Regional Economic Groups_ Lessons on Tax Coordination for ECOWAS & AU

The 21st century will be Africa’s century of economic development. Incomes will be

rising rapidly and Africa will become one of the main engines of economic progress in

the world. For this to happen, markets must be liberalized and barriers to trade

eliminated. Without hindrance, businesses should be able to source anywhere,

manufacture anywhere, and sell anywhere. Free trade and free competition are

essential if standards of living are to rise. Countries should realize that what is good for

their neighbours is good for them too. For free trade and free competition to come

about, Regional Economic Communities (RECs) and the African Economic Community

(AEC) should ensure that tax systems do not discriminate against goods and services,

persons and capital from other African countries. Import duties are the most obvious

example of tax discrimination against out-of-state products, but other indirect taxes,

such as VATs and Excise duties can also be used as trade barriers. Similarly, corporation

taxes can distort the location and structure of production through their impact on the

cost of capital. Against this background, this paper discussed the experience of tax

coordination among RECs, involving the abolition of ‘bad’ taxes, such as import duties

and non-tariff barriers, and the alignment of ‘good’ taxes, such as VATs and Excise

duties, which will have to take over the revenue role of the taxes that hinder intra- and

inter-regional trade.

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