News / Africa

Tax Havens Cost Africa $38 Billion a Year

Report Claims Tax Havens Cost Africa $38 Billion a Yeari
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May 11, 2013 3:05 AM
Campaigners are calling for the world's richest countries to end so-called tax havens, which allow companies to transfer profits among jurisdictions and reduce their tax bills. An investigation headed by former U.N. Secretary General Kofi Annan has concluded that the practice costs Africa $38 billion a year in lost revenue. Henry Ridgwell reports for VOA from London.
Henry Ridgwell
— Campaigners are calling for the world's richest countries to bring an end to so-called tax havens, which allow companies to transfer profits between jurisdictions and reduce their bills.  An investigation headed by former U.N. Secretary General Kofi Annan has concluded that the practice costs Africa $38 billion a year in lost revenue.  

Activists claim multinational corporations are costing developing countries billions of dollars in lost revenue by transferring their profits to tax havens. Melanie Ward is spokesperson for the 'Enough For Everyone If' campaign.

"I think a lot of people here in the U.K. and around the world are fed up with tax dodging," said Ward. "They are fed up with a system where the rich and powerful play by a different set of rules to everybody else."

Tax havens and low tax jurisdictions - like Ireland - provide a level of secrecy and enable companies or wealthy individuals to cut their expenses, says Professor Ronen Palan of City University London.

"These countries offer very low taxation, either to corporations or to individuals.  And specifically they target non-residents," said Palan.

The Africa Progress Report, written by a panel of 10 prominent figures including former UN Secretary General Kofi Annan, concludes that African countries lose $38 billion a year through tax havens. Professor Palan cites more statistics.

"Africa exported about $1 trillion of capital in the last 30 years whereas inward investment in terms of FDI [Foreign Direct Investment] or aid is about $300 billion.  So Africa is losing capital.  Africa, or sub-Saharan Africa, is actually funding development elsewhere," he said.

The charity ActionAid alleges that brewing giant SABMiller uses a complex system of tax havens to siphon profits out of developing countries like Ghana.
 
SABMiller denies that it exploits tax havens.  It says in 2010 it paid more than $249 million in corporate taxes in sub-Saharan Africa and India.

ActionAid also alleges that Associated British Foods uses a network of subsidiaries to reduce its tax liabilities in Zambia by millions of dollars.  Associated British Foods says ActionAid's analysis is "incomplete at best and factually wrong in places."
 
Some argue that tax havens actually facilitate investment in the global economy, says Mark Littlewood, Director General of the Institute for Economic Affairs in London.

"This idea that, sort of, Western companies that are tax efficient are exploiting these places rather than bringing inward investment to them, I think, is a rather neo-imperialist old style way of looking at the world.  We want more of that inward investment.  That creates jobs and creates growth in some of the poorest countries in the world," said Littlewood.

British Prime Minister David Cameron has pledged to put the issue of tax havens on the agenda when he hosts the G8 Summit next month.

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by: Mark
May 12, 2013 10:11 AM
The issue of suspect diamond and gold sales from Africa, is what should be discussed at the G 8 Summit, but what purpose would it serve as the G8 cannot enforce control measures - how would those involved be extradited, to what Country, and then prosecuted? mmm not hapening.

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