POLICY, LEGISLATIVE & REGULATORY FRAMEWORK

Policy, Legislative & Regulatory Frameworks

The POLICY, LEGISLATIVE AND REGULATORY FRAMEWORK focuses on the policy and legislative frameworks that countries have in place to tackle tax-based IFFs. This includes an examination of the legal and regulatory measures that have been adopted, as well as the effectiveness of their implementation.

Indicator R1-1 : Implementation and Compliance with Automatic Exchange of Information and Standards on the Information to be Exchanged and Shared

Tax-related Indicators to be measured

AEOI and CRS Standards

Weight

Weighting Rationale

High weight reflects the crucial role of automatic information exchange in combating global tax evasion and the importance of CRS compliance in achieving transparency.

Scoring Criteria

Score 3

The country has a fully operational automatic exchange of information.
Comprehensive legislation, regulations, and infrastructure are effectively operational and appropriately scaled to the country's capacities.
ll relevant income and entity types, including corporate taxes and business entities, are covered.
A strong enforcement mechanism with stringent penalties for non-compliance is in place.
The country actively and timely exchanges complete information with other jurisdictions, demonstrating a high commitment to transparency and combating tax evasion.

Score 2

The country's policy, laws and regulations on exchange of information and standards on the information to be exchanged and shared are operational.
The exchange of information is partially automatic.
The coverage of income and entity types is limited but there is a clear commitment to expanding capabilities and automating exchange of information with other jurisdictions.
The country is also in the process of negotiating internationally agreed exchange of information sharing and reporting standards, such as the Common Reporting Standards under the AEOI framework designed by the OECD, and is making significant progress in implementation, despite some resource constraints.
Enforcement mechanisms are in place, with moderate penalties for non-compliance that are enforced to the extent possible given current resources.

Score 1

The country has in place a policy, laws and/or rules on exchange of information and standards on the information to be exchanged and shared.
The country is in the early stages of implementing this policy, laws and/or regulations. Information exchange is limited, and on a request basis, with plans to increase scope as capacities develop.
Enforcement mechanisms and penalties for non-compliance are under development.

Score 0

The country does not have in place policy, laws or rules on exchange of information.
The country does not have standards on the information to be exchanged and shared.
There are no measures in place to exchange financial and tax related information with other jurisdictions.
This score reflects significant challenges due to resource and capacity limitations rather than an absence of political will.

Indicator R1-2 : Implementation and Compliance with Laws and Regulations on Beneficial Ownership Transparency (BOT)

Tax-related Indicators to be measured

Laws and Regulations on BOT

Weight

Weighting Rationale

Given the significance of uncovering the actual ownership of companies to prevent tax evasion, this indicator is rightly given high weight.

Scoring Criteria

Score 3

The country has a comprehensive legal and regulatory framework for BOT, with requirements that ensure all relevant entities across various sectors are disclosing beneficial ownership information in a timely and accurate manner.
The disclosed information is subject to verification and validation and is kept current in a publicly accessible and/or private register.
Robust enforcement mechanisms are in place, with strong penalties that effectively deter non-compliance.
At this stage, the country’s BOT framework is actively contributing to the global effort to combat IFFs by closing loopholes used for tax evasion and other financial crimes.

Score 2

The country has enacted laws and regulations for BOT, with efforts to capture all relevant entities and sectors, though some gaps remain.
Disclosure requirements may not be completely exhaustive, and there may be challenges in the verification and validation processes.
Access to BO information may be somewhat restricted, and enforcement mechanisms, while established, may suffer from weaknesses or inconsistencies.
Penalties for non-compliance are in place but may not fully ensure adherence.
At this level, the country is making meaningful progress in addressing IFFs, though further enhancements are needed to achieve optimal effectiveness.

Score 1

The country exhibits preliminary steps towards BOT with basic provisions or initiatives in place.
However, these efforts are either inadequate, not up-to-date, or poorly enforced, leading to minimal impact on curbing IFFs.
The BOT framework at this stage is nascent, and while it represents a commitment to transparency, it is not yet a significant force against IFFs.

