African Nations Need to Address Transfer Pricing Malpractices

June 8, 2015 Taxation In Africa

JOHANNESBURG – By improving their transfer pricing regulations, governments in Western Africa could see their tax revenues rise by billions each year.

Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo could collectively raise their tax collections by millions each year if they adequately tackled the issue of tax evasion, capital flight, and illicit outflows, according to information contained in a new report issued late last week by the international think tank Dalberg and the international aid group Open Society Institute West Africa.

The countries, which together make up the Economic Community of West African States, could see their cumulative tax revenues over the years 2012 and 2018 rise by as much as USD 56 billion by implementing modern transfer pricing regimes aimed at eliminating the occurrence of trade mispricing.

Significant amounts of funds could also be saved by eliminating ineffective tax incentives provided to multinational businesses, as repeated studies have shown that such tax breaks do not encourage greater amounts of investment, and only serve to reduce the government’s tax take.

Aside from the loss of funds, the ongoing efforts by multinationals to avoid their taxes in Africa are also undermining efforts to promote economic development, transparency, and economic governance.

Photo By: melenama