African leaders have agreed in principle to impose a flurry of taxes in a bid to finance their pan-African bloc, set up to push the continent’s diplomatic agenda but dependent on foreign handouts.
After a two-day summit held in the African Union’s Chinese-built headquarters in the Ethiopian capital Addis Ababa, heads of state proposed new taxes on airline tickets, hotel stays and text messages.
The AU was once heavily bankrolled by toppled Libyan strongman Moamer Kadhafi, who championed the institution as a means to challenge Western hegemony. Now, however, 72 percent of the AU’s operational budget comes from international donors led by the United States and European Union.
“Over 70 percent of our budget is foreign funded. This is
not sustainable,” said Zimbabwean President Robert Mugabe, who during the summit was appointed to the AU’s rotating chair — certain to raise eyebrows among key donors who have sanctioned him for political violence and intimidation.
Kenyan President Uhuru Kenyatta, who has also been embroiled in a stand-off with the West after being charged by the International Criminal Court for crimes against humanity, also said the dependence on foreign financing was a “profound handicap and an impediment to the continent’s momentum”.
“Depending on external funding for the union’s budget is simply unacceptable,” he said during Friday and Saturday’s summit, calling for Africa to assert “its independence and sovereignty more robustly”.
At present, the 54-member bloc sources only 28 percent of its half-billion dollar operational budget from its own members. In addition it has to source an additional $750 million for peacekeeping operations — with the funding gap filled mostly by the European Union, United States, World Bank, China and Turkey.
– Donor conditions –
The bloc is now proposing a $10 tax on flight tickets to and from African destinations, plus a $2 dollar tax on each night spent in a hotel. It is estimated that the levies will pull in $730 million dollars a year.
An additional half-a-cent tax on SMS exchanges would bring in $1.6 billion, according to AU officials, who are hoping to see the bloc able to fund its operations and projects to the tune of 65 percent by 2016.
The anticipated windfall would shake off institutional aid dependency and ease pressure on key donors Libya and Egypt, which cannot afford to contribute at the same levels as before.
“We should be able to take our decisions freely,” said Francine Muyumba, head of the Pan-African Youth Union (PYU).
“In case of emergencies like Ebola, we need to have the means to intervene quickly and without having to wait for foreign money. Money from donors always comes with strings attached.”
Whether the plan takes off, however, remains to be seen — even as AU members will additionally have to respect a new, higher threshold for contributions calculated on the basis of their GDPs.
While African heads of state agreed in principle to the proposals, the application of the taxes will be initially on a voluntary basis — leaving each member state with the choice of slapping the new taxes on their citizens and visitors.
The proposals, drawn up by former Nigerian president Olusegun Obasanjo in May 2013, have been criticised by many member states as punishing for their tourism sectors and unduly sparing of the oil and mineral sectors.