African nations invited to join new global initiative to tackle tax avoidance

Out-Law News | 14 Nov 2014 | 11:54 am | 1 min. read

African nations are to be invited to take part in a new international initiative aimed at combating tax avoidance.

The Organisation for Economic Cooperation and Development (OECD) said the invitation to Kenya, Senegal and Tunisia follows their engagement with initial work of the Base Erosion and Profit Shifting project (BEPS).

The move, backed by the OECD and G20 group of the world’s biggest developed and emerging economies, aims to help countries adopt “coherent international tax rules to end the erosion of national tax bases”.

Five regionally-organised networks of tax policy and administration officials will be established “to coordinate an ongoing and more structured dialogue with a broader group of developing countries on BEPS issues”, the OECD said.

Tax expert Heather Self of Pinsent Masons, the law firm behind Out-Law.com, said: “It is good to see the OECD recognising the need for more active participation by developing countries in the BEPS process. However, BEPS is running to a tight timetable and some of its issues are less relevant to developing countries.”

Self said: “It will be important to continue beyond BEPS, and look strategically at how the longer-term needs of developing countries can be met.”

The OECD said building support for BEPS was “imperative”. “The regional networks will play an important role in the development of toolkits needed to support the practical implementation of the BEPS measures.”

According to the OECD, the African Tax Administration Forum and the Inter-American Centre for Tax Administration “will continue to play a critical role in leading regional discussions” on tax erosion issues.

A two-part report from the G20 ‘Development Working Group’ shows that “BEPS issues pose acute problems for developing countries, most of which have lower tax bases than advanced economies and raise a far higher share of tax revenues from corporate taxes than developed countries”.

The OECD said: “Developing countries have consistently recognised the importance of addressing base erosion and profit shifting as part of wider measures to increase domestic resource mobilisation, in order to promote stable economic growth and invest in infrastructure, education and health, among other government priorities.”

In September 2013, the OECD released its first recommendations towards ending the “erosion of national tax bases and the artificial shifting of profits to jurisdictions to avoid paying tax”. The recommendations were endorsed by G20 finance ministers last year and will be under discussion at a summit of the leaders of G20 nations taking place in Australia on 15 and 16 November.