Score 0

The country lacks any legal or regulatory framework for BOT, indicating an absence of formal measures to identify beneficial owners of entities.
Without such provisions or initiatives, there is no structural capacity to combat IFFs through BOT.
The country is at a stage where establishing a BOT framework would be the first step in joining the global fight against IFFs."

Indicator R1-3 : Ratification and Implementation of International Agreements for Tax Cooperation and Exchange of Information

Tax-related Indicators to be measured

International Agreements for Tax Cooperation

Weight

Weighting Rationale

Assigning a higher weight underscores the necessity for countries to engage globally in tax information exchange and mutual assistance to combat IFFs effectively.

Scoring Criteria

Score 3

The country has ratified and is fully compliant with a comprehensive suite of international tax cooperation agreements, such as the Convention on Mutual Administrative Assistance in Tax Matters, and any UN-based frameworks and other bespoke bilateral or multilateral treaties, such as AEOI.
The country's legislation, regulations, and administrative practices are robust, reflecting a deep integration of international standards.
The country not only exchanges financial account information efficiently but also engages in the broader exchange of other tax-related information essential for effective tax administration. This includes detailed country-by-country reports, transfer pricing documentation, beneficial ownership registers, and information on tax rulings that affect cross-border tax arrangements.
Such comprehensive information exchange demonstrates a proactive approach to combating tax evasion and illicit financial flows, showcasing a commitment to global tax cooperation tailored to the African context, where the specific economic challenges and the need for technical support are acknowledged and addressed.

Score 2

The country has ratified key international tax cooperation agreements like the Convention on Mutual Administrative Assistance in Tax Matters (MAAC) and is actively working to integrate these standards into national practice.
While progress is evident, there are still areas requiring enhancement, such as expanding the scope of information exchanged and increasing the efficiency of administrative procedures.
The country is making strides in international tax cooperation, with a moderate level of transparency and a growing capacity to enforce tax laws effectively.

Score 1

The country is in the initial stages of ratifying international tax cooperation agreements, indicating a commitment to global tax standards.
However, implementation is nascent, with limited operational capacity for comprehensive information exchange.
There's an ongoing effort to establish the necessary legal and administrative frameworks that will enable fuller participation in international tax cooperation.

Score 0

The country has not yet ratified or is not in compliance with international tax cooperation agreements.
This stage reflects either a lack of engagement with global tax cooperation frameworks or significant challenges that hinder the ratification and implementation processes.

Indicator R1-4 : Implementation and Compliance with Country by Country Reporting (CbCR)

Tax-related Indicators to be measured

CbCR

Weight

Weighting Rationale

This deserves a high weight as it provides detailed insights into MNEs' allocation of income and taxes paid, which is vital for tax authorities to assess tax avoidance risks.

Scoring Criteria

Score 3

The country has a fully implemented CbCR framework tailored to its economic context.
It proactively includes a broad spectrum of MNEs that have significant local operations, mandating the disclosure of extensive financial and tax-related information.
This disclosure encompasses global and local operations, revenues, profits, taxes paid, capital, accumulated earnings, tangible assets, and employment data for each jurisdiction.
The framework mandates public disclosure to enhance transparency and holds MNEs accountable with a rigorous enforcement mechanism.
Strong penalties for non-compliance are in place, ensuring adherence and serving as a robust deterrent within the country's economic environment.

Score 2

The country has enacted CbCR legislation that includes a considerable number of MNEs by lowering the OECD-prescribed reporting threshold.
The reporting captures essential financial details but may not comprehensively cover all aspects, such as detailed capital structures or earnings.
Efforts toward transparency are in progress, with moves to encourage public disclosure.
Enforcement mechanisms exist but may require further strengthening to be truly effective, and penalties for non-compliance are being enhanced to provide a significant deterrent.

Score 1

The country has signalled an intention to implement CbCR, with preliminary legal frameworks under discussion or in the drafting phase.
These initial frameworks are expected to acknowledge the need for more inclusive thresholds that better capture the activities of MNEs within the country's economy.
Although the country has not yet operationalised these frameworks, there is a clear direction toward enhancing transparency and laying the groundwork for effective enforcement mechanisms.

