Can AfCFTA Balance and Reconcile the Impossible Trinity

The chapter delves into the complex interplay between the African Continental Free Trade Area (AfCFTA) and harmful tax competition. It begins by setting the stage with an introduction to the AfCFTA, highlighting its economic objectives and the importance of effective law and dispute settlement mechanisms. The text then explores the phenomenon of harmful tax competition, tracing its origins as a problem between developed countries and its subsequent impact on developing nations, particularly in Africa. The chapter examines the historical context, including the OECD's and EU's efforts to combat harmful tax practices, and the challenges faced by African countries in adopting similar measures. A significant focus is on the potential risks a successful AfCFTA poses in fuelling harmful tax competition. The chapter argues that a successful AfCFTA could lead to a race to the bottom, where countries lower their tax rates to attract businesses, ultimately eroding the tax bases of other countries. It discusses the escalation of business location into harmful tax competition and the need for mitigating measures. The chapter concludes by proposing the adoption of an additional protocol to the AfCFTA to address harmful tax competition, outlining key elements that should be included in such a protocol. This chapter provides a comprehensive analysis of the AfCFTA's potential impact on harmful tax competition, offering insights into the historical context, current challenges, and future solutions.