AfCFTA and Revenue: Navigating Outstanding Fiscal Issues and Legal Framework to attain Agenda 2063

The African Continental Free Trade Area (“AfCFTA”) Agreement will adversely affect revenue collected by African States in its early stages of adoption. The legal effect of tariff liberalisation among Member States will result in the decline of much needed developmental income. Revenue mobilisation is a priority to attain Agenda 2063 and to improve the standard of living and quality of life for “all Citizens”. Domestic taxes are one of the most sustainable financing methods African countries leverage for development. Tariff rates and trade-facilitation measures are the primary focus of the continental project. The AfCFTA Agreement and draft Investment Protocol, however, include agenda items on fiscal policy related issues. Taxes run parallel with trade and economic rules and play a critical part of integration particularly on issues such as incentives, investor rights and most importantly revenue mobilisation for the government. The continental project could potentially play a significant role in facilitating harmonisation that addresses base erosion and profit shifting, and common approaches that increase domestic tax collection and revenue. It is therefore necessary to examine interlinks between trade and taxes under the AfCFTA. This paper examines tax related issues in the continent, and the role the AfCFTA could play in integrating them into the continental project. The salient issues that will be analyzed relate to; a) the movement of capital, b) VAT harmonisation in the continent which is key to ensure efficient and fair intra-African trading, c) tax incentives which create tax competition, d) transfer pricing and comparables; and e) exchange of information regarding domestic taxes. The paper further goes beyond substantive issues and also examines the legal infrastructure of the AfCFTA and regional institutions such as African Tax Administration Forum (“ATAF”), and Regional Economic Community (“REC”), interventions in administering fiscal issues, in order to attain AfCFTA’s objective of creating a single common market, and attain Agenda 2063.