Score 0

The country has not yet initiated a CbCR framework and lacks specific legislation or regulations in this area.
There is no evidence of substantive efforts to introduce CbCR, indicating a lack of formal commitment to adopting this transparency measure at present.

Indicator R1-5 : Implementation and Compliance with Transfer Pricing Regulations

Tax-related Indicators to be measured

Transfer Pricing Regulations

Weight

Weighting Rationale

High weight is appropriate as proper transfer pricing enforcement is a cornerstone of fair tax competition and preventing profit shifting.

Scoring Criteria

Score 3

The country has a robust transfer pricing framework that fully aligns with international standards while being tailored to local economic conditions.
It has comprehensive laws and regulations that include mandatory contemporaneous documentation, which ensures compliance with the ALP and accommodates the use of Advanced Pricing Agreements and formulary apportionment when appropriate.
The framework provides detailed guidelines on TP methods, comparability analysis, and methodology selection, which are well-suited to the country's specific challenges with MNEs.
Enforcement is rigorous, with specialized TP audit teams, systematic audits, and consistent enforcement actions.
Strong penalties for non-compliance serve as a significant deterrent, and the TP rules are adapted to effectively address the realities of the digital economy and the presence of dominant MNEs.

Score 2

The country's TP legislation and regulations are in place, reflecting international norms but require enhancements to address local market conditions effectively.
Documentation requirements exist but may not capture all necessary transactions, particularly those involving digital services or dominant MNEs.
The guidelines on TP methods and comparability are present but may not be sufficiently clear for complex monopoly-like industry structures.
Enforcement exists through occasional TP audits, but the need for a more specialized and consistent approach is evident.
Penalties for non-compliance are in place but may not fully reflect the severity of TP violations or the economic impact of MNE practices.

Score 1

The country has established a basic legal and regulatory TP framework.
It acknowledges the Arm’s Length
Principle but has not yet fully developed documentation requirements or clear guidelines for TP methods that consider the local context, such as the presence of monopolistic MNEs.
The framework may mention Advanced Pricing Agreements and formulary apportionment, but these are not yet operational.
Enforcement mechanisms are underdeveloped, and penalties for non-compliance are not sufficiently deterrent.

Score 0

The country lacks specific TP legislation and regulations.
There is no formal framework addressing TP issues, no documentation requirements, and no clear adherence to the Arms’ Length Principle or consideration of alternative TP mechanisms like Advanced Pricing Agreements or formulary apportionment.
Consequently, there is no enforcement mechanism or penalties for non-compliance, leaving the country vulnerable to profit shifting and erosion of the tax base.

Indicator R1-6 : Implementation of General Anti Abuse Rules (GAAR) and Measures to Prevent Tax Abuse

Tax-related Indicators to be measured

GAAR and Measures to Prevent Tax Abuse

Weight

Weighting Rationale

A maximum weight emphasizes the importance of having overarching rules that counteract aggressive tax planning and ensure tax laws are applied as intended.

Scoring Criteria

Score 3

The country has implemented a robust GAAR framework within its tax legislation, designed to address a comprehensive range of tax avoidance strategies.
This includes detailed provisions that work alongside Specific Anti-Avoidance Rules (SAARs), with clear guidance and interpretation available for both taxpayers and tax authorities.
Judicial oversight is established, with a consistent body of case law supporting the enforcement of GAAR.
There is strong alignment with international tax standards, especially regarding cross-border transactions and cooperation with other tax jurisdictions.
Tax authorities are well-resourced, with sufficient expertise and training to enforce GAAR effectively.
Whistleblower protections and incentives are in place to support the detection of tax avoidance schemes.
Regular reviews and updates to the GAAR provisions are conducted to address emerging tax avoidance strategies.
The framework is transparent, with public awareness campaigns highlighting the government's commitment to combating tax evasion, and there is a coherent integration of GAAR with the overall tax system, ensuring fairness and minimising legal uncertainty.

