African Nations Considers Information Exchange to Increase Tax Revenues

African Nations Considers Information Exchange to Increase Tax Revenues. As African nations struggle to sustain their debts, governments have now turned to information exchange to increase tax revenues.

In the previous year, the size of revenue generated by African countries from exchange of information (EOI) requests rose from $71.5 million in the year before to $2.3 billion, the highest level in over a decade.

This is according to the Tax Transparency in Africa Report 2024 recently published by the Africa Initiative.

It was said to be due to increased use of EOI and automatic exchange of information (AEOI) between countries to net fish out tax cheats hiding money and other assets in offshore accounts to escape taxes in their home countries.

Back in 2023, the number of exchange of information requests forwarded to other jurisdictions worldwide by African nations rose by 67% to 888, up from only 531 in 2022.

Typically, African countries don’t use the avenues available for such EOI arrangements as much as they should. They receive more requests than they send, which shows their slow adoption of the agreements.

For example, back in 2022, African countries sent out only 531 requests but got approximately 683 requests from other jurisdictions.

Eight years before that, Africa made only 38 requests but got 279 requests on average.

This however is no longer the case, as back in 2023, African nations made a total of 888 EOI requests, the highest number since the Africa Initiative was launched.

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African Nations Considers Information Exchange to Increase Tax Revenues: The Africa Initiative

The Africa Initiative is a project launched by the Global Forum on Transparency and Exchange of Information for Tax Purposes in 2014 to increase Africa’s ability to use EOI avenues to check tax evasion and increase revenues.

A minimum of 19 countries used EOI avenues in the previous year, up from 15 in 2022, a sign that African countries are increasingly appreciating the need for tax transparency platforms accessible to them.

According to the Global Forum, African countries including Kenya, Tunisia, Algeria, and Nigeria, made over 90% of all the requests made.

The increased utilization comes at a time when most African nations are struggling to service their debts, the costs of which have risen significantly.

On average, the budget deficit for Africa is anticipated to reduce to 3.7% of gross domestic product (GDP) this year, from about 4.1% in 2023, and 4.4% in 2022.

Simultaneously, the International Monetary Fund (IMF) expects Africa’s average debt-to-GDP ratio to fall from 60.1% in 2023 to 58.5% in 2024, a sign that the majority of African countries will be taming their appetite for debt servicing this year compared to prior years.

In the region, nations seem to be overstretching their limits to generate additional funds from local revenue mobilisation efforts.

For example, last year in Kenya, a set of new taxes was introduced, with the expectation of increasing ordinary revenues from Ksh2 trillion ($15.4 billion) in the 2022/23 financial year to Ksh2.6 trillion ($20 billion) in the present financial year.

In the subsequent financial year, Nairobi anticipates additional tax measures to raise a minimum of Ksh324 billion ($2.5 billion), putting its total tax revenues at Ksh2.9 trillion ($22.3 billion).

Other countries in the region are also trying new ways to generate tax revenues to fund their subsequent year’s budgets, and the EOI approach seems to be the most sought-after.


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