Tax treaties a way of the future

October 5, 2009

, NAIROBI, Kenya, Oct 5 – Tax experts have predicted that many African countries might enter into tax agreements with each other in the coming years as one way of encouraging compliance among their tax payers.

A partner with Ernst and Young Bob Brown on Monday argued that the current economic conditions have affected revenue authorities around the world thus the need for governments to implement measures that will increase compliance rates.

"I see an explosion of tax treaties and Tax Information Exchange Agreements (TIEAs) and I think that over the course of the next five or 10 years, it will be unusual for countries not to have that form of dialogue or exchange," he said on the sidelines of the opening of the Africa Tax Conference in Nairobi.

TIEAs are bilateral agreements between or among governments where they agree to share information on tax matters but Mr Brown doubted that such information would be exchanged with the blacklisted countries considered as tax havens.

Participants at the three day conference heard that many countries have missed their revenue collection targets while companies\’ profit margins have been impacted negatively by the ongoing economic downturn.

Besides the financial crisis, other countries such as Kenya and Tanzania have also had to grapple with the effects of drought which has resulted in the poor performance of key sectors of their economies.

The meeting seeks to encourage the members to share information on how both corporates and governments can cushion themselves against, and how to get out of such crises.

Mr Brown was however optimistic that entrepreneurs would take advantage of the current stimulus packages that have been advanced by several governments to develop their businesses to enable tax administrations to achieve their targets.

Tanzania Revenue Authority Commissioner of Large Taxpayers Department Patrick Kassera pointed to the need by these parties to strive to build good relationships that can go a long way to improve the flow of tax revenues into the exchequers.

"We need to know how do we interact, how do we engage each other so that the government realises the revenue it needs. If we put a lot of unnecessary obstacles, we won\’t realise our revenues and so we have to smoothen our relationships," he maintained.

Kenya has made progress in trying to ensure an efficient tax regime by rolling out online services and widening of the tax net.

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