Africa losing US$50 billion annually through illicit outflows


Finance Minister Patrick Chinamasa

GOVERNMENT is working on a fiscal policy aimed at preventing illegal leakages of mineral resources, Finance and Economic Development Minister Patrick Chinamasa said.

Speaking at the launch of the 2015 Africa Capacity Report (ACR), Chinamasa said despite being the top export earner, the mining sector’s contribution to Treasury was next to nothing.

“We are in the process of formulating a mining fiscal regime with assistance from Norway to curb illicit outflows from the mining sector. This is an area which has been giving me a lot of headache because they are the biggest export earner but there is nothing that comes into the fiscus,” he said.

Chinamasa said the proposed regime would ensure that both Treasury and the mining sector derived benefits from minerals.

“It’s a matter that we need to approach very scientifically to know what is happening in the sector so that we have what is due to us just as the miners will have what is due to them,” he said.

The ACR report theme is ‘Capacity Imperatives for Domestic Resource Mobilization in Africa.’

Chinamasa said given the dwindling levels of Overseas Development Assistance to Africa, countries must effectively generate savings and collect taxes from domestic resources to fund projects.

“For us domestic resource mobilization is not just a means to financing our needs but is a must borne out of necessity. It is clear that given diminishing levels if Overseas Development Assistance to Africa, successful implementation of Africa’s development agenda will rely more and more on internally generated resources,” he said.

He added: “Out of necessity, Zimbabwe has in terms of mobilization broadened the tax base by introducing and extending a wide range of taxes on wide array of economic activities in the informal sector.”

He said government through Zimra is currently implementing a fiscalisation pilot project to enhance revenue collections through plucking VAT leakages.

Chinamasa said the pilot is starting with a data base of 3 000 which will be linked to all major tax authorities.

“This project will link up Zimra with the Ministry of Finance and the Reserve Bank of Zimbabwe and this will give an opportunity to have real time inflows of revenue into the consolidated revenue fund upon which we could make informed decisions quicker,” he said.

Chinamasa also said as part of domestic resource mobilization, Government will next year float an infrastructure bond that the insurance companies will subscribe to.

In his remarks ACBF Zimbabwe executive secretary Emmanuel Nnadozie said the success of Africa’s development agenda will heavily rely on domestic resource mobilization.

He said domestic funding reduces risks associated with the volatility of outside funding.

“Enhancing domestic mobilization is now a necessity as it reduces risks associated with the volatility of outside funding,” he said.

Nnadozie on other hand said Africa needs to curb the illicit flows of minerals and finances and channel these towards infrastructure development.

Despite significant improvements in tax revenue collection over the decade 2006 – 2015, Domestic Resource Mobilization remains low. Estimates show that during 1996-2010, 27 countries, representing 60 percent of the 45 countries covered by the African Capacity Report 2015, have made low tax collection effort.

But Zimbabwe has collected more than its counterparts in the region.

The ACR 2015 country case studies highlight a number of constraints which include very narrow tax base; the tax base is further eroded by high levels of capital flight, evasion and avoidance and proliferation of tax exemptions.

He said the continent is losing over US$50 billion per annum through illicit outflows and this has been a major challenge for many economies on the continent.

He added that in most economies Transfer Pricing Unit are not well resourced to capture all revenue transactions to tackle illicit flows. FinX
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