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Illicit Financial Flows and Tax Justice

This page updated on-line at http://www.africafocus.org/intro-iff.php.

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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.

Most recent bulletins on illicit financial flows and tax justice

May 13, 2016  Mozambique: Debt Crisis & the Panama Papers http://www.africafocus.org/docs16/moz1605.php
    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 http://www.africafocus.org/docs16/pan1604.php
    "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 http://www.africafocus.org/docs16/tax1602.php
    "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 http://www.africafocus.org/docs16/coke1602.php
    "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 http://www.africafocus.org/docs15/iff1511.php
    "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 http://www.africafocus.org/docs15/td1510.php
    "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" http://www.africafocus.org/docs15/pik1510.php
    "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

September 14, 2015  West Africa: Tax Giveaway Follies http://www.africafocus.org/docs15/wa1509.php
    "Our research shows that three countries alone Ghana, Nigeria and Senegal are losing up to $5.8 billion a year. If the rest of ECOWAS lost revenues at similar percentages of their GDP, total revenue losses among the 15 ECOWAS states would amount to $9.6 billion a year [due to tax incentives offered to foreign companies]." - Action Aid and Tax Justice Network Africa

July 21, 2015  Africa/Global: "Stop The Bleeding" http://www.africafocus.org/docs15/iff1507.php
    With the exception of inclusion of a statement promising to address "illicit financial flows," the outcome document of the Financing for Development conference in Addis Ababa (July 13-16) broke little new ground. Significantly, rich countries vetoed action on a greater role for the United Nations in setting international tax standards, preserving that role for the club of the OECD countries dominated by the United States and Europe. But civil society momentum for more significant action is continuing to grow, as was marked by the launch of the "Stop The Bleeding" campaign at a continent-wide gathering in Nairobi in June.

June 30, 2015  South Africa: Marikana Perspectives, 1 http://www.africafocus.org/docs15/mar1506a.php
    Almost three years after the killings by police of 44 striking miners at Marikana platinum mine, the official Commission of Inquiry last week released a bland 646-page report, faulting primarily police commanders and apportioning some blame as well among the striking miners themselves, the mining company Lonmin, and two rival unions. However, the Commission said there was not adequate evidence for the responsibility of higher officials. And its recommendations for action on the police responsible were for further investigations.

June 30, 2015  South Africa: Marikana Perspectives, 2 http://www.africafocus.org/docs15/mar1506b.php
    "President Jacob Zuma's response to the Marikana Report is underwhelming, to say the least. He was allowed to avoid being forced to act in a more pointed way following what happened at Marikana because Judge Ian Farlam's recommendations are legally and socially conservative, and morally weak. The recommendations that essentially pass the buck to other state agencies to re-investigate will have left most the victims and families of victims of the killing spree in August of 2012 feeling cheated." - Greg Marinovich

June 2, 2015  Africa/Global: Tax Justice & Inequality http://www.africafocus.org/docs15/tax1506a.php
    "The prevailing international tax rules and practices, as well as the failure of governments to cooperate on international tax matters, continue to undermine the ability of governments in the Global South and the North to ensure that corporations and wealthy individuals pay their fair share of taxes. ... At the same time, many governments themselves act in the interest of corporations, liberally providing tax incentives and signing tax treaties that enable huge outflows of public revenues. As a result, ordinary people all over the world carry a disproportionately heavy burden of raising tax revenues -- while public services lack adequate resources to meet the needs of citizens." - World Social Forum, 2015

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