Tax Policies

August 2, 2021

Professor Puleng LenkaBula, Principal and Vice Chancellor of the University of South Africa, takes pleasure in inviting you to the virtual Inaugural lecture of 

Professor Puseletso Letete, College of Law: Department of Mercantile Law, School of Law

Topic: Tax Policy Gap in Southern African Countries: Reflections on Indirect Tax Coordination and Tax Diversity in SADC Post COVID-19.

Returning to a global vision of the analyzed matter, it should be noticed that in its long path to becoming an OECD member, Peru closely follows the discussion progress towards a global solution to tax challenges arising from digitalization. Nevertheless, Peru has not stablished yet unilateral tax measures to levy high digitalized services especially in the context of B2C services, but the intention is present according to a later comment.

Teaching taxation is not only a matter of mastering the tax codes and regulations, not anymore. Tax return filing apps, either provided by governments or companies, will provide for results that may not reflect the best interpretation of legal provisions. Working with tax policies for the digital economy has proved to be almost an ”impossible mission”: difficult to draft a proposal and even more difficult to reach a consensus.

The role of  States’ in the protection and delivery of fundamental rights was reintroduced in the international debate.  The  State is responsible for the implementation of the most relevant measures, mainly in emergencies such as the one we are facing now. Only coordinated measures with collective goals will have a real effect on the fight against the COVID19. The cries of "less state" began to be rethought. We may mention the example of the Brazilian health system,  the SUS - Free and universal Unified Health System, which provided for health services for most cases of COVID19 in Brazil, despite a large private health services network across the country. At this moment, we hope that Brazilian authorities will become more aware of the importance of social controls of public money and demand transparency and efficiency of public measures and expenses.

Today, the influence of technology on the economy is not platitudinous and it has been deepened through the current Covid-19 crisis. In the same way, the tax administrations (TAs) of Latin America and the Caribbean (LAC) have not been oblivious of this trend and have sought to adapt technological changes to the tax collection process. Within the world there are different levels of progress in the incorporation of digital services in TAs however, it is important to note that there is no universal solution for all countries, as there is also influence of the country's own conditions, for example, levels of evasion and informality, technological infrastructure, the behaviour of taxpayers, institutional capacity, etc.

The Post-COVID19 path to economic recovery in Latin America and the Caribbean will demand both Domestic Revenue Mobilization measures and the promotion of domestic and foreign investment. Amid all the controversy surrounding the concession of tax incentives, the COVID-19 pandemic taught us a lesson: nothing is a sole economic issue. Public policies should address other concerns such as employment, health, environment, and education. A well-designed package of governmental measures may be a balanced proposal that includes diverse public interests to achieve optimal delivery of public goods. This post will focus on the granting of tax incentives for the digital economy in  accordance with the GATT, the GATS, and the OECD’s recommendations on harmful tax competition.

In the tax world, this is significant because businesses react to tax policy. Tax policy, in turn, stimulates the interest of both local and international investors who are the key drivers of economic growth. Therefore, the challenges of the economic downturn will be more glaring and significant for African countries, who have a greater reliance on tax revenue from large taxpayers than more advanced economies.

The start of 2020 brought with it very perilous times in which countries around the world were forced to close their borders in a concerted effort to contain the deadly COVID-19 which claimed over 7 million lives around the world in the first half of the year. Tax bases dwindled due to job losses and a correspondent decrease in income and sales taxes. As many governments scramble to come up with inventive policies to rebalance the economy and raise tax revenue, this is a call to revisit the relevance of existing tax expenditure policies as they may become redundant in a post-pandemic era.

The huge investments in the extractive sector should, in principle, be a catalyst for economic growth, job opportunities, and development. Often, these investments have been a source of environmental degradation, socio-economic malaise and despair. Equatorial Guinea, for instance, is a classic example of the ‘resource curse mystery in Africa. To leverage extractive resources for development, African countries are faced with legal, fiscal, implementation, infrastructure, regulatory and institutional challenges. This contribution addresses state and investor responsibility in the sustainable development of Africa’s extractive sector. It highlights four responsibility indices that will guide states and investors in fostering a shared value approach to an inclusive and sustainable development of Africa’s extractive sector.