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The Nexus between Tax Treaties, Transfer Pricing and BEPS. Lessons for African Tax Policy Makers and Administrators

Paper by: Cephas Makunike

Tax is a sustainable tool for domestic revenue mobilisation for governments to fund public services. Revenue alternatives have been affected by the global financial liquidity challenges and have become unreliable. There are various tax loopholes threatening tax revenue mobilisation. This paper discusses tax loopholes around tax treaties and the threat they pose to domestic revenue mobilisation in Africa. The network of double taxation treaties is one of the mechanisms used by multinational companies to avoid paying taxes. Whilst tax treaties aim to stem double taxation and double non-taxation, some tax treaty provisions facilitate aggressive transfer pricing as well as base erosion and profit shifting. African Governments have a critical role to play to address tax loopholes inherent in tax treaties. This paper proffers recommendations such as reviewing the provisions of current tax treaties, developing new tax treaty frameworks and coordination of tax rules as important steps to address tax loopholes.

6 December 2019
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