Strengthening Africa’s tax capabilities

Africa's struggle to improve its tax capabilities has been a prominent issue that has raised concerns across the continent. The recent African Tax Administrators Conference aimed to address this challenge and find ways to enhance domestic tax revenues in African countries. The conference highlighted the need for reforms in tax policies and emphasized the importance of effective implementation to combat tax evasion and enhance compliance. CNBC Africa had the opportunity to speak with Logan Wort, the Executive Secretary of the African Tax Administration Forum, to delve deeper into the challenges faced by African nations in strengthening their tax systems. Wort acknowledged the significant disparity in tax-to-GDP ratios among African countries, with some nations lagging behind at around 5-6%, while others reach 15-20%. He emphasized the critical role of skilled tax administrators in improving tax collection and compliance. Wort pointed out that the lack of expertise and motivation among tax officials has been a major hindrance to effective tax administration. However, he noted a positive shift in recent years, with measures taken to incentivize tax officials and attract professionals from the private sector to enhance tax administration capabilities. The conversation also touched upon the challenges posed by multinational corporations engaging in complex tax avoidance schemes. Wort highlighted the need for African countries to equip their tax authorities with the necessary skills to detect and address such practices effectively. Drawing parallels with global cases like Starbucks in the UK and Apple in the EU, Wort emphasized the importance of having proficient tax authorities capable of navigating intricate tax arrangements. In the context of Nigeria, Wort discussed the ongoing tax reforms and initiatives aimed at increasing tax revenues, such as the Voluntary Assets and Income Declaration Scheme (VAIDS). While acknowledging the positive impact of reforms, Wort stressed that effective implementation of existing laws is crucial to driving revenue growth. He cited the example of Lagos State, where a significant revenue increase was achieved through improved data collection and enforcement of tax laws, without any changes to the legislation. The discussion also touched upon the challenge of data management and the need for a centralized database system to enhance tax compliance. Wort highlighted the importance of harmonizing existing databases and emphasized the long-standing need for a national identification system to facilitate effective tax administration. In conclusion, Wort emphasized the need for a collective effort to enhance tax capabilities in African countries. By investing in skilled tax administrators, improving data management systems, and implementing reforms effectively, African nations can boost their domestic tax revenues and combat tax evasion. The road ahead may be challenging, but with the right strategies and commitment, Africa can strengthen its tax systems and drive sustainable revenue growth.