Afton Titus: seeking a new tax system for Africa

Associate Professor Afton Titus in the Department of Commercial Law enjoyed a spectacular 2020. She completed her PhD at the University of Amsterdam and was promoted to associate professor.

Afton has developed an interest in national and multinational tax systems and asked the question, “How do the least developed regions receive more financial support?”

The starting point of her research was the idea of a corporate income tax system for the whole of the European Union (EU) (called the Common Consolidated Corporate Tax Base [the CCCTB]). This is widely viewed as a failure because of the inability of the EU member states to reach agreement on the concept of an EU-wide direct tax. Afton took this idea and asked how it might work if it were applied to the East African Community and its proposed federation.

With some adaptations made for the new context and the need to ensure that the least developed regions in East Africa receive more financial support, she has argued that the idea (the CCCTB) could work in Africa and become an instrument for a fairer distribution of tax revenue.

Making a European idea work in Africa

Legal scholars are intrigued by Afton’s approach, and she has recently been invited to participate in the Global Tax Governance Conference hosted by Leiden University and the International Centre for Tax and Development. She has also been invited to contribute to the Global Tax Symposium in December 2021, an event hosted by Leiden University, the London School of Economics, the University of Louvain, the University of Melbourne and the National Institute of Public Finance and Policy (India).

The application of the CCCTB in Africa could mean that Africa would finally be able to say goodbye to the incredibly complex and time-consuming method of taxing the profits of multinational companies, called transfer pricing. African countries like Kenya and South Africa are different from most other developing countries in that they are home to not only foreign multinational companies, but also home-grown ones. Transfer pricing issues are therefore particularly important in Africa. Because Africa loses approximately US$10-11 billion in transfer pricing mismatches every year, as a conservative estimate, the stakes are incredibly high to fix this issue.

A system like the CCCTB would address the core failure of the transfer pricing model and replace it with a system that would have a much greater potential for African countries to increase their collections of corporate income tax and, in so doing, improve the capacity of African countries to improve the lives of Africans.

Afton comments: “I have so many plans about where to take this idea because, despite its many (many) critics, I do believe that the CCCTB as an idea is an adaptable and functional tool. I can see so many different applications for it, and I am hoping that I will be able to create the space in my career to do these plans justice. I also foresee many late nights writing grant applications! Fun times.”