African countries preparing to move into extractive industries need to put appropriate tax arrangements in place quickly or risk missing out on the revenue potential, an international tax expert has told the Africa Congress of Accountants.
Professor Lee Burns, honorary professor of taxation law at the University of Sydney, said: ‘If you don’t put proper [tax] structures in place, the resource will be gone and people will be asking what happened.’
But he said there was no one single tax instrument that was appropriate and should not deter companies from carrying out expensive exploratory work, so it was therefore important to consult with the industry on proposed tax arrangements.
However, Burns noted that once resources had been identified, they tended to generate profits in excess of normal returns – so-called ‘economic rent’. Therefore governments should be able to share in the profits.
‘It should be structured so the government will receive a share from the start,’ he told an ACOA session on taxation yesterday.
‘It’s very important that you have a pay-as-you-produce instrument so revenue is coming to the government immediately.’
CIPFA chief executive Rob Whiteman addressed the same session and suggested that the accountancy profession as a whole needed to have a discussion about the subject of tax.
He suggested that, while accountants had a responsibility to their clients, if tax was being underpaid, they may have a duty to highlight that.
‘We the profession need collectively to talk about the fact that we need to work in the public interest,’ said Whiteman.
‘The profession needs to be seen to act in the public interest at all times.’