African nations, including Nigeria, lose approximately $50 billion every year due to tax evasion, according to Mr. Logan Wort, Executive Secretary of the African Tax Administration Forum (ATAF).
This alarming revelation was made during the ATAF Annual Meeting in Kigali, Rwanda, where leaders and experts convened to address this pressing issue.
Mr. Wort noted that tax evasion constitutes a significant portion of illicit financial flows on the continent.
“It is a big driver of money loss in Africa,” he said, stressing its disproportionate impact on economic stability.
He disclosed that 60 percent of tax evasion losses stem from corporate activities, where businesses manipulate their tax obligations through aggressive strategies.
Additionally, 10-15 percent of these losses arise from corruption and aggressive tax planning, often facilitated by weaknesses in existing tax policies and enforcement mechanisms.
A particular focus was placed on the extractive industries, such as mining and oil exploration, where tax evasion is rampant. Mr. Wort explained the common practice: “Typically, companies in extractive industries receive tax-free concessions, such as a 10-year tax holiday, to incentivize exploration. However, some companies exploit this by under-declaring their discoveries.”
In many cases, companies may strike oil or find minerals within the early months of their tax-free period but delay reporting their findings until the holiday period ends. “This results in governments losing up to a decade’s worth of taxes,” he noted.
To combat such practices, Mr. Wort stressed the need for robust tax policies, solid legislation, and significant technological investment.
“As a government, as a ministry of finance, as tax officials, you avoid this through good and solid policy and legislation. Part of the problem is that many countries on the continent lack strong enough tax frameworks to counter aggressive tax planning,” he stated.
Cross-border transactions, particularly those involving multinational companies, exacerbate the problem. He stressed the importance of adopting technological solutions that enable real-time monitoring and information exchange between key stakeholders, including central banks, commercial banks, and tax authorities.
Mr. Wort noted the challenges posed by global businesses that exploit loopholes in weak tax systems.
“When you have technology and legislation that allows the central bank, businesses, and commercial banks to exchange taxpayer information, you can accurately track money flows, identify beneficiaries, and ensure that requisite taxes are paid before funds leave the country,” he said.
Such measures, he added, enable authorities to understand the flow of money, detect irregularities, and recover unpaid taxes, whether from individuals or corporations.
Mr. Wort pointed out the importance of international tax agreements in combating evasion. Countries can legally share taxpayer information between authorities by signing information exchange agreements.
This ensures that tax information remains private while allowing authorized officials to access the necessary data to collect the correct taxes,” he explained.
ATAF has been instrumental in helping African countries strengthen their laws and auditing capabilities to curb tax evasion. “With the right legal frameworks and technology, African nations can significantly reduce losses and enhance their revenue generation,” Mr. Wort concluded.
The ATAF Annual Meeting in Kigali continues to explore strategies for addressing tax evasion. Key discussions focus on implementing stronger legislation, leveraging advanced technology, and fostering cross-border cooperation among Africa