International tax standards critical to combating illicit financial flows

Finance Minister Enoch Godongwana says tax administration tools are imperative to countering illicit financial flows and ensuring that governments can continue to collect revenue and serve society.

He was addressing the 13th Africa Initiative Meeting held by Tax Transparency in Cape Town on Thursday.

The Minister highlighted that in Africa, illicit financial flows are costing governments between €48 billion and €77 billion – valuable resources needed for functioning governments.

“[Tax administration] is one of the most valiant career callings because it is at the centre of enabling governments to provide infrastructure and basic services, and improve the lives of society at large, but especially the lives of the poor, vulnerable and marginalised. As tax administrators, you are tasked with the imperative responsibility of collecting what is due to governments in a timely and efficient manner.

“However, this task is not easy where tax evasion, tax crimes and illicit financial flows continue to spirit away revenues due to the State. A means to counter this scourge is [allowing] tax administrations, with the requisite tools and capabilities, measures such as tax transparency through Exchange of Information (EOI), as facilitated by the Global Forum and its regional partners,” he said.

Godongwana emphasised that although these tools are being improved, “this is only effective where the necessary political will is explicit”.

“We see this in the quality of laws that are passed, international agreements that are entered into, and the commitment to build competent and fully resourced tax administrations and the development of best international practices in effective tax administrations,” he said.

The Minister reflected on the efficiency of international tax standards and how these have become an “effective tool” in curbing tax evasion and other illicit financial flows.

“During the past eight years, the Africa Initiative has changed the tax transparency landscape in Africa, enabling the mobilisation of more than €310 million in domestic resources. However, continuous action is needed to ensure a long-lasting positive impact.

“Working with its regional partners, the Global Forum should continue to serve African countries and to support the Africa Initiative in its efforts to build or enhance their capacities to use the EOI standards at their full potential on the continent.

“From the South African experience, I can unequivocally say that [Exchange of Information on Request] and [Automatic Exchange of Information] are essential tools to drive tax compliance. As such, I want to urge members of the Africa Initiative to continue this important work, to collaborate closely, and to ensure that a sustainable legacy is left behind for future generations,” Godongwana said.