Kleinmond - Budget deficits in Africa are leading to a climate of much more aggressive tax collection.
Ken Aitken, head of the Nigerian tax division of PricewaterhouseCoopers (PwC), says for Africa the international economic crisis means a deceleration of development, greater unemployment in the wake of retrenchments by multinational companies, a shortage of foreign exchange and persistently high interest rates.
At the 12th annual PwC African Tax and Business Symposium he declared that governments would increase taxes in the current environment, even if they strongly deny it now. It's unavoidable, since money to keep struggling sectors afloat has to come from somewhere.
Africa is currently reacting in two ways to the growing budget deficits and the financial crisis. One is aggressive tax collection and the other is tax incentives to stimulate investment inflows.
In the case of South Africa, the government is doing both while countries like Morocco, Cameroon, Togo and Senegal are largely focusing on incentives for foreign investors.
According to Aitken, smaller countries, in particular, are offering incentives because they cannot expect much more from tax revenues.
In Cameroon the government has decided to reduce or abolish import duties on equipment for oil exploration.
Mali's government has decided to repay gold mining companies VAT claims that have accumulated over the years. But there are practical problems, especially in terms of the country's own cash flow.
In Togo the tax rate for companies has been reduced from 37% to 30%. In the Cape Verde Islands these rates have fallen from 30% to 25%.
In South Africa investment in the manufacturing sector, infrastructure and green projects is rewarded with tax incentives. In contrast, countries like Nigeria, Gabon, Ghana, the Democratic Republic of Congo (DRC) and even South Africa are raising taxes.
SA's tactics
South Africa is focusing on wealthy individuals, companies' conveyancing price policies and a punitive regime of fines for tax evasion.
In July this year Ghana instituted a 5% national fiscal stabilisation levy on companies in certain industries.
The DRC, which is always raising taxes, increased its sales tax from 13% to 15%, says Aitken.
Nigeria has experienced a significant decline in foreign investment inflows and many oil companies have decided to move to Angola because of problems in the Niger Delta.
In response to the revenue losses Nigeria has become much more aggressive in tax collection. A commission for economic and financial offences has even been instituted. Project Eagle Eye is now also targeting tax issues which can lead to criminal prosecution.
Aitken says the commission's expertise regarding tax legislation is pretty poor, and the situation could become "dangerous".
And then racism is part of tax legislation in the Lagos State, which is one of 36. The projected tax rates on the earnings of European, Indian and black directors differ. Armed members of the police force have been known to walk into a director's office and lock up the premises because too little tax has allegedly been paid.
Detention in Nigeria, whether for a long or short period, is a nasty experience, Aitken points out.
- Sake24.com
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