Score 2

The country has enacted GAAR provisions targeting tax avoidance, but the framework has gaps in coverage and specificity regarding tax avoidance strategies and the balance with SAARs.
Guidance and interpretation may be present but lack detail or accessibility.
Judicial oversight exists, but legal precedents may be limited or inconsistent.
There is some alignment with international standards, but improvements are needed in cross-border cooperation.
Tax authority resources are adequate, but there may be limitations in expertise or enforcement capabilities.
Whistleblower protections exist, but incentives may not be fully developed.
The GAAR provisions undergo periodic reviews, but the process may not be sufficiently proactive or regular.
Efforts towards transparency and public awareness are in place but could be strengthened, and coherence with other tax rules may occasionally lead to unintended consequences or disputes.

Score 1

The country has demonstrated an intent to implement GAAR, with initial measures introduced. These provisions are limited in scope and may not comprehensively address tax avoidance.
Guidance, judicial interpretation, and case law are minimal or nascent.
International standards are recognised, but there is little practical alignment or enforcement.
Tax authorities lack significant resources or expertise specific to GAAR enforcement.
There are no formal whistleblower programs, and regular reviews of GAAR provisions are not established.
Public awareness and transparency initiatives are in the early stages, and the integration with the overall tax system is rudimentary.

Score 0

The country lacks a GAAR framework, with no specific legislation or regulations targeting abusive tax practices.
There is no guidance or judicial oversight specific to GAAR, nor any alignment with international standards.
Tax authorities do not have resources or training related to GAAR, and there are no mechanisms in place for whistleblower reporting or regular updates to tax rules.
There is an absence of public awareness campaigns related to GAAR, and the tax system lacks the necessary coherence to prevent tax avoidance effectively."

Indicator R1-7 : Existence and Implementation of Policy, Legislation or Regulation Guiding the Review, Renegotiation and Optimisation of Double Taxation Agreements (DTAs)

Tax-related Indicators to be measured

Policy on DTAs

Weight

Weighting Rationale

Although crucial, the weight reflects that the review and optimization of DTAs are part of a broader international tax dialogue.

Scoring Criteria

Score 3

The country has a robust DTA policy that actively supports comprehensive and transparent reviews of existing DTAs and those under negotiation, with a clear commitment to preventing treaty shopping and other mechanisms that could facilitate tax related IFFs.
The policy mandates public consultation, ensuring that stakeholders, including civil society and industry experts, are involved in the review process. It includes specific provisions for renegotiating terms to prevent abuse and has a framework for monitoring the effectiveness of DTAs in real-time, using a set of indicators such as the number of disputes resolved and the impact on tax revenue.
The country has undertaken or is currently conducting a systematic review of its DTAs to ensure they are optimised to hinder tax related IFFs while promoting fair tax competition.

Score 2

The country has established a DTA policy that recognises the need for regular reviews of DTAs to prevent their misuse. However, the review process lacks full transparency and may not always engage all relevant stakeholders.
The policy outlines the importance of renegotiations but does not clearly articulate the mechanisms to address specific issues related to tax related IFFs.
While there is acknowledgment of the need for continuous monitoring of DTAs’ effectiveness, the practical implementation of such monitoring is still underdeveloped.

Score 1

The country has taken initial steps towards creating a DTA policy, with basic guidelines on reviewing and renegotiating DTAs.
The policy is in its infancy, with limited scope and no established processes for stakeholder engagement or monitoring. The focus is primarily on setting up the foundational elements of the policy rather than actively using it as a tool to combat IFFs.

Score 0

The country lacks a DTA policy, resulting in no formalised approach to reviewing or renegotiating DTAs.
There are no mechanisms in place to ensure DTAs do not facilitate tax related IFFs, and there is no framework for monitoring their impact on the country's tax base or the broader economy.

Indicator R1-8 : Implementation of Legislation and Regulatory Measures to Combat Trade Misinvoicing and Criminalise Misstating Trade Values

Tax-related Indicators to be measured

Measures to Combat Trade Misinvoicing

Weight

Weighting Rationale

High weight justifies the critical nature of addressing trade misinvoicing which is one of the largest components of measurable IFFs.

