African countries have reported €1.69 billion in additional revenues from fighting against tax evasion and illicit financial flows since 2009, a new report by Africa Initiative has revealed.

Illicit financial flow refers to the movement of money across borders that is illegal in its source. Examples include illegal movements of money or capital from one country to another while the income is from illegal activities such as tax evasion, drug sales, dirty money transfers, and money transfers to finance terrorism activities among other forms.

Given the size of illicit financial flows from African countries, the Africa initiative aims to unlock the potential of tax transparency and exchange of information for Africa by ensuring that African countries are equipped to exploit the improvements in global transparency to better tackle tax evasion.

Tax Transparency in Africa 2023: Africa Initiative Progress Report (TTiA) includes information provided by 38 African countries. Rwanda is among the 38 countries which include Algeria, Angola, Benin, Botswana, Burkina Faso, Cabo Verde, Cameroon, Chad, Congo (Rep. of the), Côte d’Ivoire, Djibouti, Egypt, Eswatini, Gabon, Ghana, Guinea, Kenya, Lesotho, Liberia, Madagascar, Mali, Mauritania, Mauritius, Morocco, Namibia, Niger, Nigeria, Rwanda, Senegal, Seychelles, Sierra Leone, South Africa, Tanzania, Togo, Tunisia, Uganda and Zimbabwe.

Members of the Africa Initiative identified assistance in the cross-border recovery of tax claims, as a collection of tax claims was a challenge for many tax administrations, including those in Africa.

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The report was presented during the 13th Meeting of the Africa Initiative in Cape Town on July 7. The additional revenues from tackling tax evasion and illicit financial flows, through offshore tax investigations, were generated thanks to raising political awareness and commitment in Africa and developing capacities in African countries in tax transparency and exchange of information.

"While this report demonstrates African countries’ progress in using tax transparency and exchange of information, it remains uneven. A significant number of African countries are not yet effectively using available EOI infrastructures to enhance their efforts for domestic resource mobilization,” reads part of the report.

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The report adds that this calls for new strategies by African tax authorities to establish a culture of exchange of information and ensure that it becomes a tool to promote tax compliance.

"These strategies should include continued capacity-building and awareness-raising activities targeting tax auditors/investigators on the usage of exchange of information as a tool to complement domestic information,” it recommended.

In 2022, Tunisia committed to starting automatic exchanges of financial accounts information (AEOI) by 2024, joining four other African countries (Kenya, Morocco, Rwanda, and Uganda) that are committed to undertake their first automatic exchanges by a specific date, and five other countries already exchanging on a reciprocal basis (Ghana, Mauritius, Nigeria, Seychelles, and South Africa)

In 2022, Angola was invited to sign the Convention on Mutual Administrative Assistance in Tax Matters.

Madagascar signed the Convention, and Burkina Faso, Mauritania, and Rwanda deposited their instruments of ratification.

Implementation of the automatic exchange of financial account information in Rwanda is expected in 2025, the report says.

Overall, it is expected that 10 African members will be exchanging information automatically by 2025.

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Tax evasion is the most prevalent financial crime in Rwanda, in terms of money lost, according to five-year statistics by 2021, indicating that over Rwf20bn was lost to the vice during this period.

Illicit financial flows in Africa are estimated between $50 billion and $80 billion annually as 44 per cent of Africa’s financial wealth is thought to be held offshore, which corresponds to tax revenue losses of €17 billion.