The ManicaPost
Business Reporter
The fourth African Tax Administration Forum General Assembly is scheduled for Durban, South Africa from October 3-7 October as the continent’s heads of tax administrations meet to map out ways of optimally leveraging Africa’s untapped tax base.
The conference will run under the theme: “Harnessing the African Cash Economy: Contributing Towards Expansion of the African Tax Base.”
At least 38 African states and development partners in the international community are expected to converge in Durban for fruitful deliberations aimed at understanding underlying aspects, reasons and consequences of the cash economy, and its implications for tax revenues, tax burden as well as revenue forgone due to non-compliance with tax laws.
The tax indaba will focus on providing practical solutions in dealing with a cash economy in order to broaden the tax base in Africa in a bid to maximise revenues within the current cash environment as well as encourage migration to the non-formal economy such as e-wallet and both mobile phone and internet banking.
A cash economy is basically economic activity where goods and services are substantially paid for in cash and where transactions are generally unrecorded making it extremely difficult for potential revenue to be harnessed into the tax net. ATAF hopes to curb base erosion by helping member states identify the dynamics of a cash economy in an endeavour toward maximising domestic resource mobilisation on the continent.
Speaking ahead of the conference, Mr Logan Wort, the executive secretary of ATAF said: “It is widely believed that the African tax base is yet to be optimally explored. This is partly due to non-contribution of a fair share of taxes by cash economies in Africa. Although efforts are being made to close the tax gap through various initiatives aimed at the multi-national enterprises and cross-border transactions, cash economies in Africa pose base erosion threats that have not been adequately addressed.
“The conference will therefore provide an ideal opportunity for the exchange of views in anticipation of special attention being given to the cash sector of the economy. Tax administrations will have an opportunity to share experiences which will collectively provide a sound basis for appropriate remedial action plan such as for instance, the implementation of digitalisation of transactions,” he said.
Reports estimate that on average the size of the informal economy in Africa (in percent of GDP) was 42 percent for the years 1999/2000. Zimbabwe (59,4 percent), Tanzania (58,3 percent)and Nigeria (57,9 percent) have by far the largest informal economy on the continent.
At the lower end of the informal economy are Botswana with 33,4 percent, Cameroon with 32,8 percent and South Africa with 28,4 percent although the figures are rising. In sum, the size of the informal economy, which is more like a parallel economy in Africa, is quite large.
It is further reported that the informal sector, which uses unrecorded cash transactions, has prejudiced the African economy at least 38 percent of its GDP and therefore a key outcome of the conference, will be laying the foundation for development of action plans to be pursued by African tax administrations until the next General Assembly in 2018.
ATAF, the leading Pan-African tax organisation, holds its General Assembly, the highest decision-making congress, every two years.
During the previous General Assembly convened in Tanzania in 2014, ATAF members discussed leadership and management strategies for African tax administrations in the new global tax environment and focused on a theme on “Leveraging on technology: The scope of automation and modernisation,” in one of its sessions.
In 2014, members realised that the modern finance and information technology systems which have changed the way transactions are recorded and reported by tax authorities presented new demands in the way tax administrations collected tax and audited taxpayers. Having generally successfully implemented automation innovations and interventions by 2016, ATAF members have now realised that a parallel economy has been created which only uses cash in order to evade the automated tax radar hence the call for harnessing the cash economy during the fourth General Assembly.
