Revenue from the extractive industry must benefit all

Niël Terblanché

Namibia like many other African countries has to improve Domestic Resource Mobilisation (DRM) and take charge of own development agendas with funds garnered from improved fiscal policies and robust taxation systems.
Delegates from across the continent gathered in Swakopmund to attend the African Tax Administration Forum (ATAF) Workshop on Value Added Tax (VAT) Administration and Compliance in the Extractive Industry
The Namibia Revenue Agency (NamRA) is hosting the two-day event which is aimed at providing insights and updates on the best practices in VAT administration and compliance.
At the official opening of the workshop, Mary Baine, the Deputy Executive Secretary and Head of Member Services and Domestic Resource Mobilisation of ATAF, said that VAT is consistently regarded as the highest revenue earner for many countries around the globe.
“As revenue agencies we have the responsibility of ensuring that our fiscal policies and taxation systems are robust and effective. This is where the importance of VAT administration and compliance comes into play. VAT, as a key component of our taxation systems, serves as an essential tool for revenue generation, which can be utilized to fund essential public services, infrastructure development, and social programs,” she said.
She said the topic that will be discussed holds immense significance for Africa’s economic growth and development especially given the efforts by all countries to garner revenues to assist in the post Covid-19 recovery period.
“Summarily put, there is a need for countries to improve Domestic Resource Mobilisation (DRM) and take charge of own development agendas,” she said.
According to Baine, he extractive industry, encompassing mining, oil, and gas, plays a crucial role in Africa’s economic landscape.
The industry contributes significantly to GDP, employment, and foreign direct investment.
She said that the mining sector contributed about 10 percent to Gross Domestic Product (GDP) on average, 50 percent on average of total exports and one third of Foreign Direct Investments (FDI) in resource intensive countries in Africa.
Baine said that Africa is rich in natural resources and that the continent has the potential to harness the value chain, fiscal regimes and taxation in the sector to propel nations towards prosperity, alleviate poverty, and create sustainable development.
In this regard she said that VAT, as a consumption-based tax, has been recognized globally for its efficiency, transparency, and relative ease of administration.
“In Africa, VAT has become an increasingly vital source of revenue for governments, often accounting for a significant portion of their total tax revenues. According to the African Tax Outlook, VAT has contributed the highest revenue at an average of 30 percent of total tax revenue in African countries. As such, ensuring that VAT administration and compliance are efficient and effective in the extractive sector is crucial to unlocking the full revenue potential of these industries,” she said.
Baine was of the opinion that the extractive sector presents unique challenges and opportunities in the realm of VAT administration and compliance.
“The complexity of operations, the need for large capital investments, and the often cross-border nature of transactions make it essential for governments and businesses to adopt sound and clear VAT policies,” she said.
She said that by addressing the challenges in VAT administration and compliance it will be possible to unlock the full revenue potential of the extractives sector, allowing governments to invest in infrastructure, healthcare, education, and other social programs that will ultimately benefit our people and drive sustainable development.
As the leading Africa focused tax policy and administration organization, ATAF is consistently poised to support tax administrations on the continent in achieving the DRM goals for sustainable development.
The ATAF continuously provides support to African countries to improve DRM through the publication of technical resources, provision of trainings, tailor-made technical assistance and workshops.
The support includes training, technical assistance and workshops on VAT Fraud, Transfer Pricing, Audit and Investigation, Compliance Risk Management, Data Analytics and Mechanics of the Extractive Industry. It also includes publications on VAT Audit, Transfer Pricing Audit, Tax Treaties, Missing Trader Fraud and Exchange of Information for Tax Purposes. More recently ATAF has published 3 major technical guides consisting of Suggested Approach to Drafting Qualified Domestic Top-up Tax Legislation, VAT Digital Toolkit for Africa and Future of Resource Taxation. “As we embark on this journey of learning and knowledge sharing, I encourage each one of you to actively participate in the discussions, ask questions, and engage with your fellow attendees. Together, we can strengthen our understanding of VAT administration and compliance in the extractive sector and contribute to a brighter, more prosperous future for Africa,” she said.

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