Monday 12 April 2021
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Tax reforms: Cure for Africa’s over-reliance on commodities

Efficient tax collection is key when it comes to strengthening public resource mobilisation and it will subsequently lessen Africa’s over-reliance on commodities, former executive secretary of the United Nations Economic Commission for Africa has said.
Lopes expressed concern during an exclusive interview with The Patriot this week that African governments are too focused on receiving foreign aid instead of ensuring that their tax systems are efficient to maximise tax collection and at the same time indicated that Africa lacks good policies.
“African leaders in general discuss development aid most of the time instead of focusing on harnessing the capabilities of the tax economy, which is not discussed enough despite its enormous fiscal abilities,” he said. Lopes gave an example, which he says is reliant on revenue from oil while neglecting its tax system. “We can blame commodity prices and the markets that control those commodities for the precarious economic situation in most commodity-dependent countries but we only have ourselves to blame,” he said. Lopes accused African governments of relaxing when commodity prices are high instead of using that space to reform their tax systems to enhance revenue collection through taxes. “We [governments] do nothing during good times to build our tax systems that will subsequently lessen our dependence on exports, despite the fact that we are aware that the working class is not taxed properly.” He further added: “African countries often celebrate growth although this growth does not produce transformation.”

The African Economic Outlook (AEO) in a recent report said Africa has the potential to increase revenue from both private income and corporate income tax simply by improving the tax collection processes. The organisation indicated that short-term tax policy options in “most” African countries are constrained by their manual tax administration processes. “Therefore, upgrading tax administration is a pre-requisite to reducing income inequality through progressive taxation,” said AEO. A 2014 research report by the African Tax Administration Forum (ATAF) shows that there were still concerns about online security, which resulted in a “low uptake” of electronic filing systems on the continent. According to ATAF, however, training, accountability and a commitment to the implementation of electronic filing systems can address these concerns.

SA linkage
Lopes believes Namibia is much better off having South Africa as an economic partner and cautioned against any plans to de-link the two economies. “South Africa is a guarantor of modernity because they possess the skills and the capacity of their economy is significant. The fact that South Africa is going through turbulence should not be confused with structural needs. For Namibia to be sophisticated it needs South Africa by its side because the gains are multiple,” he said. In order to strengthen its economic system, Lopes proposed that Namibia consider deciding on its own interest rates, tighten macroeconomic indicators to make situation less volatile as well as tap into institutional funds to boost public investment.

Social Equity Frameworks
He also spoke about the importance of well-crafted social equity-related measures to equality. “There is no right time to adopt a social equity-related measure because its success depends on how it is implemented. The level of its impact on the economy should be measured otherwise it will not yield the desired affects,” he cautioned. His remarks come at a time when Namibia is in the process of adopting  the controversial New Equitable Economic Empowerment Framework (NEEEF).   Of failed equitable frameworks Lopes said: “The implementation was probably not properly done, but it does not mean the principle was wrong. But we must remember that there is need to create opportunities for people to be uplifted into the middle classes,” he said.

Good policies
African leaders often boast that Africa has good policies but it fails when it comes to implementation. “I am not sure Africa has the right policies, people say it loosely. In fact, we have a deficit of good policies but a number of good intentions that are of a policy nature. One example is regional integration, do we have the rules of origin studies to ensure that it happens or customs harmonisation? Implementation is often not happening because we are not granular when dealing with policies,” he said. Our countries should work towards sophistication and signing good deals, he said. “You cannot claim you want to industrialise yet sign agreements like EPA’s. Such agreements challenge the infant industries and provides market access for goods from Europe to enter our markets,” he said.

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