Tax Base Erosion and Profit Shifting in Africa Part 1: Africa's Response to the OECD BEPS Action Plan

Abstract

This paper considers what Africa’s response should be to the OECD’s base erosion and profit shifting (BEPS) project. The paper acknowledges that BEPS concerns for developing countries (such as those in Africa) may not necessarily be the same as those for developed countries. The author first explains the concepts of tax avoidance and tax planning, to describe the background to BEPS. An explanation is given of the causes of BEPS, the challenges BEPS poses to corporate tax systems, the importance of corporate taxes in Africa, and the factors that exacerbate BEPS in Africa. The paper also differentiates BEPS from the notion of illicit financial flows – a matter that is causing a lot of confusion to the general public in understanding BEPS issues, and to finding solutions to the problem of capital flight from Africa. Thereafter the author addresses the relevance of the OECD BEPS Project to Africa, the international initiatives that could benefit Africa in curtailing BEPS, and what Africa’s response should be.