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Accepted Paper:
Tax Treaty Aggressiveness: Who is bringing down taxing rights in Africa?
Markus Meinzer
(Tax Justice Network)
Javier Garcia-Bernardo
(Tax Justice Network)
Maimouna Diakite
(World Bank Group)
Lucas Millan-Narotzky
(Tax Justice Network)
Paper short abstract:
We analyse the aggressiveness of tax treaties towards African countries—the extent to which signing tax treaties reduces the taxing rights of African governments. We find that treaties signed with Mauritius, United Arab Emirates and with former colonial powers constrain African tax revenues.
Paper long abstract:
Tax avoidance strategies by multinational companies rely heavily on tax treaties. Multinational companies can relocate financial activities across countries to ensure the applicability of the most beneficial tax treaties. This "treaty shopping" can be particularly harmful for African countries, impairing their efforts for domestic resource mobilisation and achieving sustainable development goals. In this paper, we analyse the aggressiveness of tax treaties towards African countries—the extent to which signing tax treaties reduces the taxing rights of African governments. We find that treaties signed with Mauritius and United Arab Emirates reduce withholding tax rates the most, while treaties signed with European countries—and particularly the United Kingdom and France—greatly limit other taxing rights, for example by restricting the scope of permanent establishment definition.