Scoring Criteria

Score 3

The country has enacted and fully implemented comprehensive laws and regulatory measures that criminalise the misstating of the price, quality, or any other aspect of trade in goods and services.
The legal framework provides specific provisions and penalties for offenders involved in trade misinvoicing, ensuring robust detection, investigation, and prosecution of such illicit practices.
The country maintains a dedicated task force or specialised unit equipped with skilled personnel trained in forensic accounting and financial investigations to effectively detect and investigate cases of trade misinvoicing.

Score 2

The country has enacted laws and regulatory measures to address trade misinvoicing and criminalise the misstating of trade values.
There are limitations in the effectiveness or comprehensiveness of the implemented measures. While the legal framework provides specific provisions and penalties for offenders involved in trade misinvoicing, further improvements are needed to enhance detection capabilities, investigation procedures, and prosecution mechanisms.
The country may have a specialised unit or task force, but there might be gaps in the level of training and resources available to effectively detect and investigate cases of trade misinvoicing.

Score 1

The country has taken initial steps to address trade misinvoicing and criminalise the misstating of price, quality, or other aspect of trade in goods and services.

Score 0

The country has not enacted specific laws or regulatory measures to criminalise the misstating of trade values or address trade misinvoicing.
There are no established provisions or penalties targeting the illicit practice of misstating trade values."

Indicator R1-9 : Existence and Implementation of Legislation and Regulation Addressing Harmful Tax Incentives

Tax-related Indicators to be measured

Legislation Addressing Harmful Tax Incentives

Weight

Weighting Rationale

This is weighted to reflect the balance between attracting genuine investment and preventing opportunities for tax avoidance.

Scoring Criteria

Score 3

The country has specific legislation and/or regulation in place that includes strict controls to identify, prevent, and eliminate harmful tax incentives.
The legislation provides clear guidelines and criteria for evaluating tax incentives to ensure they align with the country's economic and social objectives, promote fair taxation, and minimise the risk of tax-related illicit financial flows.
The evaluation process is comprehensive, transparent, and regularly implemented, encompassing regular assessments, reporting, and consultative engagements with relevant stakeholders.
Public accountability is emphasised throughout the design, implementation, and evaluation of tax incentives, with mechanisms in place to solicit public input, promote transparency, and ensure responsible fiscal management.
The country has conducted a comprehensive review of its existing tax incentives regime, assessing the potential presence of harmful tax incentives and taking action to eliminate or modify them based on the review findings.

Score 2

The country has some legislation and/or regulation in place to address harmful tax incentives. However, there may be limitations in the effectiveness or comprehensiveness of the existing controls.
The legislation provides some guidelines and criteria for evaluating tax incentives, but they may not fully align with the country's economic and social objectives or effectively minimise the risk of tax-related illicit financial flows.
The evaluation process, although initiated, may lack transparency or regularity, and the level of stakeholder engagement and public accountability measures may be limited.
The country has taken some steps to identify and address harmful tax incentives. engagement and public accountability measures may be limited.
The country has taken some steps to identify and address harmful tax incentives.

Score 1

The country has minimal or preliminary legislation and/or regulation addressing harmful tax incentives

Score 0

The country does not have any specific legislation or regulation in place to address harmful tax incentives.
There are no established controls or guidelines for evaluating tax incentives, and the country lacks a systematic approach to identify, prevent, or eliminate harmful tax incentives.

Indicator R1-10 : Existence and Implementation of Legislation and Regulations Preventing Banking and/or Financial Secrecy that enable tax-related IFFs

Tax-related Indicators to be measured

Measures Preventing Banking/Financial Secrecy

Weight

Weighting Rationale

Weighting signifies the role of transparency in the financial system, although it's often implemented in tandem with other international measures.

Scoring Criteria

Score 3

comprehensive legislation and regulations that effectively dismantle banking and financial secrecy barriers that facilitate tax-related IFFs.
These laws mandate full transparency in the ownership and transactions of financial accounts and enforce rigorous due diligence procedures on all financial institutions and designated non-financial businesses or professions (DNFBPs).
There are strong enforcement mechanisms, including regular oversight and audits, and strict penalties, including substantial fines and criminal charges, for institutions and individuals that violate transparency regulations.
The country's financial intelligence unit (FIU) is well-resourced and has the authority to investigate and sanction complicit entities.

