Mr Oupa Magashula - the Commissioner of the South African Revenue Service
Mrs Jennifer Morel – Commissioner of the Seychelles Revenue Commission
Ms Monica Bhatia– Head of the Global Forum on Transparency and Exchange of Information for Tax Matters,
Representatives of Development Partners
Heads of Legal Departments of African Tax Administrations and Members from ATAF Countries
The ATAF Secretariat
Friends and colleagues
It gives me great pleasure and pride in welcoming you all to this most important event and marking another milestone in the life of our young organisation. I am most grateful to Mr Oupa Magashula and the South African Revenue Service for hosting us over the next three days. I trust that you are all enjoying the hospitality of South Africa and the Capital City. I would also like to thank the German Agency for International Cooperation (GIZ) for their continued support and for the generous financial assistance in making this conference a reality.
Let this city, then, become the backdrop of a momentous occasion where we will engage among one another in spearheading an exercise that is of vital importance not only for our individual revenue authorities but for our countries and Africa as well. This importance is perhaps best painted against the backdrop of the economic gains Africa has made in the past decade. The continent is booming with activities of democratic process and economic renewal and development.
In 2011, the continent experienced a record number of 28 national-level elections in 20 countries. On the economic front, the African continent enjoyed good growth and yielded positive economic signs in the period 2006 to 2008, with an average annual growth amounting to approximately 6% and a growth in gross domestic product (GDP) per capita reaching almost 4%. Furthermore, a strong rebound after the tumultuous global financial and economic crisis in late 2008 and 2009 was evident as the continent’s average growth rate for 2010 amounted to 4.9%, up from 3.1% for the previous year. Moreover, positive and strong growth is forecast for the continent in 2012 at an expected rate of 5.8%. African countries are well positioned to improve the mobilisation of domestic resources amid such improved economic activity. The challenge is the stem the tide of tax and capital outflow out of African economies.
Internationally, the tax development dialogue is focussed on transfer pricing, exchange of information and sharing best practises in tax administration. I believe that our presence at these treaty discussions is at least attending to two of those issues I have mentioned. Our discussion over the next three days to finalise a Mutual Administrative Assistance Agreement will allow us to attain information easier, through structured methods and at the same time, improve our capacities to assist one another. Exchange of information is crucial in the development of African economies as it plays a multi-facet role. This role allows African revenue authorities to commence work on gathering information that may be relevant to the legal processes of tax payers in different countries. It also illustrates the will of Africans to work with each other and to improve tax collections on our continent.
Ladies and gentlemen,
It is of paramount importance therefore, that our efforts as revenue authorities in collecting taxes are enhanced to be more effective and efficient. Collected taxes in Africa increased from an average of 17.9% of gross domestic product (GDP) in 2000 to 20.3% in 2010. However, this increase was mainly driven by resource-related taxes in oil-exporting countries as oil prices surged after 2007. Our challenge is to secure more sustainable revenue sources and in particular to broaden the tax base, improve the tax mix and optimise administration and service to tax payers across the continent. This will allow for a better collection of taxes as African economies grow and middle classes expand.
Colleagues, allow me at this point to place into context the importance of this meeting based on how international fiscal evasion takes place.
A fact sheet compiled by the European Network on Debt and Development puts the illicit capital flight from developing countries at anything between $500 and $800 billion per annum, with commercial tax structuring contributing about 64% thereof, criminal activity 35%, and corrupt money passing hands around 5%. Figures provided by the 2010 Global Financial Integrity Report, on the other hand, indicate that developing countries are losing $98 billion to $106 billion per annum due solely to re-invoicing. This represents an estimated 4.4% of the developing world’s total tax revenue. Most estimates on revenues lost, however, exceed by some distance the level of aid received by developing countries. Simply put, it is said that for each US Dollar that comes to the South in terms of aid, more than seven US Dollars return to Developed countries through illicit proceeds.
In a new report commissioned by Tax Justice Network, entitled “The Price of Offshore Revisited”, it notes the billions of dollars kept in offshore accounts by the world’s wealthiest people, astonishingly up to $21 trillion over the past 30 years. Moreover, developing nations continue to lose large amounts in tax revenue through networks of bankers and advisers globally. It is therefore our task to protect our revenue bases and collect all that is due to our countries. The platform provided by us being here is a start to ensuring that we are in the process of exchanging information and working together to achieve common goals.
