Tax authorities in three African countries are now working together to prevent multinational companies from avoiding taxes and depriving their countries of money that could be used to fight poverty.
The African Tax Administration Forum (ATAF) said this month that South Africa, Tanzania and Zambia plan to exchange information about taxpayers.
The effort, spurred by an international aid group's research, is aimed at monitoring whether corporations are paying enough tax.Companies which find ways to use tax laws to pay as little as possible are "likely to get away with it more" in developing countries that often lack the resources to audit and investigate, according to Logan Wort, executive secretary of the African Tax Administration.
Aid groups and governments are expressing growing concern about whether poor countries in Africa are getting a fair share of taxes from the rich companies that operate there. Mr David McNair, a tax researcher for Christian Aid, said the steps being taken by South Africa, Tanzania and Zambia are proof years of lobbying is having an effect.
"The growing profile of the role of tax in development has given developing countries confidence," Mr McNair said. "It's really encouraging to see African countries standing up together."Even South Africa which has the most sophisticated tax system on the continent says it's losing billions of rand (dollars) in possible taxes.
South African Finance minister Pravin Gordhan was quoted by the government news agency recently as saying his country was missing out on uncollected taxes because companies' tax planners were so far ahead of government tax administrators. Activists point to multinational beer company SABMiller as one example of how accounting sleight of hand can reduce a tax burden in African countries.
While SABMiller isn't breaking any laws, the group ActionAid issued a report last year questioning the ethics of depriving "governments of significant amounts of tax enough money to educate a quarter of a million African children."
ActionAid says one common method involves determining prices for payments made by a multinational's subsidiary in a developing country for goods or services provided by a sister company based elsewhere.
Tax authorities would ideally like to see the payments be based on market prices, but that can be difficult to confirm or enforce. The result can be reducing or eliminating a subsidiary's taxable profits.
London-based SABMiller the world's second-biggest brewer, with subsidiaries across Africa says it adheres to international standards on what is known as transfer pricing, and follows regulations in the countries in which it operates.