Score 2

The country has enacted legislation aimed at reducing banking and financial secrecy and is in the process of strengthening the implementation of these laws.
While there are measures to improve transparency, there may be gaps in coverage, enforcement, or capacity that limit effectiveness.
Some financial institutions and DNFBPs may not yet be fully compliant with due diligence requirements.
Penalties for non-compliance exist but may not be fully deterrent or consistently applied.
Efforts to empower the FIU and other regulatory bodies are underway to enhance monitoring and enforcement capabilities.

Score 1

The country has recognised the issue of banking and financial secrecy in relation to tax-related IFFs and has begun to take steps to address it, such as drafting legislation or initiating reforms.
However, these measures are not yet comprehensive, and enforcement mechanisms are weak or non-existent.
The FIU and regulatory authorities may lack the necessary resources or authority to effectively tackle non-compliance, and penalties for violations are either not in place or insufficiently stringent to act as a deterrent.

Score 0

The country has not taken significant action to address banking and financial secrecy that enables tax-related IFFs.
There are no specific laws or regulations in place to compel transparency in financial transactions or ownership, nor are there effective due diligence requirements for financial institutions and DNFBPs.
Consequently, there is a high risk of the financial system being exploited for tax-related IFFs, and the country's capacity to engage in global tax cooperation is severely limited.

Indicator R1-11 : Existence and Implementation of Legislation and Regulations for the recovery and repatriation of tax-related IFFs

Tax-related Indicators to be measured

Legislation for Recovery/Repatriation of IFFs

Weight

Weighting Rationale

Weight highlights the importance of not just preventing IFFs but also having mechanisms implmented in tandem with other measures such as BOT to recover and return illicit funds.

Scoring Criteria

Score 3

The country has fully operational laws and regulations, along with established mechanisms, for the comprehensive tracing, freezing, recovery, and repatriation of assets related to tax-related IFFs.
This includes a clear legal process for identifying and tracking illicit funds, the ability to freeze assets promptly to prevent further dissipation, effective procedures for asset recovery, and established channels for repatriation.
The country also has specialised units with trained personnel to handle complex cases of IFFs, and there's active collaboration with international bodies to facilitate cross-border cooperation.
The legal framework includes provisions for mutual legal assistance, making it aligned with international standards and best practices.

Score 2

The country has enacted laws and regulations and is in the process of developing the infrastructure and institutional mechanisms for the tracing, freezing, recovery, and repatriation of assets related to tax-related IFFs.
The systems for tracking and freezing assets are in place but may not be fully streamlined or efficient.
Recovery processes are established but may not be consistently effective across different cases.
Efforts are being made to set up mutual legal assistance treaties and cooperative frameworks to handle cross-border cases, but these may not yet be fully functional or comprehensive.

Score 1

The country is in the early stages of enacting laws and regulations for the tracing, freezing, recovery, and repatriation of tax-related IFFs.
There is recognition of the need for such legislation, and initial drafts or proposals may be under consideration.
The country may lack the necessary institutional framework and may be seeking international assistance to develop capacity for the enforcement of these laws.

Score 0

The country has no laws or regulations in place for the tracing, freezing, recovery, and repatriation of tax-related IFFs, indicating a significant gap in the legal and regulatory framework necessary to combat IFFs.
There is an urgent need for the country to begin developing these frameworks to protect against the loss of revenue through tax-related financial crimes.

Indicator R1-12 : Existence and Implementation of Legislation and Regulations to address the unique tax challenges posed by the digital economy and e-commerce, particularly in preventing and mitigating tax related IFFs.

