UN-HABITAT gives Somaliland tax collector a big boost.
A Geographic Information System (GIS) established in Hargeisa Municipality with technical assistance from UN-HABITAT has helped to increase annual property tax revenues by 248 percent, from USD169,062 in 2005 to USD588,754 in 2008.
New technology and innovative thinking delivers real change in tax collection in Africa.
I like this!
Africa needs its own tax solutions. This, quite literally, is a local one.
allAfrica.com: Liberia: Capital Flight – Millions Out, Less in (Page 1 of 1).
The reality of illicit financial flows documented in Liberia in 2008.
And make no pretence about it: tax havens play a part in this process of denying developing countries the funds they need to finance their domestic economies.
Yesterday’s call on this blog to neuter the world’s tax havens has transferred to the Guardian today. As Larry Elliot says:
Robert Zoellick, the World Bank’s president, made a contribution to this debate yesterday when he called for the anachronistic G7 to be expanded to include seven leading developing countries. That would be sensible, as would toughening up credit rating agency rules and a general beefing-up of the IMF’s early warning role in spotting crises.
This list does, however, contain one crucial omission – the role of tax havens in undermining the policies of sovereign states. As Richard Murphy of the Tax Justice Network noted yesterday, tax havens provide a “get-out-of-regulation free” card for banks faced with tougher sanctions. This card needs to be taken off the table – but to do so will require the sort of global policy coordination so sorely lacking in recent years.
Whilst Polly Toynbee puts it this way:
Sadly international action now seems remote, but Britain has the power to close down the many tax havens it administers: days of turning a blind eye to offshore activities are over.
A number of other ideas from this blog are also to be found in her article, whilst Paul Collier says:
While the crisis will weaken our assistance for the poorest countries by curtailing aid, it could inadvertently have an offsetting effect if we use it to close the illicit outflow. Money flows out of Africa into our banks, and into the offshore banks that depend for their existence upon being able to transact with our banks. US rules on banking transparency are even weaker than the European rules: vast sums looted from the public purse in Africa are being held in nominee accounts and moved around the world at greater speed than our cumbersome legal processes can track them down.
Western legal systems are stacked, thanks to the hired hands of skilled lawyers, to protect the rights of the crooked over the rights of Africa’s ordinary citizens. At the time of the Commission for Africa, I urged that Britain revise its laws on banking secrecy. Yet despite the enormous emotional energy aroused by Gleneagles, there was no political appetite: aid, yes; banking openness, no. The silver lining in this grim cloud is that we have a second chance to clean up the banks.
There is a growing consensus on this issue, but the neo-liberals will still fight it, as Paul Collier notes they did after 9/11 and on Blair’s Commission for Africa.
This time though we’ll sink if we don;t do it. Surely that’s enough to kick start the change, or do the elite really want the chaos to continue? Never rule out that possibility: they think they’re immune form it, so what do they care?
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.
The TJN blog has a great article by Nick Shaxson on the need for France to transform its relationship with Africa. As he says:
Once again the latest chapter in one of the biggest, and most fascinating, stories about Africa’s international relations has been almost entirely neglected by the English-speaking media. The French Secretary of State for Co-operation, Jean-Marie Bockel, has challenged his own president, Nicolas Sarkozy, to fulfil earlier promises of a “rupture” with the bad old ways of “Fran?ßafrique.” As he said:
This “rupture” is taking its time to arrive. There are still too many private interests; too many intermediaries without clear utility; too many parallel networks to allow a clean, uncomplicated partnership of equals. The moment has come to . . . kill off these moribund practices and renew our ways of dialogue with Africans. The President will be in Africa at the end of February: that will be a good moment to do it.
Read Nick’s analysis in full here. He’s an Africa expert. I buy his argument.
Forbes has reported that President Levy Mwanawasa of Zambia has announced the cancellation of all tax concessions for copper mining companies operating in Zambia, saying they were ‘unfair and unbalanced’ and that in their place ‘The government has, therefore, decided to introduce a new fiscal and regulatory regime in order to bring about equitable distribution of the mineral wealth.’
The change is dramatic. Without them mining firms would have earned US$4 billion in the 2008/9 financial year but would only have paid tax of US$300 million. Revenue is expected to rise to US$650 million after the change.
Christian Aid has been campaigning on this issue for some time, and I contributed to that work. It’s fantastic to see a result and a fairer sharing of the wealth from this resource.
Change is possible – and the courage to make that change possible is also welcome in this case.
More from the OECD tax conference in South Africa:
The OECD’s Deputy Secretary General, Pierre Carlo Padoan, says capital flight to tax havens is harming the continent’s development.
