Tax Policy, Investment and ECOWAS Economic Integration CONTRIBUTION AS DISCUSSANT PRESENTED BY: Dr. Mohamed DIEYE, Legal and Tax Advisor Cabinet Aziz Dieye Tel: +221 76 687 09 95; E-mail: mohadieye@cabinetazizdiey.sn Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

OUTLINE BACKGROUND TAX HARMONIZATION ISSUES SOME INSIGHTS PRELIMINARY CONCLUSIONS Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

• BACKGROUND ECOWAS was established in 1975 to promote trade and investment from outside and within the region. ECOWAS Vision 2020 aim to integrate the Community into a stronger and more cohesive body Farrow & Sunita (2006) Tax harmonization helps remove barriers created by tax rates or regime differences, and reduce the negative effects of tax competition Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

II. THE ISSUE What degree of sovereignty transfer should there be in the harmonization process form member States to the Community? What choice should be made between: “Centralization” which requires a high concentration of decision-making at the community level “Coordination” to harmonize the policies to reduce distortions? Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

II. THE ISSUE 3. Aren’t the differences in system and the obsoleteness of our tax regimes blocking factors for integration and for foreign private investment? 4. What place should be reserved for tax incentives in a context of the need to attract investments and of scarcity of budgetary resources? 5. What type of legal instrument best suits the chosen option: Regulation , Directive or Recommendation? Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

III. 1. SOME INSIGHTS The overall orientation should be based on the objectives of Economic Integration and the need to attract investment in the sub-region. An harmonization to eliminate the distortions on the regional market The stability of the economic (and tax) environment which is a factor of economic development and investment attraction Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

III.2 . WHAT TO HARMONIZE? Favoring experiences with proven positive impact on the economic and social development. eg. What mechanisms should be implemented to encourage the productive savings? Morocco managed with a suitable tax incentive device, to increase the share of net assets of UCITS in the GDP to more than 22. 43 % (for 2006 ) Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

III.2 . WHAT TO HARMONIZE? Lessons Nigeria which suffers from constant decline in oil revenues could draw from the experience of other ECOWAS countries The VAT system of Senegal being increasingly modernized over the years South Africa has one of the most modern and proven through VAT systems in the world. Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

III.2 . WHAT TO HARMONIZE? Getting to harmonize the structure of tax systems How to make the ECOWAS Member States learn from Ghanaian experience? Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

III.3. WHAT METHOD SHOULD BE FAVOURED? Should a transfer of sovereignty from member states to the ECOWAS Commission be strengthened or limited? Different methodologies with a more or less significant involvement of MSs Integration of intermediate forms of harmonization as coordination and cooperation Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

III.3. WHAT METHOD SHOULD BE FAVOURED? "Cooperation is the most civilized form of Harmonization, since no policy rapprochement is involved. Sovereignty is respected, and cooperation only happens if there is a previously identified interest, be it reciprocal or mutual. The most typical example of this kind of harmonization is the exchange of information between tax adminis- trations”. This refers to examples of tax treaties to avoid double taxation (eg. the tax treaty between MSs and WAEMU signed in 2010) Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

III. 4. WHAT SUPPORT MEASURES? Sensitization of Member States and other stakeholders in the sub-region can be a success factor Accompanying proposals of harmonization with budgetary and economic impact studies, to comfort the States. Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

IV. PRELIMINARY CONCLUSIONS When an investor chooses a location, economic conditions and political climate seem to be the most important factors. In the context of a common market, tax competition between member states is negative for the states themselves, and also for the market. Tax Harmonization creates a similar environment across territories within which businesses and consumers can operate Creating a stable and consistent environment to attract foreign private investment Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

The near future is Africa The near future is Africa! ECOWAS is the nearest door, And WAUTI is the key… Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal

THANK YOU FOR YOUR ATTENTION Dr. Mohamed DIEYE, Legal and Tax advisor - Senegal