African nations urged to reform VAT regimes to attract investors

BY BUSINESS REPORTER

AFRICAN nations have been urged to reform their value added tax (VAT) regimes to make it easy for multinationals to invest in the continent.

A new report by consulting firm PricewaterhouseCoopers (PwC) has revealed that multiplicity of VAT systems across Africa exposes multinational companies to tax risk, errors and inconsistencies in the application of the law.

This has made the continent to lose many lucrative deals at a time when Africa desperately needs foreign investments to spur economic growth.

"The VAT systems in Africa are not aligned, which has a major effect on a company’s operating and financial systems. As a result, the compliance burden on companies may be onerous," said Rajesh Shah, a Tax Partner at PwC Kenya.

The report comes at a time when Tanzania and some other African nations are in the process of reforming VAT laws to make it easy to comply.

According to the PwC report entitled an Overview of VAT, 2011, many multinational firms encounter major hurdles when entering into transactions in Africa because VAT laws tend to be complex.

This has made compliance with the VAT laws difficult for multinationals due to the diversity of laws in different tax administrations.

Besides, companies are unable to claim VAT refunds as a result of unsophisticated tax systems and changes in legislation and unreasonable deadlines for submitting claims.