African leaders must seize the initiative on global tax reforms

28 January 2014

As leaders gather together at the African Union summit, IDS Fellow Mick Moore recommends, in a recently published briefing, that they seize the initiative on tax reform and not wait for richer countries to implement proposed changes from last year's G8 and G20 summits.

The collector of market stall tax issues a receipt to a stall holder in Nakambala Market. Credit: Jason Larkin - Panos

In fact, there still remains a great deal of uncertainty around how initiatives on tax set out in the G8 Lough Erne Declaration and the G20 Leaders Declaration will be implemented and, perhaps more importantly, whether they will benefit the world's poorest countries.

IDS Fellow Mick Moore argues that there is plenty that leaders of poorer countries, and, organisations such as the African Development Bank and the African Union can do themselves to create more effective national tax systems and influence international processes.

Professor Moore, who leads the International Centre for Tax and Development, said:

"The fact that tax is taking centre stage both in terms of the public and political debates is welcome. But moving from rhetoric to reality is where the real challenge lies. Poorer countries can and must seize the initiative on tax reform, and not wait for international processes to be finalised"

In the briefing, Professor Moore highlights two key areas where poorer countries can take positive action.

  • Firstly, on tax exemptions, which are particularly prevalent in poorer countries, but universally used and granted to companies to attract new investment. Doubts have been cast around how effective exemptions are in generating new investment and Professor Moore argues that organisations such as African Union, the African Development Bank and the African Tax Administrators Forum should take the lead on developing new international guidelines on their use and effectiveness.
  • Second, poorer countries can boost their own domestic tax revenues by boosting property tax collections and this could be encouraged through the creation of a regional based organisation such as an African Property Tax Initiative.

The proposed changes to the global tax system are directed almost exclusively at making more information about the potential tax base available to national tax authorities, more easily and at lower cost. While this is a step in the right direction, the benefits will not be shared equally. Richer countries, the BRICS, and a few other large emergent economies stand to gain the most because their tax authorities have the resources to use more information to reduce tax avoidance and evasion.

Professor Moore concludes:

"By taking the initiative and organising collectively at a regional level poorer countries can help create fairer national and international tax systems that suit their needs as well as the needs of the OECD countries and the BRICS."

Image credit: Jason Larkin - Panos