Tax-related Indicators to be measured

Taxation of Digital Economy

Weight

Weighting Rationale

Given the growing role of digitalization in the economy, this indicator is weighted at 5 to ensure taxation keeps pace with business evolution and new forms of value creation but is to be considered in tandem with R1-13

Scoring Criteria

Score 3

The country has comprehensive and well-defined policies, laws, and regulations specifically tailored to the digital economy and e-commerce.
These include clear definitions and broad coverage of digital services, value creation, and revenue generation models unique to the sector.
There are detailed provisions for the taxation of digital transactions, including rules for permanent establishment, profit allocation, and withholding taxes on digital services.
Effective anti-avoidance measures to combat tax-related IFFs are rigorously enforced, with a clear mechanism for monitoring and compliance, backed by a capable tax authority equipped with the necessary digital tools and expertise.

Score 2

The country has policies, laws, and regulations in place to address the taxation of the digital economy and e-commerce.
These laws take steps toward taxing digital transactions but may lack comprehensive definitions and detailed guidance on certain aspects of the digital sector.
Some measures to prevent tax-related IFFs are enforced, but there are notable gaps, and the enforcement is not consistently rigorous.
The capacity of the tax authority to deal with digital transactions may be developing, and additional resources or training might be required to achieve effective enforcement.
The country has rudimentary policies, laws, or regulations that recognize the need to tax the digital economy and e-commerce but are not fully developed.
These regulations are outdated or lack specific measures for dealing with the complexities of digital transactions, resulting in significant loopholes that could be exploited for tax-related IFFs.
Enforcement is weak, with limited capacity to monitor digital transactions effectively or to implement anti-avoidance measures.

Score 1

The country has rudimentary policies, laws, or regulations that recognize the need to tax the digital economy and e-commerce but are not fully developed.
These regulations are outdated or lack specific measures for dealing with the complexities of digital transactions, resulting in significant loopholes that could be exploited for tax-related IFFs.
Enforcement is weak, with limited capacity to monitor digital transactions effectively or to implement anti-avoidance measures.

Score 0

The country lacks any policies, laws, or regulations that address the tax challenges of the digital economy and e-commerce.
There is no framework in place to capture revenue from digital transactions, leaving a wide-open space for tax-related IFFs.
There is a critical need for developing a legal and regulatory framework that can adapt to the rapidly evolving digital sector.

Indicator R1-13 : Integration of informal sector into tax system

Tax-related Indicators to be measured

Informal Sector

Weight

Weighting Rationale

This weighting underscores the indicator's importance alongside other measures such as digitalisation, bot, aimed directly at international standards and compliance, recognizing the unique and pivotal role of the informal economy in African countries.

Scoring Criteria

Score 3

The country has a comprehensive policy/strategy for integrating the informal sector into the formal tax system. This includes targeted tax education programs, simplified tax regimes, and incentive structures designed to encourage voluntary compliance.
There are reliable data collection mechanisms and regular assessments to monitor the size and trends of the informal economy.
The tax administration has dedicated resources and units specialising in informal sector activities, and there is evidence of a sustained increase in tax compliance within the informal sector.

Score 2

The country has taken concrete steps to address the informal sector in its tax policies, such as introducing simplified tax regimes for small taxpayers and conducting outreach programs.
However, these initiatives may not be fully comprehensive or adequately resourced.
There are efforts to collect data on the informal sector, but these may not be systematic or regular.
The impact on increasing tax compliance in the informal sector is present but limited.

Score 1

The country has acknowledged the importance of integrating the informal sector into the formal economy and has initiated some form of policy dialogue or pilot projects.
There are minimal or ad hoc measures to collect data on the informal sector, and there is limited engagement with informal sector operators.
Efforts to increase tax compliance are in the early stages and not yet effective.

Score 0

The country has no clear policy or measures in place to integrate the informal sector into the tax system.
There is a lack of data on the informal sector, and tax compliance efforts are non-existent or ineffective.
The informal sector is largely ignored in tax policy and administration."

Policy, Legislative & Regulatory Frameworks Country Assessment Reports

Overview Indicators Assessment
Detailed Country Indicators Assessment

Please note that the data currently displayed on the Anti-IFFs Policy Tracker is randomly generated for demonstration and illustrative purposes only. The actual assessments and data gathered through our rigorous methodology may vary and will be updated accordingly once the complete evaluation process is conducted.