He says while Africa is beginning to fulfil its economic potential, better tax revenues are needed to finance the infrastructure and the skills needed for a vibrant economy.
Read the front page of the TJN web site and you’ll see we’ve been saying this longer than just about anyone.
Now there is no room left for anyone to argue. Africa says it. The OECD says it. The fact that tax havens don’t agree makes no difference: it’s a fact that they deny, but that does not change the truth.
It’s why we promote Country by Country reporting.
It’s why we have promoted our Code of Conduct.
Together they could make a massive contribution to solving this crisis.
So why are the International Accounting Standards Board, the UK’s Accounting Standards Board and the tax and accounting professions as a whole ignoring this issue? Is it that they want to make poverty a reality? What other explanation is there?
My plea is simple: accountants could change the world. Please do it. We have a greater capacity to achieve this than anyone. We cannot duck that responsibility.
Trevor Manuel, South Africa’s Finance Minister, is one of the rock stars of his profession. His keynote speech to the the world’s tax experts at the latest OECD forum on Tax Administration in beautiful Cape Town are right on the money. Quoted in South Africa’s Business Day, he said:
Smaller, poorer countries with tax administrations that are less sophisticated cannot be expected to develop the expertise required to unravel the complex structures that multinationals and other large companies put in place to minimise tax.
Although multinational enterprises are an essential element of the global economy, he continued, some engage in behaviour “aimed at one purpose – the minimisation of tax”.
For the global trade system to work in the long term, everyone, including the multinationals, had to recognise that such behaviour was likely only to result in a backlash, a retreat to protectionism and inevitably to a world that was poorer.
What is more, he said, the tax policies of a single country, such as the steady downward adjustment in corporate tax rates — could have negative consequences for tax administration globally.
He went on:
It must be of concern to policy makers and tax administrators that changes to tax policies have been a significant factor driving rising inequality in the world today . . . Our world needs a set of rules that are simple, transparent and equitable to differentiate legitimate competition between countries from the steps and measures that make tax evasion or avoidance easier.
It is, he continued, “imperative that we build relations with the taxpayer on the basis of ‚Ķ social responsibility.” Accountants, lawyers, investment banks and financial advisers were increasingly engaged in “organised efforts” to find tax loopholes and undermine nations’ tax bases.
As we know, the numbers involved are astronomical. Raymond Baker, a world authority on cross-border financial flows, has estimated that of the $1 to $1.6 trillion of illicit money that crosses borders annually, half-$500 to $800 billion a year-comes out of developing and transitional economies. As the Tax Justice Network has pointed out before, recent research has shown, for example, that sub-Saharan Africa is a net creditor to the rest of the world: its external assets, measured by the stock of capital flight, exceed external liabilities, as measured by the stock of external debt. The difference is that while the assets are in private hands, the liabilities are the public debts of African governments and their people.
Serious action on international taxation has the potential to do far more for the finances of developing countries than foreign aid, and would help lead poor countries away from aid dependency towards tax-financed self-reliance, with governments accountable to citizens, not to foreign donors.
Trevor Manuel is a man of great stature in the international financial community. Well said that man.
Hat tip: Tax Justice Blog
Tax Commissioners from OECD and non-OECD countries meet to discuss how to enhance the relationship between revenue bodies,
taxpayers and tax intermediaries
Cape Town, South Africa
10-11 January 2008
South Africa will host the Fourth meeting of the OECD’s Forum on Tax Administration in Cape Town on 10-11 January 2008, bringing together more than 130 participants from around 40 countries. The meeting, at the Westin Grand Cape Town Arabella Quays, will be chaired by. Pravin Gordhan, the Commissioner of the South African Revenue Service and will focus on three related issues:
1. New trends in global business and wealth management and the implications for revenue bodies
2. The conclusions and recommendations of a study on the role of tax intermediaries which was launched at the Seoul meeting in 2006. [www.oecd.org/ctp/ta/seouldeclaration]
3. Exploring ways to assist African Tax Administrations to develop their capacity to raise the funds required to meet the Millennium Development Goals. [http://www.un.org/millenniumgoals/]
The meeting will be opened by Trevor Manuel, South Africa’s Minister of Finance, and Pier Carlo Padoan, Deputy Secretary-General of OECD, at 9:00 a.m. on Thursday 10 January. This opening session, from 9.00 to 9.45 a.m., will be open to the media. There will be a press conference on Friday 11 January 2008 at 12:30.
Further details can be obtained from Jeffrey Owens(Jeffrey.owens@oecd.org), Lincoln Marais(lamarais@sars.gov.za), Malerato Sekha(msekha@sars.gov.za), Thumida Maistry( tmaistry2@sars.gov.za), or Adrian Lackay (alackay@sars.gov.za).
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