Tax Base Erosion and Profit Shifting in Africa – Part 1: What Should Africa’s Response be to the OECD BEPS Action Plan?

Abstract

This article acknowledges that the BEPS concerns facing developing countries (such as those in Africa), may not necessarily be the same as those facing developed countries. Part 1 of the article addresses what Africa’s response should be to the OECD BEPS Action Plan, while Part 2 offers a critical analysis of some aspects of the BEPS Action Plan from an African perspective. To discuss Africa’s response to BEPS, I explain the concepts of tax avoidance and tax planning with reference to international case law, which is of persuasive value in most African countries, or forms part of their common law. I then explain the causes of BEPS, the challenges BEPS poses to the corporate tax systems, the importance of corporate taxes in Africa, and the factors that exacerbate BEPS in Africa. Thereafter an explanation is given of the difference between BEPS and illicit financial flows – a matter giving rise to major confusion among the general public in understanding BEPS issues and finding solutions to the problem of capital flight in Africa. Against this background, I address the relevance of the OECD BEPS Action Plan in Africa and how Africa should respond to the plan.