To help its national members meet the twin challenge of providing tax relief and achieve revenue targets, the African Tax Administration Forum, or ATAF, issued a report Thursday recommending measures to be taken during and after the pandemic.
Among the recommendations are that tax administrators across Africa work to maximize revenue collection once businesses have begun a "new normal" mode of operation following the current crisis. This can be achieved through vigorous enforcement of debt collection, auditing and other assurance processes, the ATAF said.
Its report advised tax administrators to pay special attention to large enterprises with huge tax arrears, and to be especially vigilant regarding the greater risk of big companies that declare excessive losses attributed to a slowdown caused by the pandemic.
Closer collaboration between government tax administrations and tax policymakers will be needed to revive the continent's economies, according to the 38-nation group.
"Tax administrations will continue to deal with the aftermaths of COVID-19 years after it has ended," ATAF Executive Secretary Logan Wort said in a statement accompanying the report.
He said it was imperative that the ATAF's support to members also focused on equipping them with relevant tax policy and administration tools for a successful post-pandemic economic recovery.
"This report is an important step in this direction," added Wort, a former leading official with the South African Revenue Service.
The report doesn't mention the prospect of digital taxes, although the ATAF said in a recent paper that it would be publishing model legislation for African countries considering new taxes on digital activities to help shore up their finances. That paper, however, had stopped short of endorsing digital services taxes, noting opposition from the U.S. and a project of the Organization for Economic Cooperation and Development to negotiate a global alternative proposal by year's end.
The report examines six key aspects of COVID-19 interventions relating to African tax administrations: tax relief measures, nontax relief measures, business continuity, enterprise risk management, tax fraud and customs revenue. It also offers suggestions on how international donors and development agencies could assist African tax administrations during and after the pandemic.
It highlights the fact that tax measures were the most important and widely used tools that African governments have employed in response to COVID-19, the respiratory disease caused by the novel coronavirus. The ATAF cited its own estimate that of 36 African countries surveyed, each was spending an average of 1.07% of gross domestic product to respond to the pandemic — a total of over $37.8 billion for all of the countries.
The report also said that the 23 countries with data available enacted a total of 204 tax relief measures in response to COVID-19. The most frequently used measures were the extension of filing and payment deadlines, enhancement of business cash flows and support to public health systems. Another 121 nontax relief measures were classified into three groups: maintaining health, support to business and support to households.
The report found significant gaps in its member administrators' work to implement measures to improve enterprise risk management and business continuity. Based on 18 countries that supplied customs data, about $500 million was lost due to the pandemic between February and April, the ATAF said.
A representative of the ATAF didn't respond to a request for comment on the report.
Domestic revenue mobilization, or the effectiveness of a country's tax regime in delivering economic benefits to citizens, has long been a challenge for many African countries, particularly with regard to tax transparency and efforts to halt illicit financial flows. That challenge has become more acute amid the pandemic, Zayda Manatta, head of the OECD's global forum for transparency and exchange of information for tax purposes, told a tax transparency forum in June.
--Additional reporting by Alex M. Parker. Editing by Joyce Laskowski.
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