The African Tax Administration Forum (ATAF) has commended a pledge made by rich countries to support developing countries collect the taxes owed them by providing them with access to the global tax information they need.
ATAF reports that, for decades, countries in Africa have collectively lost trillions of dollars through courses of action phrased as illicit financial flows.
“No region has suffered more from tax evasion, aggressive tax planning and plunder of national wealth through offshore registered companies,” former Secretary General of the UN, Kofi Annan, once said.
Illicit financial flows occur when profits of a multinational franchise are untraceable in the country of origin, which therefore means the records of the profits made don’t appear in the country of origin thus the company is not obliged to pay tax in that country.
Based in Pretoria, South Africa, the ATAF is said to promote and facilitate mutual co-operation amongst African Tax Administrations and other relevant and interested stakeholders with the aim of improving the efficiency of their tax legislation and administrations.
Executive Secretary of ATAF Logan Wort also supported the initiative by the leaders of the developed countries to work with the OECD to come up with a multilateral model to punish tax evaders.
“We commit to establish the automatic exchange of information between tax authorities as the new global standard, and will work with the Organisation for Economic Cooperation and Development (OECD) to develop rapidly a multilateral model which will make it easier for governments to find and punish tax evaders. On tax avoidance, we support the OECD’s work to tackle base erosion and profit shifting. We will work to create a common template for multinationals to report to tax authorities where they make their profits and pay their taxes across the world,” read a communiqu├® from the last G8 meeting.
Wort revealed that even though the process of illicit financial flows is not illegal per say, its aggressive nature verges between tax evasion and tax avoidance because the country where the company is based is losing money.
“You cannot stop illicit flows but you can try to understand why and how it happens as part of an attempt to reduce these sorts of transactions,” said Wort.
Wort emphasised that corporate behaviour is the number one reason why countries in Africa are still losing money.
“Corruption is third in line why we are losing money, after corporate behaviour and crime,” said Wort.