By Osaze Omoragbon
While the gains made by Africa in the last few years are still being trumpeted, some countries under the aegis of Low-Income Francophone Countries (OIF) are brooding over the decision of the G20 to combat “legal tax avoidance” which they claim hurt their own finances. They are demanding formal representation at G20 discussions to finalize the new policy measures to ensure their needs are fully taken into account. Legal tax avoidances are methods used by multinational firms to reduce taxes paid to fiscal authorities through transfer pricing and the use of tax havens.
Though, the bloc welcomes the efforts of the G20 to combat legal tax avoidance, they are however concerned that the initial design of the resulting measures, risk centralizing revenue in headquarter (largely OECD) countries of multinational firms, which would negatively affect their income.
Such effort, they hope, should be geared towards putting in place a unitary system of taxation that will give weight to payment of taxes in the ‘source’ countries where commodities are produced and profits originated.
Though studies are yet to be conducted into the potential (negative) impact of other countries tax policies on their revenue, provisional figures for the Democratic Republic of Congo shows the country hemorrhaging about $1billion yearly owing to “official tax avoidance”, representing a whopping 25 percent of total revenue.
Analysts note that francophone countries are constrained by lack of fiscal and monetary space owing to their unhealthy attachment to and reliance on France, their colonial master for the formulation and implementation of fiscal and monetary policies. This makes it all the more difficult for them to take hard stances on issues that affect France and their allies.