Leveraging Africa’s wealth… for Africa
30 June 2015
How Avatar Electronic Fiscal Solution can help stem the illicit cash flows that drain Africa of its resources
Evidence suggests that foreign aid may not be the answer to Africa's poverty problem. Can one really describe as “poor” a continent that enjoys such a wealth of natural resources, even though most of its countries are low-income? South Africa and Guinea, for instance, are among the 15 countries in the world that are sitting on a fortune of metals and minerals. Apart from this leverageable wealth, Africa also has many other resources at its disposal.
The sheer size of the informal sector and the insufficient tax revenues (40% to 60% and 10% to 14% of the GDP respectively) in low income countries show that domestic tax resources could be further leveraged to address most of the continent’s socio-economic development needs. In such countries, the VAT gap, that is to say the difference between the VAT that is due and the VAT that is actually collected, is 50 to 60%, compared to 7-13% in developed countries. Leveraging its own tax resources would therefore allow Africa to considerably increase its tax revenue. This would considerably reduce its dependency on foreign aid.
Tax evasion and other illicit financial flows facilitated through tax havens deprive Africa’s governments of a total of US$35.3 billion every year. This sum would allow the latter to solve many of their problems. Tax fraud and avoidance are greatly facilitated by the lack of control over sales transactions and by the many consumers who neglect to claim their receipts. Both these issues can be traced back to the fact that the tax administration in Africa is mostly paper-based. The modernization of these systems, which entails the implementation of electronic sales-recording methods, is therefore a crucial instrument in the fight against fraud.
As a company specializing in electronic solutions for the optimization of tax compliance and collection, Avatar Technologies recommends a global, holistic approach to this issue. The company’s approach takes into account both the situation and constraints of the African taxpayers and the needs of the tax authorities in terms of monitoring tools.
The Avatar Electronic Fiscal Devices (EFD) solution is well-adapted to the environment of the different African countries. By enabling the authorities to easily access the data they need to counter tax fraud more efficiently, it helps stem the related illicit financial flow exiting the continent. At the same time, it provides African countries with a way of leveraging their own resources to improve their tax revenue and thus to take charge of their own socio-economic future.
Read the whole article: http://www.myafricanow.com/aid-to-africa-from-world/
 Source: “Supporting the Development of More Effective Tax Systems”. FMI, OCDE, ONU, BM report, 2011