Illicit Financial Flows and Tax Justice
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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
January 23, 2017 South Africa: State Capture & Energy Policy
"Eskom, accused of overly cozy ties with the Guptas featured heavily
in the report, with 916 mentions. ... it's Eskom's chief executive,
Brian Molefe, who comes out looking the worst. According to cell
phone records, Molefe had 58 phone calls with the eldest of the
Gupta brothers, Ajay Gupta, between August 2015 and March 2016, just
before the Guptas purchased South Africa's Optimum coal mine for
2.15 billion rand ($160 million). Eskom, which prepaid the Gupta's
Tegeta Exploration and Resources 600 million rand for coal, had been
accused of helping to finance the Guptas' coal mine deal through
preferential treatment." - Quartz Africa
November 28, 2016 Africa/Global: Overcoming the Shadow Economy
"Knowledge of beneficial ownership of companies and bank accounts is
fundamental, both to ensure taxation and also to prevent and
prosecute crime and the money laundering that so often is associated
with it. ... Corporations, trusts, and foundations are creations of
the state--and as such, they have no inalienable rights. They are
created to facilitate societal welfare, and to ensure that they do
so, they need to be globally regulated--regulated in ways which
ensure full knowledge of beneficial ownership and full compliance
with all tax laws." - Joseph Stiglitz, in testimony to European
Parliament Panama Papers inquiry
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."