Tanzania in International Tax Law: Engendering global tax cooperation
If the world economy is to prosper, governments around the globe need to deepen their cooperation in managing global issues, including international taxation. Cross-border tax avoidance and illicit financial flows and the divergence in tackling these and other challenges has cast global tax cooperation into the limelight in the most notoriously controversial manner imaginable.
Given that Tanzania is a part of the flux world economy, this article considers how Tanzania could tap into the global tax cooperation as it deals with those issues.
The forums through which Tanzania can cooperate with other countries on regional and international tax issues include the East African Community (EAC); the Southern African Development Cooperation (SADC); the Organisation for Economic Cooperation and Development (OECD); the United Nations (UN) Committee of Experts on International Cooperation in Tax Matters; and the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development (G-24).
The EAC and SADC regional blocs have developed their own model tax treaties. As a member of both blocs, Tanzania faces the challenge of having to coordinate regional tax matters primarily through officials of the Tanzania Revenue Authority, which mutually cooperates with other revenue authorities in Africa through the African Tax Administration Forum (ATAF), which has also developed its own model tax treaty.
The EAC, SADC and ATAF model tax treaties generally follow the OECD’s and the UN’s model tax conventions.
The majority of regional and global tax issues and challenges entail political support which is yet to fully embrace the full spectrum of cooperation on these issues and challenges. However, illicit financial flows (IFFs) out of Tanzania are a special case: IFFs have become a serious concern due to their negative impact on Tanzania’s development agenda.
Tanzania should utilise its ‘wriggle room’ within the EAC, SADC, ATAF and the African Union to provide political support for more exacting standpoints on global tax coordination within a regional and global context.
Globally, the OECD provides stellar coordination on international taxation among its member countries than any other international organisation. Although Tanzania is not an OECD-member, the OECD’s international tax rules have an effect on Tanzania and other non-members.
Opportunities exist for Tanzania and other African countries to reform these rules to their benefit provided that they improve coordination amongst themselves.
Through its Committee on Fiscal Affairs, the OECD is widening its reach beyond its membership with initiatives such as promoting tax information exchange and preventing base erosion and profit shifting (BEPS).
Indeed, two years ago, Tanzania published its new Tax Administration (Transfer Pricing) Regulations, 2018, which are largely consistent with the OECD transfer pricing guidelines developed as part of the BEPS Action Plan aimed at tackling international tax avoidance by multinational companies.
But beyond these initiatives, developing countries don’t have the right to participate directly in OECD’s main global rules-setting agenda.
The UN Committee of Experts on International Cooperation in Tax Matters (“the UN Committee of Tax Experts”) offers another opportunity in global tax cooperation for Tanzania and other developing countries to seek together bigger changes in international tax rules. The UN Committee of Tax Experts has a generally more favourable picture of the creation of international instruments that are advantageous to developing countries than the OECD.
Be that as it is, Tanzania’s strengthened cooperation at EAC, SADC and ATAF levels with all relevant African member countries having shared interests will provide one of the easiest ways to reaching more potentially effective agreements. These agreements can be the “terminus a quo” for swaying the results of international negotiations on taxation.
As a member of the Group of 77 (G-77) at the UN, Tanzania should consider enhancing its participation in discussions of the G-24 members, which has underscored the importance of supporting the efforts of developing countries through effective global tax cooperation.
Besides supporting the work of the UN Committee of Tax Experts, the G-24 is able to work more effectively with the OECD/G20 Inclusive Framework on BEPS to curtail tax avoidance (a legal practice) that exploits gaps and mismatches in countries’ tax laws so as to avoid paying tax.
By working together with other G-24 members, Tanzania and other developing countries will be able to bring awareness to international taxation and development policy issues of concern.
Finally, a longstanding commitment by Tanzania the regional and global tax cooperation calls for the need to adhere to the rule of law a fundamental pillar for human rights protection and to embrace a free market and greater economic freedom and transparency.
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Paul Kibuuka ([email protected]), a tax and corporate lawyer and tax policy analyst, is the CEO of Isidora & Company and the Executive Director of the Taxation and Development Research Bureau.
