Tax Base Erosion and Profit Shifting - Part 2 : A Critique of Some Priority OECD Action Points from an African Perspective - Preventing Excessive Interest Deductions and Tax Treaty Abuse

Abstract

This second part of the article on 'base erosion and profit shifting' (BEPS) in Africa', is a critical analysis of two of the OECD's BEPS action points that are of priority in most African countries. These are; Action 4: limit base erosion via interest deductions and Action 6: prevent treaty abuse. This analysis is premised on the view that Africa must come up with customised solutions to protect its own tax base in order to ensure domestic resource mobilisation. The paper stresses that international tax cooperation in addressing BEPS concerns should take into account the needs and capacities of all countries. In this African customised analysis on Actions 4 and 6, the author identifies the general concerns most African countries face with respect to base-eroding interest payments and abuse of tax treaties and provides examples on specific matters from an array of African countries. It provides recommendations as to how African countries can effectively adopt the OECD recommendations to prevent base-eroding interest payments and abuse of tax treaties in light of their economic development and tax administrative capacity constraints.