Understanding AfCFTA taxation & its impact on businesses

The African Continental Free Trade Area (AfCFTA) is a ground-breaking initiative that aims to enhance economic integration and bolster intra-African trade. With an array of benefits like preferential treatment for goods originating from member states and the possibility of synchronized tax policies, it presents a promising landscape for businesses to explore. However, businesses and member states grapple with various compliance requirements and hurdles to optimize the advantages of AfCFTA. CNBC Africa correspondent Tabitha Muthoni engaged Emmanuel Eze, the ATAF Senior Advisor to the African Union, in a compelling conversation to delve deeper into these crucial aspects. Emmanuel Eze shed light on the significance of originating goods from one member state to qualify for preferential tariff treatment under AfCFTA. He emphasized the vital role of certificates of origin or proof of origin, which serve as documentary evidence that the goods meet the required criteria. By presenting verified certificates, exporters can ensure their products receive preferential treatment in the importing member state. Additionally, Eze discussed the current scenario of addressing variances in VAT and other indirect tax policies across AfCFTA member states. While AfCFTA does not have a direct mechanism for regulating indirect tax differences, member states are responsible for implementing measures to curb non-tariff barriers that these variations may pose to trade. Notably, regional economic communities like ECOWAS have taken steps to harmonize VAT policies within their jurisdictions, setting a precedent for similar initiatives across the continent. The conversation then shifted to the role of double taxation agreements in alleviating tax burdens for businesses operating across African borders. Eze emphasized that such agreements play a pivotal role in enhancing trade by preventing businesses from being taxed twice for transactions conducted across borders. Implementing tax treaties among African countries fosters a conducive environment for business operations, reducing compliance burdens and ensuring clarity on tax treatments. Furthermore, the discussion touched upon the challenges faced by small and medium-sized enterprises (SMEs) in navigating the diverse corporate tax regimes within AfCFTA member countries. While AfCFTA does not dictate direct tax measures, it underscores the importance of adopting non-discriminatory practices to facilitate free trade. SMEs play a crucial role in the AfCFTA ecosystem, and it is imperative for member states to establish frameworks that enable these enterprises to navigate the complex tax landscapes effectively. In conclusion, Emmanuel Eze provided valuable insights into the intricate dynamics of AfCFTA taxation and its impact on businesses. As member states continue to navigate the complexities of compliance requirements and tax policies, fostering a conducive environment for trade and investment remains a shared responsibility. Collaboration, harmonization, and a commitment to facilitating seamless cross-border transactions are essential to unlocking the full potential of AfCFTA and driving economic growth across the African continent.