s tax share to its GDP is less than 10%, which is very weak as compared to OECD countries’ around 30%. Progress needs to be made in this regard. But we cannot succeed in such domestic resource mobilization if there is tax evasion and if there is corruption,” he said.
The experts meeting will be held starting this Thursday while the ministers for finance, economic planning and integration will convene on Monday next week. In order to get external independent experts’ views, the Economic Affairs Directorate has also held two days’ workshop at the African Union, according to the Director.
The key recommendation adopted at the workshop will be presented for the experts of African Union member states to review in the coming days and present the final document for the ministers next week.
It is recalled that the January 2018 African Union heads of states meeting focus was themed, “Winning the Fight against Corruption: A sustainable path for Africa’s Transformation”.
In recognition of the negative impact that corruption has on the development of African countries, the AU has dedicated the year 2018 to the fight against corruption.
Reports show that Official Development Assistance (ODA) for Africa has been falling well short of pledges and commitments and is largely unfulfilled.
The imperative for additional development financing in Africa has led to a concerted search for alternative, innovative and more predictable sources. A number of initiatives have been launched during the past decade but with limited effect in most cases.
But in the past few years mobilization of domestic financial resources has been getting attention by Amy Africa countries, who also see it as a route to independence from the often string attached aid and wealthy countries’ and institutions’ loan.
Among the domestic financing options recommended by the High Level Panel on Illicit Financial Flows from Africa, which is led by former South African President Mbeki, include the following:
- Levy on insurance premiums: Impose a minimum levy of 0.2% on any insurance policy taken by an African citizen or enterprise operating in Africa, which is to be collected by insurance companies on behalf of the African Union;
- Levy on imports: To impose a 0.2% tax on consumable goods imported outside the continent, excluding donations and exempted goods. The accruing amounts will be collected by Member States’ Customs Services on behalf of the African Union;
- Levy on international travel: Impose a tax US$5 per ticket on flights to and from Africa. The accrued funds are to be collected with the help of IATA from its affiliates. In the case of companies not affiliated to IATA, the countries would have to collect the accruing funds and transfer them into AU’s account;
- Tourism and hospitality: Collect between US$1- US$10 for each stay in African hotels. Accrued funds would be collected on behalf of the AU by hotels in collaboration with the revenue agencies of Member States.
The High Level Panel observed that implementing each proposal would have minimal impact on the economies of Member States of the African Union and that the proposed instruments are viable and sustainable as an alternative source of income for the African Union.
The report of the Panel further demonstrates that implementing the latter four options would generate revenues of US$1.4 billion. Furthermore, if the levy on air tickets were to be increased to US$10 per ticket and hospitality levy increased to US$1, additional revenue of US$762 million would be raised without repercussions on the economies of the member states.