The Tax Justice Network for Africa issued this press release today:
FOR IMMEDIATE RELEASE
May 10, 2008
Lusaka, Zambia
Africa has lost $607 billion (US).
Equitable taxation not aid will end the looting of Africa: Tax Justice Network for Africa
Africa’s revolving door
Capital flight from Africa is devastating development at an alarming rate. It deprives Africa of investment and further exacerbates the gap between the North and South and also between rich and poor people. 35 civil society representatives from 13 southern African and 2 European Countries gathered in Lusaka to discuss strategies to combat revenue leakages in Africa. They met under the banner of the Tax Justice Network for Africa (TJN-A), which was established in 2007 at the World Social Forum in Nairobi.
Addressing the meeting hosted by the Civil Society Trade Network of Zambia (CSTNZ), John Christensen, the Director of the Tax Justice Network International, revealed that $607 billion (US) has been shifted out of Africa over the last three decades. This is depriving Africa of investment and tax revenues that it needs to fund its own development. According to Mr Christensen: “Since the 1970’s, for every dollar in external loans to Africa roughly 60 cents left as capital flight in the same year. For example Zambia has lost 19.8 billion dollars in capital flight representing 272% of the debt stock as at 2004.”
Mr Christensen also cited other examples of Southern African countries experiencing massive capital flight and external debt: Angola has experienced 50 billion dollars of capital flight representing 535% of that country’s external debt. Over the same period, Zimbabwe has lost almost 25 billion dollars, more than 5 times the value of its external debt. The figure for Swaziland stands at 1.3 billion dollars and Lesotho has lost 893 million dollars.
Alvin Mosioma, who coordinates the activities of Tax Justice Network for Africa, said: “Africa is particularly vulnerable to capital flight, tax avoidance and evasion. African leaders must take urgent steps in a concerted political effort to seal the loopholes that are haemorrhaging the outflow of resources from Africa and protect their population from predatory tax practices. They must also join international efforts to close down havens that act as parasites on the global economy.”
As a result of massive tax evasion and avoidance via tax havens, states often attempt to recover lost taxation revenue through increasing regressive taxes that hurt the poor most - such as the Value Added Tax. Governments are placed under pressure to put in place incentives such as tax holidays and other incentives which do not serve a useful purpose. Manipulative accounting policies of multinational corporations, assisted by ac counting firms and banks, are at the heart of the matter. They channel corporate profits to secretive offshore tax havens in order to escape paying taxes in the countries that multinationals operate in.
“The aggressive tax avoidance policies of multinationals are amongst the darker sides of globalization. The problem is not limited to Zambia and Southern Africa. Over half of world trade is channelled through tax havens, despite the fact that these tax havens account for only 3% of the global GDP,” says Francis Weyzig, an expert from the Centre for Research on Multinational Corporations (SOMO) based in the Netherlands. The problem is a worldwide epidemic that threatens the sovereignty of both developing and developed countries. US Senator Barack Obama has even sponsored a bill in the US: the Stop Tax Haven Abuse Act.
So why hasn’t the problem been addressed before?
Savior Mwambwa, of CSTNZ, explains: “The discussions around tax have traditionally taken place in closed circles, in esoteric language purposely designed to confuse the common person. We know there are also acute vested political interests of businesses and elites who would prefer the situation to continue as it does presently.”
The Civil Society Organisations Call upon :
National Government:
- To set up regulatory policies that monitor the transfer of funds
- To reconsider tax policies that place SMEs at a comparative disadvantage and stifle development
- To promote taxation policy that encourages sustainable business environments
- To demand country by country reporting by companies stating clearly what profits are made in each country where they operate
- To encourage a global standard in accounting?
- To call on the UN to adopt a global standard in taxation policy
- To negotiate Information exchange with tax havens
- To end retrogressive tax incentives such as EPZs
- To review mining contracts
- strengthen government institutions that limit corruption
Business:
- Respect the sovereign right of countries to setup national tax policy
- The incorporate of taxation policies into sustainability reporting
Civil Society Organizations should:
- WAKE UP TO TAX JUSTICE
- Act as a check on business and government with respect to taxation policy
- Target small to medium size business who are less able to take advantage of tax flight.
- Raise awareness among citizens about expanding the definition of corruption to include facilitators and tax havens that enable capital flight.
Matthew Clarke, a commentator on corporate responsibility working in South Africa, concludes: “Civil society is aware of the fact that business will argue that they are in fact the engine of development bringing jobs and important resources to communities. But predatory state taxation policies that encourage MNCs to set up shop without paying taxes place small to medium sized business at a financial disadvantage - stifling development.”
For more information contact:
Alvin Mosioma,
Tax Justice Network for Africa
Savior Mwambwa - National Coordinator
Civil Society Trade Network of Zambia- 0977-875404
Footnotes:
-What is capital flight- The deliberate and illicit disguise expatriation of money by those resident or taxable within the country of origin.
-What is VAT, Value Added Tax- A form of consumptive tax
-Creative accounting - Accounting practices designed to evade national taxation.
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