Opening speech by SARS Commissioner Oupa Magashula (ATAF chairman), at the joint ATAF – Korea Conference on Domestic Resource Mobilisation

Deputy Minister of Finance, Mr Nhlanhla Nene,
Deputy Minister for Tax and Customs of Korea, Mr Yung-sup Joo,
Council members of ATAF and heads of Tax Administrations,
Representatives of Development Partners,
Honoured guests,
Colleagues,
Ladies and gentlemen

I am honoured to address you at this Joint African Tax Administration Forum (ATAF) – Korea Conference on Domestic Resource Mobilisation (DRM) and the particular role played by taxation in developing the economies on the African continent. It is most significant that this event has come about through the collaboration between different global regions (Africa and Asia) and as a result of a collaboration of a special nature, namely the 2010 Korea-Africa Economic Cooperation (KOAFEC) Ministerial Conference and its associated Action Plan for 2011 to 2012.

More specifically, Korea hosted several Heads of Tax Administrations from East Africa at the end of 2009 during a special study tour as part of the East Africa Domestic Resource Mobilisation Project undertaken by ATAF and the African Development Bank. The tour laid the basis for a Comparative Study of Tax Policies in the East African Community, the results of which were then presented at a seminar in March 2010.

Some may ask “Why this African – Korean partnership?”, but it should come as no surprise. Korea offers an insightful example of efficient harnessing of domestic resources for financing development efforts, while having previously faced many of the same challenges faced by African countries. Thus an important rationale for our collaboration is to compare and learn from both Korean and African experiences, with a view to identifying best practices.

Korea has been the world's second fastest growing economy for over four decades, and is now one of the strongest economies in the world. This achievement was supported by a succession of successful tax strategies, characterised in particular by tax policies specifically designed to support and encourage capital formation and export industries, and strategies to progressively reduce dependence from aid.

These are experiences that tax administrations in Africa would do well to take a much closer look at. This conference thus creates an opportunity for us to share with each other the challenges we face, and the progress we have individually and collectively made in addressing these challenges.

Despite the recent gains made by a number of African countries in terms of export revenue, in part due to high prices of some major primary commodities, the economic growth rate in sub-Saharan Africa as a region continues to fall short of the seven to eight per cent necessary to achieve the 2015 Millennium Development Goals target on halving poverty. It is believed that, across all developing countries, an additional US$50 billion to US$76 billion per year is needed to reach these goals. In Africa, the need for additional resources is generally believed to amount to between 10 and 20 per cent of Gross Domestic Product (United Nations Economic Commission for Africa, UNECA 2007).

The reality of budget constraints in African and many other countries, and the range of challenges to development, make this event’s discussion topics particularly important, and timely. Strengthening our financial systems in order to deliver the necessary resources to boost investments and facilitating employment creation continues to be a large challenge for African nations.

We are witnesses to how the global financial crisis has reduced external inflows into African economies, impacting on foreign direct investment, aid and export earnings into our countries. This, in turn, has made it more difficult and more expensive to attract private capital in most countries.

Africa urgently needs to further reduce its dependence on external financial flows to sustain its economies. Developing systems of tax administration that are capable of effectively and efficiently collecting all revenue that is due, that are able to deal with increasingly complex and convoluted tax evasion and aggressive avoidance schemes, and that consistently build and entrench a culture of compliance are a vital precursor and enabler for this ambition.

To make the transition from dependence to self reliance, African countries need to create that “fiscal space” for themselves, through raising their revenues and increasing the efficiency of public spending.

ATAF, as a continental organisation, has thus been steadily working towards creating the opportunities for African tax officials to improve their skills, exchange information and share best practices that will ultimately lead to greater self reliance and autonomy for African nations.

In conclusion, ladies and gentlemen, ATAF has already put forward ambitious proposals in its Strategic Plan for 2011 to 2013 and its Work Plan for this year to improve the existing instruments for administrative cooperation between African tax administrations. This conference is an important step in our journey towards empowering our continent’s tax administrations to deliver the funds needed to meet not just the Millennium Development Goals (MDGs) but the hopes and dreams of all our people.

I wish you a successful conference and am particularly looking forward to both the presentations as well as the ensuing discussions, which will provide an invaluable insight in making domestic resource mobilisation an important part of the effort to accelerate progress of the Millennium Development Goals for the future of a sustainable Africa.

I thank you.

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