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 :
- 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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[…] Eh? With all the TB around, they should be swimming in money, shouldn’t they? […]
Tim Worstall wrote the note above.
No doubt he thinks he is being funny.
I allowed it only to show that he’s willing to mock a simple typing error (or more likely aitocorrect error) in a late night press release.
He’s not willing to address the issue that capital flight in Africa directly contributes to hundreds of thousands of deaths annually
That’s how sick the Right is.
I hope he’s ashamed of himself. I don’t imagine for a minute that he is.
just a thought……. What if taxes were lowered for the ‘small to medium sized business at a financial disadvantage’ to help them develop and create jobs ??? Maybe give tax relief to encourage MNC’s to come to Africa where jobs are needed, instead of spending the money to enforce so many tax laws ??? Although ‘less’ tax laws would decrease the tax revenue, the increase in development and jobs would directly increase money and the self-sustaining ability of these countries.
Thierrys
You assume that tax is the big impediment. It is not. Infrastructure is. Tax pays for that. Nothing else will.
Richard
Richard,
One should never assume, especially on another person’s behalf…
I do not assume tax is THE big impediment, but if there is no business there is not tax generated. I agree that infrastructure is a HUGE problem. I just returned from Africa and am currently aiding the government of a small country there. My team has been working with them for 5 years and are returning there in 2 weeks.
That being said, the problem is the beautiful people there want jobs…… Jobs make money….. Those with money spend and pay taxes. Those with money can pay for their health care and the gov. does not have to do so. Therefore taxes are made and revenue is made and people can actually get medical care. I know first hand that the African people I have met and worked with want to work. There are no jobs…….
I have seen and personally visited cities that were once poverty cities and relied completely on ‘donor funds’, AID dollars to survive. Few survived past the age of 5 and even fewer past the age of 40. You bring in one MNC with financial backing, roads are built (mainly by the Chinese, another subject) and jobs are created. Those cities start to build self-reliability. Live expectancy is higher and more tax dollars are made because there are jobs !!!
What has all the AID infrastructure been used for over the years? Further, Is the capital flight described in the press release related to MNCs or all cap flight? Does that include the massive numbers of corrupt government officials in SSA?”
Thierrys
Pity you won’t say who you are, where you worked, who for, and so on
Please make your case publicly
Without evidence it’s ahrd to appraise what you say
Richard
Richard,
Gosh, not the response I expected…… Not sure what it matters who I am and not that exciting but I will share. Let me say, I am not a blogger, have never blogged and this is my first time to comment on a blog. I will give you my name, info, photos of Africa if you need it. I do not want my name, photo, info out on the www though.
I am a stay at home mother with 2 young children and got the opportunity to travel to South Africa with some wonderful friends that are involved with helping the African people. This group (I will not share their names since this does not involve them) consist of retired CEO’s that have decided to invest their ‘free’ time ( with the praise of their wives, I am sure )and their own money to help the people in Africa make the best use of their efforts and ultimately become self-sustaining if all works out. This group does not work for anyone but themselves and are investing their own money with nothing in return but knowing they helped.
This came about after the accountant met someone working in Africa and heard of the issues there. You tell a newly retired CEO of an accounting firm about a government with no computers, no back-up files and running 3 years behind in reporting…….. He could not help himself.
So, that is my story. I do not work for anyone. I pay all my taxes………..
I am sincerely asking you a question because I have been to South Africa and I am investing my time in helping where I can. Since I have small children I cannot go to Africa often. I work on things here where I can. I keep updated on things going on in Africa. That is how I came upon your post. I have seen half built building that the gov started with tax dollars that are just sitting there while people starve and die because the hospitals have no drugs.
See, we sit here in our home with our health care at every corner and pay our taxes so we have roads, schools, etc. If you sit in an office and look at numbers to make the laws, the laws seem to make sense. Sometimes you must get out of the ‘box’ and see what else is happening out there in a place like Africa. I hope one day that is what is happening in Africa. It is not.
My question to you was a real one. What about tax cuts to get businesses to come there ??? The current way is not working. There is corruption heavily in the SSA. Just go drive my many government worker’s homes……. Does not take much to figure it out. The money is not going to help the people. I am sure some is but something must change. Trying to get tax dollars from people that do not have a job is not going to work. There is no money. They want to work. Most work harder than anyone I know. Just to survive and grow enough to eat……..
I agree, too much money is leaving Africa. The more money you try to get from companies that are there the more they may try to get out of paying. Or worse, leave. If they have to spend so much to be there…… why go. The one thing that can help Africa is jobs…….. AGAIN, if you have jobs for people and that may be from Multinational Corporations……. they make money, spend money, pay taxes……
What is wrong with that ??? I even hope the company makes a huge profit and prospers. Then there are tax dollars from the company, jobs, health care, and maybe more companies will come to Africa and make more jobs………
Thierrys
I apologise of you thought my reaction odd: dealing with anonymous people is not something I like doing. It’s only on the web that people seem to think they have this right.
But let me take you at face value: I have no reason not to.
I am sure you are sincere and well meaning. And I and my colleagues are wholly convinced of the enormity of the corruption issue. the trouble is that the corruption (the serious end of it) almost all takes place through tax havens. they are run by apparently respectable bankers, accountants and lawyers. Estimates vary as to the loss of revenue to the developing world as a result. Let’s put it at not less than $500 billion a year.
Plese read this http://www.taxjustice.net/cms/upload/pdf/0701_Mirror_Mirror_corruption.pdf
Then read this http://www.taxjustice.net/cms/upload/pdf/Trevor_Manuel_0801.pdf
And I’ll ask you to trust me: there is no proven evidence anywhere in the world that cutting taxes stimulates growth: it’s a myth to make the rich richer.
Eliminating the mechanisms that facilitate corruption is much more important. we’re working on that.
Please come back again though if you still have more to add
Richard