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Dar es Salaam. Tax experts and stakeholders have emphasised that taxing the digital economy and multinational corporations (MNCs) are key reasons why the United Nations Tax Convention (UNTC) reforms are crucial, particularly for African countries like Tanzania.
These reforms are also vital for strengthening Domestic Resource Mobilisation (DRM) to fund development projects and addressing the unfair allocation of taxing rights that hinders African governments’ ability to collect adequate revenue.
The points were raised during a breakfast meeting organised by Policy Forum in collaboration with Norwegian Church Aid and the Interfaith Standing Committee on Economic Justice and Integrity of Creation (ISCEJIC).
Titled, “The UN Tax Convention: Africa’s Role in Advancing Fair Tax Policies and Promoting Tax Justice,” was held in Dar es Salaam last weekend.
It advocated for a unified UN body that would foster equitable tax policies tailored to the socioeconomic realities of African nations.
The proposed UN platform aims to combat tax avoidance and evasion by establishing international standards and providing capacity-building, training, and technical support to countries lacking resources to develop effective tax policies.
It would also encourage cooperation among African nations, promote knowledge sharing, and align tax policies with the Sustainable Development Goals (SDGs) to ensure adequate financing for essential services.
Tabling his paper, “The UN Tax Convention: A Case for Demanding Reforms in International Tax Systems,” Interfaith Coordinator Edmund Matotay called for global tax reforms, highlighting how digitalisation challenges traditional tax systems. He noted that many corporations operate online without paying taxes where they conduct business: “Several corporations conduct business online without paying taxes where they operate.”
Mr Matotay cited some foreign companies, like the South African-registered company Showmax, and international companies like Amazon and Netflix as examples.
“They collect revenue from different African nations, including Tanzania, but deny the countries of business operations crucial tax revenue,” he said. Mr Matotay also pointed to the issue of tourists booking services and accommodations online.
According to him, while these bookings are made in European countries, Tanzania and many other African countries lose out on potential tax income.
“We are losing huge tax potential due to global shifts in trade,” stated Mr Matotay.
He emphasised that the global tax system, led by the Organisation for Economic Co-operation and Development (OECD), disproportionately favours developed nations.
Tax issues, Mr Matotay argued, are not isolated to individual countries, stressing that there is a need for coordinated international efforts to tackle tax evasion, resolve disputes, and help countries increase domestic revenue.
According to the 2023 report from ActionAid Tanzania, the country was losing an estimated Sh17.4 trillion annually due to inefficiencies, tax evasion, harmful tax policies, tax incentives, double taxation agreements, and illicit financial flows (IFFs), said Mr Matotay.
He said the amount was more than double the annual tax revenue collected by the Tanzania Revenue Authority (TRA).
A report from the Tax Justice Network, published on November 19, 2024, revealed that African countries lose an astounding $492 billion each year due to tax avoidance by multinational corporations and wealthy individuals.
Mr Matotay contrasted this with aid flows, noting that developed countries—including the US, Canada, Japan, and many European nations—contributed $224 billion in aid to developing countries, a sum less than half the amount lost to tax avoidance.
The discussion underscored the urgent need for UNTC reforms to give African countries a stronger voice in global tax discussions and promote more equitable tax systems.
These reforms aim to increase transparency, improve accountability, and ensure fair tax systems, ultimately helping African nations mobilise resources to finance development and achieve sustainable growth.
ISCEJIC Chairman Bishop Nelson Kisare echoed these sentiments, stressing the need for a UNTC to strengthen Tanzania’s tax collection efforts.
“Currently, Tanzania collects less than 50 percent of its potential tax revenue, with a significant portion lost to corruption, tax avoidance, and evasion,” he said.
“We need to scale up anti-corruption and tax avoidance efforts and agree internationally on who designs the global tax system,” he added.
Bishop Kisare pointed out that wealthy countries designed the current global tax architecture, not poor nations like Tanzania.
“We need to change the system because the current model is based on property values requiring the rich and the poor to pay equally. We propose a progressive tax system based on individual wealth,” he said.
He added that in the global tax system, poor nations like Tanzania function as computer hardware, controlled by wealthy countries, which he referred to as the software.
This, he argued, was part of the system that needs to change through UNTC advocacy.
Bishop Kisare also challenged developing nations to use tax revenue to alleviate poverty by funding essential services such as clean water, healthcare, and infrastructure.
According to him, effective tax collection could reduce the country’s reliance on borrowing and ease the debt repayment burden by curbing corruption and ensuring compliance.
The Tanzania Young Feminist Movement Executive Director, Ms Magdalena Gisse, highlighted the heavy tax burden on young, self-employed Tanzanians working online.
She noted that while they are supposed to pay an 18 percent tax to Google, the government charges an additional 15 percent, which disproportionately impacts end users compared to platform owners.
“Advocacy for a UNTC aims to create tax policies that work for us because not all globally endorsed systems are universally applicable. Not all countries have the same needs,” she said.
A discussant from the Council of Churches in Namibia, Mr Uhuru Dempers, emphasised that the UNTC advocacy is an African initiative that should be strongly supported for the continent’s sustainable development.
“Governments, parliaments, and civil society should form coalitions to lead the movement and win the advocacy,” he said.
Saint Augustine University of Tanzania (SAUT) lecturer Ms Norah Kawiche highlighted the challenges an interconnected global economy poses.
“Large corporations often shift untaxed profits through illicit financial flows, making it difficult for Tanzania to collect taxes due to legal limitations,” she explained. Ms Kawiche said UNTC adoption would enable Tanzania to collaborate with other countries to exchange crucial tax evasion and avoidance information.
“It would also strengthen our capacity to recover taxes that have already been moved out of the country,” she said.
While Tanzania’s domestic tax laws are strong, Ms Kawiche emphasised the importance of international cooperation to address funds shifted abroad.
Despite beneficial bilateral agreements, Tanzania has signed tax treaties with only nine countries, compared to South Africa’s 80. A UN Tax Convention would grant us access to over 100 countries, promoting greater cooperation and information sharing,” she said.
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