In a world where capital flows seamlessly across borders, Africa’s ability to mobilise domestic resources depends on strong tax systems, but most importantly, the transparency of those systems. For decades, African governments have faced the dual challenge of financing ambitious development plans, which also require curbing illicit financial flows that drain billions of dollars from national treasuries each year. At the heart of this challenge lies the continent’s legal and regulatory frameworks on tax transparency.
The Case for Reform
The African Development Bank estimates that the continent loses between USD 50 and USD 80 billion each year through illicit financial flows, approximately 3.7% of the continent’s GDP. Additionally, African governments forgo another USD 220 billion annually in tax incentives, many of which are poorly designed or excessively generous, with tax evasion and aggressive tax avoidance schemes leading the list of challenges. For economies where tax revenue makes up a significant portion of government income, such shortfalls directly impact key sectors such as infrastructure, healthcare, and education.
The challenge cannot be solely focused on enforcement. In many jurisdictions, outdated tax laws and weak transparency provisions hinder authorities from effectively tracking cross-border transactions, sharing information, or demanding accountability from multinational corporations. The global move towards tax transparency, led by institutions like the Organisation for Economic Co-operation and Development through the Base Erosion and Profit Shifting project and the Common Reporting Standard, has highlighted the work needed to enable the development of African legal systems.
“The tax landscape is constantly evolving, and this has been evident in recent years. According to a 2023 report by AfDB and the OECD, between 2009 and 2022, African countries collectively raised EUR 1.7 billion more in revenue by using global tools such as voluntary disclosure programmes, offshore investigations, and the exchange of tax information. In 2022 alone, revenues from information exchange increased by 77% compared to 2021, highlighting the real benefits of stronger frameworks,” observes NanaAma Botchway, Managing Partner, N. Dowuona & Company (ALN firm in Ghana)
Regional Momentum
Encouragingly, reforms are progressing. The African Tax Administration Forum has become a vital platform for harmonising national policies with global standards while tailoring them to African contexts. Countries such as Kenya, Nigeria, and South Africa have started adopting transfer pricing rules, automatic exchange of information agreements, and beneficial ownership registries aimed at combating tax avoidance.
“Africa continues to show great promise in adopting global tax reform. From beneficial ownership registries in Nigeria to transfer pricing rules in Kenya and information-sharing agreements in South Africa, we are seeing a continental shift towards stronger, harmonised frameworks. The momentum is quite positive, but it must be accelerated if Africa is to safeguard its revenue base,” notes Kenneth Njuguna, Partner, Anjarwalla & Khanna (ALN Firm in Kenya)
The African Union has also acknowledged the importance of the issue by integrating tax transparency into its Agenda 2063 development framework. These regional initiatives demonstrate a shared understanding that harmonised, modern legal systems are essential for protecting tax bases and encouraging fair competition.
Beyond Compliance: The Business Case
Tax transparency is often regarded as a government priority, but its effects reach well beyond revenue agencies. For multinational corporations operating in Africa, opaque tax systems pose significant risks: reputational damage, unpredictable disputes, and exposure to costly litigation.
On the other hand, a more transparent and predictable legal environment enhances investor confidence.
“Clear rules on information sharing, reporting obligations, taxpayer rights and dispute resolution reduce uncertainty and create a level playing field. In this sense, tax transparency has moved from a compliance requirement; it is a key enabler of sustainable business growth across the continent,” says Edward Balaba, Partner, MMAKS Advocates (ALN firm in Uganda).
Charting the Way Forward
Reforming legal frameworks for tax transparency in Africa requires a multifaceted approach.
- Legislative Modernisation
Updating tax laws to align with international best practices while adapting them to domestic circumstances. - Regional Cooperation
Strengthening platforms for information exchange across African jurisdictions to close loopholes exploited by cross-border actors. - Capacity Building
Equipping tax authorities with the tools and expertise required to interpret and enforce complex tax regulations. - Public-Private Dialogue
Encouraging cooperation between governments, businesses, and civil society to foster trust and consensus around reforms.
A Window of Opportunity
Africa’s demographic and economic trajectory offers both a challenge and an opportunity. With a rapidly growing consumer base and increasing foreign investment, the importance of implementing effective tax policies has never been greater. Transparent and well-enforced legal frameworks can ensure that the continent gains a fair share of its wealth, while also signalling to global investors that Africa is open for fair and responsible business.
The journey towards greater tax transparency is neither short nor straightforward. However, if Africa continues to align legal reforms with international standards and simultaneously develops systems that reflect its unique circumstances, it could unlock billions in domestic revenue, improve governance, and pursue a more sustainable growth trajectory.
In the words of one African policymaker: “Transparency is not about burdening business; it is about ensuring that business, government, and citizens can all share in the continent’s prosperity.”
