‘Global tax reforms must support sustainable revenue mobilisation in Africa’ – ATAF

Prosper Ndlovu

REGIONAL tax lobby organisation, the African Tax Administration Forum (ATAF) has reiterated the importance of protecting source-country taxing rights, in particular through well-designed and non-discriminatory ‘Qualified Domestic Minimum Top-Up Taxes’ and reforms to inefficient tax incentive regimes to ensure maximum economic benefits to the continent.

Zimbabwe is a member of ATAF, which has released its recent analysis of the OECD/G20 ‘Inclusive Framework’s Side-by-Side Package that introduces significant changes to the Global Minimum Tax architecture, including new safe harbours, revisions to the treatment of certain tax incentives, and further simplifications.

ATAF’s analysis provides an African perspective on how these developments affect the integrity of the Global Minimum Tax and their implications for domestic resource mobilisation in African countries.

In a latest update reflecting the continent’s perspective, ATAF executive secretary, Ms Mary Baine, said the analysis by ATAF unpacks the implications of these rules to its members to enable them to make the necessary policy choices.

She further expressed concern on some design features of the package, especially the favourable treatment of some tax incentives, underscoring that this modification of the rules may undermine the very objectives of the GMT rules.
“ATAF will continue to engage actively in further work on these rules, including the proposed stocktake process, and provide technical support to members to ensure that the implementation of these rules protects domestic revenue bases and addresses the specific concerns of African jurisdictions,” said Ms Baine.

While welcoming the elements of the package that preserve the central role of Qualifying Domestic Minimum Top-Up Taxes (QDMTT’s) and also strengthen monitoring through stocktakes and peer review, ATAF has cautioned that expanded recognition of certain tax incentives and high substance caps may undermine revenue outcomes for African economies.
“ATAF will continue to support its members with technical guidance, impact assessments, and policy advice to ensure that the Global Minimum Tax evolves in a manner that is fair, balanced, and supportive of sustainable revenue mobilisation in Africa,” said the organisation.
“While ATAF recognises that the Side-by-Side Package seeks to accommodate different domestic tax systems and reduce compliance burdens, the analysis underscores that the core risk for African countries remains unchanged.
“Without timely and appropriate policy responses, taxing rights over profits generated in Africa may continue to be ceded to other jurisdictions through the Income Inclusion Rule, the Undertaxed Profits Rule, or now potentially through Side-by-Side regimes.”