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.
Most recent bulletins on illicit financial flows and tax justice
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
September 14, 2015 West Africa: Tax Giveaway Follies
"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"
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
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