programme estimated that for every one United States dollar spent on its activities, an average of $125 in supplementary tax revenues is generated by host administrations. In the absence of robust evaluation documents, it is difficult to fully assess these claims. The scale of reported revenue losses associated with tax evasion and avoidance merits urgent consideration in the post-pandemic period. According to the Tax Justice Network, $40 billion in tax revenue is currently lost through tax evasion and avoidance. Recent IMF staff research161 shows that Governments in sub-Saharan Africa are losing between $450 million and $730 million per year in corporate income tax revenues alone as the result of profit-shifting by multinational companies in the mining sector. Capital mobility, digital service delivery, use of jurisdictions with opaque reporting requirement, reporting gaps, transfer pricing and the weak capacity of many revenue administrations, are set to increase these losses as multinational investors exploit grey areas and reduce tax liability by shifting profits. While these are long-standing concerns, the widening SDG financing gap has given an added urgency to the development of policy measures that might help close the financial floodgates opened by current tax practices. Recent efforts to address global tax concerns have focused on base erosion and profit-shifting.162 These practices are estimated by the OECD to cost between 4 and 10 percent of corporate tax revenues, with developing countries the worst affected. Less than 2 percent of the gains are estimated to accrue to revenue authorities in developing countries, according to the South Centre.163 Many of the most egregious tax practices – including transfer pricing and underpricing of assets – continue unabated, with the proceeds channelled through offshore centres.
BOX 5. Tax Inspectors without Borders in Uganda In Uganda, Tax Inspectors without Borders has worked to support the Government through a broad partnership including the World Bank, the African Tax Administration Forum and bilateral donors. Support included: • Audits related to transfer pricing and other international taxation issues. • In nine audit cases, guiding the officials through all audit stages from risk assessment and case selection to tax assessment and collection. • Uganda participated in a pilot programme which aims to build capacity in the functional area of tax crime investigation, including the transfer of investigative skills through a bilateral capacity-building programme in collaboration with the Indian Tax Administration. The evaluation has not sought to assess whether or not there is evidence of enhanced tax capability and capacity-building in the broader sense, but the Uganda Revenue Authority has commended the initiative’s learning-by-doing approach, which facilitated the transfer of knowledge and experience and increased the overall confidence levels of tax officials. UNDP Uganda reported that it integrated support to Uganda Revenue Authority in its 2018 annual workplan, with a budget to support advocacy, influence policy and strengthen reporting and capacity-building for the staff of the Uganda Revenue Authority to complement the work of Tax Inspectors without Borders.
161 162 163
Albertin, Giorgia et al, IMF, 2021, ‘Tax Avoidance in Sub-Saharan Africa’s Mining Sector’, IMF Departmental Paper, 28 September 2021. OECD, ‘International collaboration to end tax avoidance’, https://www.oecd.org/tax/beps/, accessed November 2021. Chowdhary, Abdul Muheet, ‘Developing Country Demands for an Equitable Digital Tax Solution’, Tax Cooperation Policy Brief no. 19, South Centre, October 2021.
CHAPTER 5. THE UNDP FINANCING TOOLKIT
63
