Outcome statement of the Kampala Tax Policy Dialogue
The African Tax Administration Forum, ATAF, had a high level tax policy dialogue dialogue recently under the theme, Forging the Nexus Between Tax Policy and Tax Administration in Africa. Below is the official statement from that engagement.
Over 60 officials from ministries of finance and African tax administrations of 18 countries, members of parliament, civil society, AfDB, UNECA, and individual tax policy experts met in Kampala, Uganda on 15 and 16 August 2017 for the inaugural ATAF High-Level Tax Policy Dialogue to discuss building a stronger nexus in Africa between tax policy and tax administration. The event was hosted by the Uganda Revenue Authority (URA) and supported by the African Development Bank (AfDB).
The Hon. Matia Kasaija, Minister of Finance, Planning and Economic Development, of the Republic of Uganda who opened the meeting, welcomed this vital joint African initiative and confirmed the need for forging this nexus between tax policy and tax administrations which is needed if Africa is to effectively address Illicit Financial Flows (IFFs) and improve Domestic Resource Mobilisation (DRM). In supporting the need for closer collaboration the Minister suggested the participants consider:
- How do African countries design tax policy that balances revenue collection and encourages investment?
- How does Africa generate sufficient revenue to fully finance its own national budgets and move away from Aid?
- How can Africa ensure it bring all income earners into the tax base?
There is a need to have tax policies and laws that will bind Africa together and answer these three challenges. He stressed his full support for all of ATAF’s initiatives which were helping Africa build more effective tax regimes.
The participants welcomed this new ATAF initiative and agreed that legislators, ministries of finance and tax administrations need to collaborate more closely so as to create fair and clear tax systems that both improve domestic resource mobilisation and build a more certain investment climate in Africa.
The meeting noted that if Africa is to stem IFFs arising from tax avoidance and evasion it needs to redesign its tax policies and build the capacity of the tax administrations. It was noted that ATAF is already developing tax policy tools such as the ATAF Model Double Tax Agreement and the ATAF Suggested Approach to Drafting Transfer Pricing Legislation that African countries are finding extremely valuable for negotiating Tax Treaties and drafting new legislation in complex technical tax areas. The meeting appreciated that ATAF has recently started work on drafting technical papers on a range of tax policy issues that are of particular significance in Africa.
However, it was noted that the technical tools developed by ATAF are exactly that — only tools, and to transform these into new domestic tax law and revised Tax Treaties requires political support. Closer working between Legislators, Ministries of Finance, and tax administrations will be key to obtaining effective results for domestic resource mobilisation. It was strongly recommended that outcomes of the meeting should be disseminated to members present as well as other African countries, with the aim of adopting this model.
In the same context, participants noted the major loss of tax through harmful tax competition and the granting of wasteful tax incentives where there is a lack of accountability and robust cost benefit analysis to measure the effectiveness of these incentives. There is evidence that this area of tax loss is highest in the extractives sector. There is a need to create greater political awareness of the tax impact of these incentives and that a regional and continental approach to this issue was needed.
Participants expressed the view noted that ATAF’s role and the impact were now going beyond tax administration into tax policy and was called upon to expand the work that it did into the issue of tax incentives.
The meeting reaffirmed their support for ATAF being the voice of Africa in the global tax arena. To date, African countries have only played a very limited role in setting global tax policy. ATAF has represented Africa and influenced the global tax agenda over the past two years but there is now a need for ATAF to play a stronger advocacy role both in the global tax arena and on the continent to build an African wide tax policy.
It was noted that a key part of the role of tax administrations is providing tax policy advice to ministries of finance and ATAF is playing a vital role in supporting tax administrations in that work. However, ATAF should consider changing its name to make it clearer that it provides this tax policy service to its members.
The meeting called for a consolidated strategy for Africa to address IFFs and for ATAF to develop a Model DRM strategy for Africa. Participants called on ATAF to lead African tax policy work under the guidance of the African Union. Participants noted the need to improve taxpayer compliance including voluntary compliance and key to this was increasing government’s accountability on how the revenues collected are being spent. It was recognised that civil society has a key role to play in mobilising taxpayers to increase calls for this accountability.
Participants committed to establishing a framework in their country for the ministry of finance and tax administration to work together on revisiting the country’s domestic resource mobilisation strategy and agreeing their plans for implementing that strategy. This work should take account of changes in the economic outlook of the country and the rapid changes taking place in the global tax environment.
The meeting recognised the important role of the regional economic communities in building the nexus between tax policy and tax administration through creating a similar framework at a regional level to the country level framework described above to ensure that work on tax policy takes into account regional development and the outlook for the regional economy.
Participants requested that ATAF make the Tax Policy Dialogue an annual event that will forge the network that is needed to ensure coordinated tax policy and tax administration decisions and actions in Africa in the ever-changing global tax environment. The Dialogue should be the framework within which to raise awareness on the policy interventions and cooperation required to effect Africa’s position in the global tax arena and begin the dialogue on how to improve the process of effecting tax policy reforms in line with the ever changing global tax trends.
The meeting launched the second edition of the African Tax Outlook (ATO), ATAF’s flagship publication. The key findings of the ATO second edition were presented at the meeting. The Commissioners General of Lesotho, Liberia, Swaziland and Uganda signed the publication on behalf of their colleagues who participated in the exercise. The ATAF Executive Secretary presented the ATO second edition to the ATAF Council in the presence of the media and other participants.