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Win for Africa as push for global tax reforms gets nod

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Increasing tax revenue and reducing tax gaps help in improving investment in public services. PHOTO | SHUTTERSTOCK

Calls by African leaders for reforms in the global financial architecture got a rare boost late last week when the United Nations gave a go-ahead for the commencement of the process leading to the establishment of a framework.

The move is specifically good news for leaders like Kenya President William Ruto who has been pushing against a 'rigged' financial system that he says does not favour poor in the global south. The passage of this resolution marks a historic moment to correct the imbalances that exists and represents a significant stride toward democratising the global tax system.

With globalisation and digitalisation gathering pace, international cooperation on tax matters has become more critical as trade partners seek a fairground that can only be achieved through the setting up and implementation of global standards for taxation, that will cushion developing countries, especially from Africa that suffer most revenue losses from corporate tax abuses by multinationals.

After almost two decades of lobbying by tax justice movements across the world for an effective and fair international tax system, it is expected that a UN tax convention will resolve the menace of illicit financial flows (IFFs) and base erosion and profit shifting (BEPS) that has continued to affect the international trade ecosystem.

For Africa, the UN tax convention is a breath of fresh air as it offers an opportunity for countries to be part of an inclusive global tax body where every country has an equal participation right.

With the new developments, Kenya is poised to benefit on three fronts:

Firstly, a UN Tax convention would give Kenya and other developing countries more voice and influence in shaping the global tax rules and standards, which are now dominated by rich countries and their interests. This would ensure that the tax system is fair, inclusive, and responsive to the needs and challenges of all countries.

Secondly, a UN Tax convention would enhance transparency, accountability, and information exchange among tax authorities, and prevent the erosion of the tax base and the shifting of profits to low-tax jurisdictions.

Thirdly, Kenya and other developing countries will be able to mobilise domestic and international resources for sustainable development, as envisaged by the 2030 Agenda and the Addis Ababa Action Agenda.

By increasing the tax revenue and reducing the tax gaps, Kenya will be able to invest more in public services, social protection, infrastructure, education, health, and environmental protection, and reduce poverty and inequality.

As the intergovernmental committee gets down to work on the different negotiation levels, it is with no doubt that a UN Tax Convention will level the taxation landscape. Being an inclusive process, the capacities of developing countries will be enhanced further and at the same time entrench the exchange of information and foster international tax cooperation.

The writer is the CEO of the Institute of Public Finance.