Therefore, through all of us being here, let us interact with one another to achieve the objectives of this meeting; enabling African revenue authorities to assist one another in tax matters for the prevention of fiscal evasion. As mentioned, tax revenues continue to be lost in Africa but through the exchange of information in tax matters we have the opportunity to carry out of tax examinations abroad, conduct simultaneous tax examinations, and assist in the collection of taxes.
Ladies and gentlemen,
In the global economy, tax administrations need to be organised globally if they are to deal effectively with Multinational Enterprises. The problem emerges in practice because international fiscal cooperation is subject to so many rules that these rules can at times become constrains upon the principle of cooperation.
Cooperation between tax authorities in the field of mutual assistance in tax matters takes place in several fora: for example, the European Union (EU), the Organisation of Economic Cooperation and Development (OECD), the United Nations (UN), the Inter-American Center of Tax Administrations (CIAT). The methods that are available to tax administrations in matters of mutual administrative assistance depend on two circumstances: the existing measures in the relevant agreement between two tax administrations and the measures that are available under domestic law. As we gather here, we have made the opportunity present to enhance the negotiations of the agreements between more than just one administration.
For a long time the international exchange of information was exclusively based upon the traditional concept of bilateral cooperation. Gradually, more and more multilateral forms of cooperation are emerging and we have taken to the global trend to develop one that is representative of the needs of African revenue authorities.
As there are many legal considerations in the process of exchange of information, I trust that you are all ready to represent your revenue authorities well and to take into consideration aspects of legality where necessary for your administration. Moreover, working with your peers on this important matter should make the task both challenging and refreshing. The ATAF Working Group on Exchange of Information and Tax Treaties met in Uganda on 18 April 2012 to enhance their offering of the AMATM and have been backed by the ATAF Council to conduct this meeting. The ATAF Council approved the draft AMATM Agreement you are about to discuss. You have the task to discuss the finer detail and thereafter it will be presented to ATAF member countries for accession.
Colleagues, this Agreement on Mutual Assistance are designed to take account of the differing levels of infrastructure in the various tax administrations. It is an African initiative which has its primary aim of encouraging exchanges between ATAF members and achieving that aim as soon as possible. Importantly it is a part of the ATAF project to: prioritise the prevention of tax evasion by exchange of information, provide training and expert assistance in information exchange and setting up the structures to ensure that it is effectively carried out between Members. It will allow for Members to address issues between themselves relating to multinational enterprises (such as transfer pricing) through simultaneous examinations and examinations abroad. Adoption of this Agreement can potentially be undertaken in a short space of time allowing for cooperation in all these areas.
Impact on ATAF:
1. ATAF will have the opportunity to provide technical support for member countries in the implementation of an Exchange of Information ( EOI) system, which include the following:
a. Development of an EOI process for member countries in different tax regimes e.g. federal tax system;
b. Development of an EOI system (capacity, capability, technology as well as template designs);
c. Providing member countries with tools to execute the function of EOI e.g. training material, manuals, EOI templates;
d. Training and development programmes for countries;
e. Providing member countries access to expert support;
f. Be a mediating body on matters where interpretation may be problematic.
g. Provide a custom made EOI product for member countries.
Impact on Member Countries:
2. Member countries will have the following responsibilities:
a. Create a dedicated process for EOI;
b. Create a dedicated position for EOI ( known as a Competent Authority);
c. Establish capacity requirements for EOI function;
d. Make strategic decisions on tax compliance and how to use EOI in the process;
e. Understand the political and economic implications for a revenue authority in using / not using EOI;
In conclusion, I am pleased announce that within the next two months, ATAF, in association with the OECD will publish the first practical guide on Exchange of Information for Developing Countries. This publication will be a handbook for any country that has to deal with the complexities of information exchange in the absence of fully trained Competent Authorities.
I now wish you well with you deliberation over the next few days and remind you that you carry the responsibility of making this treaty work for the continent.