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Illicit Financial Flows and Tax Justice

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Talking Points

  • Inequality and tax evasion are growing both within and between countries, while the rich on all continents funnel their wealth into secret bank accounts scattered around the world. This erodes the public sector, starves countries of funds needed for development, and drives up deficits.

  • The trend is worldwide as multinational companies shuttle money and subsidiaries between countries to minimize taxes, while the ultra-rich and organized crime hide their assets in untraceable shell accounts. But the toll in Africa is enormous, with losses estimated at $50 billion to $80 billion a year due to illicit capital flight.

  • One recent study, for example, estimated at least US$60.8 billion in losses due to transfer pricing in or out of 5 African Countries (Ghana, Kenya, Mozambique, Tanzania, and Uganda), from 2002-2011.

  • The good news is that governments and multilateral agencies around the world are waking up to this issue, and the pressure for transparency in financial reporting is growing. The same technical mechanisms that have been used to track funds of drug traffickers and terrorist networks can now be used, if there is political will, to track monies lost to illicit financial flows and tax evasion.

The Stop the Bleeding Africa Campaign led by six continent-wide African civil society networks is seeking support from African and global organizations as it continues to lobby African and other governments to stop illegal and illegitimate financial flows that are draining resources for the continent.

Sign up to the Campaign and find more background on the websites of the Campaign and of Tax Justice Network - Africa.

USAN: Top Ten Questions on IFF and Africa | Resources on IFF and Africa Top Ten Books on IFF and Tax Evasion | National and Global Inequality

Most recent bulletins on illicit financial flows and tax justice

October 18, 2016  Ghana: New Debt Trap
    "Ghana is in a debt crisis. Despite having had significant amounts of debt canceled a decade ago, the country is losing around 30% of government revenue in external debt payments each year. Such huge payments are only possible because Ghana has been able to take on more loans from institutions such as the International Monetary Fund (IMF), which are used to pay the interest on debts to previous lenders, whilst the overall size of the debt increases. "

September 21, 2016  USA/Africa: From #BlackLivesMatter to #StopTheBleeding Africa
    The direct and indirect toll resulting from illicit financial flows reflects the unequal value today's world places on human lives by race and place ... Reflecting the legacy of the slave trade and colonialism, the African continent and Black people around the world are disproportionately located at the bottom of a global system that systematically sucks wealth upward, toward the top "1 percent." ... there can be no doubt that the number of deaths caused by these structural economic inequalities rivals or likely even exceeds those lost due to bombs, guns, or machetes.

September 14, 2016  Gabon: High Demand for Democracy, Short Supply
    "Among 36 African countries surveyed in 2014/2015, Gabon ranks at or near the bottom on every indicator of election quality and fairness, according to citizen responses collected in September and October 2015. ... Gabon ranks dead last in public trust in the election commission. ... [at the same time] Gabon ranks near the top in favoring multiparty competition and term limits on presidents, as well as in disapproving of one-party and one-man rule." - Afrobarometer

June 22, 2016  Africa/Global: "Stop the Bleeding" Updates
    "A new report by Tax Justice Network-Africa and ActionAid says that East African countries (Tanzania, Kenya, Uganda and Rwanda) are losing approximately $2 billion a year of revenue each year by granting tax incentives to multinational companies. ... According to Yaekob Metena, ActionAid Tanzania's country director, 'Though there have been improvements in recent years in addressing the issue, governments in East Africa continue to give away domestic resources in tax incentives, funds that could pay for the regions' education and health needs and meeting the development objectives.'"

Jun 2, 2016  Liberia/Global: Financial Secrecy at Work
    "Finance Uncovered, working with an anonymous Liberian journalist, has exposed a little-known offshore business registry that has created tens of thousands of anonymous companies and registered them to a non-existent address in Monrovia, Liberia's capital city. Although these companies are technically a creation of Liberian law, management of the registry is based in the United States and appears to have the support of the US government. ... Our investigation has discovered over half a billion pounds of high-value London property registered to Liberian offshore companies."

May 13, 2016  Mozambique: Debt Crisis & the Panama Papers
    The paragraph that originally appeared here, citing AIM, and the cited article from AIM, reposted by AfricaFocus on May 13, 2016, have been removed from this AfricaFocus web archive on this page pursuant to a request from AIM, as a result of complaints to AIM on behalf of Privinvest by its public relations firm Woodstock Leasor Limited and its legal representative Michael Simkins LLP, both in London. For more details on the AIM retraction, see below.

April 11, 2016  Africa/Global: Panama Papers Tip of Iceberg
    "In other words, the leaks reveal just how the planet's wealthiest and most powerful citizens hide their money - trillions of it - in offshore tax shelters like the British Virgin Islands or the Seychelles with the help of law firms in swampy backwaters like Panama. Over 11-million horribly incriminating documents, and this is just one - if one of the more prominent - of the many law firms specialising in this line of work." - Daily Maverick, South Africa

February 29, 2016  USA/Africa: Rising Opposition to Tax Evasion
    "We said we were advising an African minister who had accumulated millions of dollars, and we wanted to buy a Gulfstream Jet, a brownstone and a yacht. We said we needed to get the money into the U.S. without detection. ... the results were shocking; all but one of the the lawyers had suggestions on how to move the funds." Global Witness (see excerpts from report below, as well as link to full report and video documentation)

February 1, 2016  Africa/Global: Accounting Tricks with Coca-Cola
    "The Cayman-based Conco is one of more than 25 entities located in tax havens -- just over 30 percent of the [Coca-Cola's] total 'financial' subsidiary disclosures.. Of those based in tax havens, almost half use Delaware, including the parent Coca-Cola company, incorporated there since 1919. ... Delaware's secret formula is the total tax exemption for all income related to intangible capital. In fact, the Delaware Code specifically highlights the advantages of holding companies for intangible capital that "charge" their own global subsidiaries a 'fee' for use of the trademarks and other intangible capital." - Khadija Sharife, in "Coca-Cola's Hidden Formula for Avoiding Taxes"

November 11, 2015  Africa/Global: Follow the Money
    "New research from the Tax Justice Network shows that the gap between where companies pay tax and where they really do their business is huge ... even developed countries with state-of-the-art tax legislation and well-equipped tax authorities cannot stop multinationals dodging their tax without a thorough reform of the global tax system. ... [these practices have] a relatively greater impact on developing countries, whose public revenues are more dependent on the taxation of large businesses."

October 20, 2015  Africa: Tax Tricks, Mobile Phones, and Beer
    "Despite MTN having its headquarters located in South Africa, 55% of the "management and technical fee payments" flow to "MTN International" (MTNI)--a company which has no staff and is located in Mauritius. The remaining 45% was paid to MTN Dubai--a subsidiary which the company says it renders international financial services and shared services to MTN Group." - Quartz Africa, on new report by amaBhungane and Finance Uncovered

October 6, 2015  South Africa/Global: Piketty says "Tax the Rich"
    "I think Europe and North America should stop having a double language with Africa, which is on the one hand they always give lessons about governance and transparency etcetera, and on the other hand, their own multinational companies and their own wealthy citizens are the very ones who are benefiting from financial opacity and they are doing nothing at all about it." - Thomas Piketty, in Nelson Mandela Annual Lecture

Complete listing of bulletins on illicit financial flows, tax justice, and debt, 2003-present