Acholi women dancers gyrated in a Larakaraka dance in Kampala, Uganda, during the 4th International Conference On Tax In Africa that was organised by the African Tax Administration Forum (ATAF). The delicate dance involves balancing small gourd-like objects on their heads.
Unknown to the dancers was how the dance was analogous to fiscal policy (delicate balancing of revenues and expenditure of government) that was central to the conference deliberations whose theme was “Innovation - Digitalisation and Harnessing Technology to Improve Tax Systems.”
This was also the 10th celebration since ATAF was created to build tax administration capacity in Africa and share experiences. This year’s forum attracted 47 African countries and half a dozen donor countries.
President Yoweri Museveni opened the conference with some unkind words to tax administrators, especially in the East African region.
He noted that lack of integrity is among the biggest problems in the region causing massive leakages when the countries needed all the revenues to develop.
He said tax administrators needed to invest in modern technologies and build human resource capacity that can cope with the changing business models. Unlike in the past, Mr Museveni noted that in the era of the digital economy, everything can be traced. This was in response to his Finance minister who had just given an impassioned speech on the problems of taxing the sharing economy and digital platforms.
The digital economy is here with us and although anything electronic can be traced, you need to build the human resource capacity, Mr Museveni said. He was right in his assessment. Africa should be seeing opportunities in the emerging technologies and take advantage of technology instead of hiding behind imaginary walls.
More investment in technology would enhance tax collection.
He implored tax administrators to put more emphasis on consumption tax and stop production tax that discourages entrepreneurship.
Although this is a policy matter, tax administrators should be conducting regular impact studies on new tax proposals.
For example, several African countries rushed to impose social media tax to limit their impact but it is instead hurting local taxpayers more than platform providers who have no physical address within the countries. Virtual organisations featured prominently at the conference. Taxing such organisations, however, is both difficult and ill advised.
We need in depth studies similar to what the Organisation for Economic Co-operation and Development (OECD) countries have done and encourage collaborations with other countries that have built sufficient expertise in taxation of digital economies. Perhaps the eventual arbiter could be the United Nations.
One of the OECD studies highlights how digital platform providers undermine native enterprises through unfair competitive pressure. The businesses can no longer compete against the increasing number of online providers who in most cases don’t pay any form of tax. This effectively impacts on employment and tax revenues.
Africa should not accept to be left behind especially with respect to the emerging 4th Industrial Revolution simply because the continent has no legacy issues to worry about.
The continent has young, educated and abundant human resources that with right intervention, it can develop capacity not just for the continent but the entire world.
The governments, the institutions of higher learning and the private sector must have the confidence to challenge the status quo with the hope of leapfrogging into the future and stop the usual narrative that we have no capacity. Africa must accept that the idea of digital economies is inevitable. The continent must embrace change, invest in technology, create an enabling legal and regulatory framework and take some risk.
The practice of wait and see what is happening elsewhere before we do it here is defeatist and retrogressive since Africa has its own unique issues that can be addressed by solutions from no other place other than the continent.