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SADC can raise US$1.2 billion annually from minute trade levies

By Joseph Ngwawi – According to a series of studies commissioned by the SADC Secretariat, the Southern African Development Community could access a huge pool of resources available in the region if it adopts some or all of the six options on alternative and innovative sources of funding.

Southern Africa has the potential to mobilise more than US$1.2 billion to reduce the reliance on donor support.

The six options are the introduction of an export and import tax; a tourism levy; a financial transaction tax; a lottery system; philanthropy; and regional events.

The study on the Export and Import Levy found that a regional tax on exports and/or imports is a common practice for raising revenues by national governments or Regional Economic Communities worldwide.

An import tax is the most common form of raising funds for other African economic communities such as the Economic Community of West African States (ECOWAS) and the Economic Community of Central African States (ECCAS).

ECOWAS has operationalised an 0.5% import levy on all goods and vehicles originating from outside its region. ECCAS has adopted; a 0.4% regional integration tax on all goods originating from outside the region.

The African Union (AU) is in the process of introducing a similar tax. The AU Summit in 2016 approved a 0.2% levy on eligible imports, with each AU region contributing about US$65 million per year.

The study said a simulation on a potential SADC import tax showed that, based on 2014 trade figures, imposition of a 0.2% levy on all SADC member state imports from outside the region could generate at least US$331.3 million annually.

It will be necessary that each member put in place legislation to enable revenue authorities to collect the import tax. However the existing collection infrastructure makes it easy for national collection of the levy once adopted.

The study on the tourism revealed that a Regional Tourism Levy can be introduced in a number of ways but two options – tax on international travel tickets and a tourism levy – are most viable and recommended to start with.

The AU Assembly has approved a tourism levy on tickets amounting to US$2 for short trips and US$5 for long trips. It also approved a 0.5% tourism tax on income from tourism activities by member states.

France and Germany implement similar levies and provide the current best practice.

Based on the study, it is recommended that SADC considers adopting a 5-10% levy on tourism activities by SADC member States.

It is estimated that US$123 million per annum could be raised through levies on air tickets alone.

A study on Regional Financial Transaction Taxes showed that such taxes are and can be a viable source of resource mobilization. Similar taxes have been used in a number of African, Asian and Latin American countries as well as in the United Kingdom.

The study recommended that SADC focuses on remittances sent through money transfer agencies.

It is projected that a 0.1% levy on these transactions has a potential of raising US$691 million per annum, enough to fund the implementation of the Revised Regional Indicative Strategic Development Plan (RISDP).

Although a legal framework is required, it is largely provided for under the SADC Memorandum of Understanding on Cooperation in Taxation and Related Matters of 2002, and also appears in Annex 3 of the SADC Protocol on Finance and Investment.

Philanthropic initiatives are fast emerging as another innovative way of mobilizing resources for development.

Several studies show that there are huge amounts of money from high net worth individuals, foundations and the private sector that flow from and to Africa. It is estimated that Africa gets between US$1.25 billion and US$3 billion from philanthropic activities.

Other sources of funding for regional integration are the introduction of a carbon levy, blended finance, transport levy, venture capital and curbing illicit financial flows.

(Southern African News Features SANF 17 no 4.)
(Southern African Research and Documentation Centre)

About The Author

SADC Correspondent

SADC correspondents are independent contributors whose work covers regional issues of southern Africa outside the immediate Namibian ambit. Ed.