Article Summary
- The UN’s Economic Commission for Africa (ECA) has called for an inclusive international tax system and an overhaul of the global financial system to achieve the Sustainable Development Goals (SDGs).
- The fiscal deficit in Africa is estimated at 5% of GDP in 2022, making it necessary to adopt a new tax system to generate domestic resources for sustainable development.
- Additional resources are needed to rescue the SDGs and transform Africa’s economies, as the current international financial architecture is inadequate for low-income countries.
The United Nations Economic Commission for Africa (ECA) has called for an inclusive international tax system and an overhaul of the global financial system as part of a global effort to secure the Sustainable Development Goals (SDGs).
The Acting Executive Secretary of ECA, Antonio Pedro, stated this while speaking at a meeting of the Second Specialized Technical Committee on Finance, Monetary Affairs, Economic Planning, and Integration of the African Union.
He explained that the tax system would enable African countries to focus their resources on sustainable and inclusive development.
Speaking further, he said that the challenges facing African countries in generating domestic resources for economic, social, and environmental investment have made it necessary to adopt this. He said:
- “The fiscal deficit in Africa is estimated at 5% of GDP in 2022 and expected to remain higher than pre-pandemic levels.”
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Pedro further stressed the need to raise additional resources as African countries face multi-faceted challenges, adding that a double-digit growth rate is needed to rescue the SDGs and accelerate the implementation of Agenda 2063.
Noting that the international financial architecture remains grossly inadequate for low-income countries to adequately respond to the imperatives of the SDGs and transform Africa’s economies, he stated that multilateral financing “is increasingly becoming inadequate and unfavourable and that international private financing is equally challenging and costly owing to poor credit ratings stemming from structural issues and systematic bias.”
Reiterating the UN Secretary-General’s recent call for a global deal that enables developing countries to focus their resources on sustainable and inclusive development and avoid a breakdown of the global order, he called for “a complete overhaul of the global financial system, the creation of an operational debt relief and restructuring framework, strengthened domestic resource mobilization and an inclusive international tax system.”
He also stressed the need for concerted efforts at the national, regional, and global levels and lauded the set of reforms currently being advocated by the African High-Level Working Group on the reform of global financial architecture.
Importance of an inclusive international tax system
Pedro further underscored the importance of an inclusive international tax system to ensure the taxing rights of African countries and the need to formulate an African Position on the UN Tax Convention.
This, he said, stems from a resolution adopted by the UN General Assembly in 2022 to begin discussions on the possibility of developing an international tax cooperation framework.
- “With this backing, Member States will be able to begin intergovernmental discussions on ambitious reforms to the global governance structure to curb global tax abuse by multinational corporations,” he said.
- “As a first step, ECA, in collaboration with the African Tax Administration Forum (ATAF), is supporting 10 African countries in estimating tax expenditures using a benchmarking methodology to examine the lost opportunities of tax revenues given as tax incentives and other perverse practices that could have been used for sustainable development,” he added.
Pedro also highlighted the need to address illicit financial flows (IFFs), which continue to siphon critical financial resources away from the continent.
While progress has been made to bridge the data gap by developing a harmonized methodology for estimating IFFs on the continent, he said more needs to be done on accelerating implementation.
