FIGHTING BASE EROSION AND PROFIT SHIFTING IN AFRICA

The document examines the OECD/G20 Base Erosion and Profit Shifting (BEPS) package, specifically Action 13, which introduces Country-by-Country Reporting (CbCR) to combat profit shifting by multinational enterprises (MNEs). While CbCR aims to increase tax transparency and domestic resource mobilisation, the authors argue that the technical and legislative requirements are onerous for resource-constrained African revenue authorities. The paper discusses the role of technology in bridging information gaps, the specific commitment levels of African states to the CbC Multilateral Competent Authority Agreement (MCAA), and the potential benefits of public disclosure over government-to-government exchange.

• Multinational enterprises (MNEs) utilize base erosion and profit shifting (BEPS) to move taxable profits from high-tax jurisdictions to low- or no-tax jurisdictions, resulting in an estimated annual global corporate income tax (CIT) revenue loss of 4% to 10%, or $100–240 billion.
• Action 13 of the BEPS package establishes a three-tiered documentation approach: a 'Master file' for global business operations, a 'Local file' for country-specific transactional data, and a 'CbC report' for MNE groups with annual consolidated revenues exceeding EUR 750 million.
• African countries face significant obstacles in implementing CbCR due to insufficient legal instruments, inadequate domestic legislation, a lack of skilled staff, and limited ICT infrastructure, particularly in states where tax returns are still filed manually.
• Adoption of the CbC Multilateral Competent Authority Agreement (MCAA) is low in Africa; of the 12 African states showing interest in the Convention on Mutual Administrative Assistance in Tax Matters, only Nigeria, Senegal, and South Africa have signed the CbC MCAA.
• The Global Tax Policy Center (GTPC) is piloting a 'Tax Information Exchange (TIE)' application to allow revenue authorities to store and access CbC data at low cost, though some African authorities express discomfort with the use of third-party contractors (3PCs) to handle taxpayer information.
• A critical barrier to effective BEPS combat in Africa is the inability to retain specialist tax staff due to non-competitive salaries compared to the private sector, though Kenya has successfully addressed this by overhauling its salary structures.
• South Africa is prioritising the CbCR agenda through the Davis Tax Committee and legislative amendments, though the committee recommended a lower turnover threshold of ZAR 36.1 billion (approx. $76.10 million) for compulsory reporting compared to the OECD standard.
• Public disclosure of CbC reports is proposed as an alternative to government-to-government exchange because it shifts the compliance burden from resource-constrained revenue authorities to the MNEs themselves.
• The lack of adoption of International Financial Reporting Standards (IFRS) in Africa—with only 20 African states adopting them—and the fact that only 14 African states have transfer pricing legislation further complicate the implementation of Action 13.

APA

Draper, P., & Krogman, H. (2017). FIGHTING BASE EROSION AND PROFIT SHIFTING IN AFRICA. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2017/03/GA_Th2_DP6_draper-krogman_20170309.pdf

Chicago

Draper, Peter, and Heinrich Krogman. FIGHTING BASE EROSION AND PROFIT SHIFTING IN AFRICA. South African Institute of International Affairs, 2017. https://saiia.org.za/wp-content/uploads/2017/03/GA_Th2_DP6_draper-krogman_20170309.pdf.

Wikipedia

{{cite report |last1=Draper |first1=Peter |last2=Krogman |first2=Heinrich |title=FIGHTING BASE EROSION AND PROFIT SHIFTING IN AFRICA |publisher=South African Institute of International Affairs |date=March 2017 |url=https://saiia.org.za/wp-content/uploads/2017/03/GA_Th2_DP6_draper-krogman_20170309.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{draper2017fighting, author = {Draper, Peter and Krogman, Heinrich}, title = {{FIGHTING BASE EROSION AND PROFIT SHIFTING IN AFRICA}}, institution = {South African Institute of International Affairs}, year = {2017}, month = mar, url = {https://saiia.org.za/wp-content/uploads/2017/03/GA_Th2_DP6_draper-krogman_20170309.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }