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USA/Africa: Rising Opposition to Tax Evasion
February 29, 2016 (160229)
(Reposted from sources cited below)
"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)
The global systems of tax evasion (and we should add tax avoidance,
for cases in which such illicit maneuvers may be technically legal
due to faulty laws and clever lawyers) are pervasive. Africa and
other developing regions suffer the most, as highlighted by the Stop
the Bleeding Africa campaign. But every country is affected, as
resources that could be used the public good are drained into the
pockets of the rich and powerful.
Before you read further, go to https://www.youtube.com/watch?v=_nDPKiWSTXI to check out the Stop
the Bleeding Africa song, with audio, lyrics, and photos, and
distribute widely in your networks. The song is expected to win the
best activist anthem award in the Honesty Oscars (
http://www.honestyoscars.org/). Voting is now closed and the
announcement will be made tomorrow.
This AfricaFocus contains several press releases and excerpts from
recent reports, as well as links to other reports highlighting how
the happens, from Nairobi to New York and throughout the global
For previous AfricaFocus Bulletins on tax justice and illicit
financial flows, visit http://www.africafocus.org/intro-iff.php
For ongoing coverage of these issues, AfricaFocus strongly
recommends https://groups.google.com/forum/#!forum/fact-coalition (primary
focus on U.S. policy and advocacy; sign-up requires contacting the
owner) and https://groups.google.com/forum/#!forum/afritax (primary
focus on Africa; open sign-up)
++++++++++++++++++++++end editor's note+++++++++++++++++
Roundup of Recent News & Press Releases
"Treasury keen to evade Parliament in Mauritius tax row," Daily
Nation, Nairobi, Feb. 4, 2016 http://tinyurl.com/zm4jtm3 [For
background see Tax Justice Network-Africa press release from Nov. 2,
Zambian civil society calls for beneficial ownership transparency in
regulations for extractive industry, Publish What You Pay Zambia and
Center for Trade Policy and Development, 14 Jan., 2016
Former President Thabo Mbeki and delegation from UNECA High Level
Panel on Illicit Financial Flow from Africa visit Washington, DC to
urge action to curtail illicit flows from Africa See press release
from Global Financial Integrity, Feb. 19, 2016
Americans for Tax Fairness, "Pfizer: Price Gouger, Tax Dodger"
Feb. 25, 2016 - on how Pfizer's "inversion" (selling itself to a
foreign subsidiary) may allow it to dodge some $35 billion in taxes.
Note that such inversions have been denounced by both Democratic
candidates for president.
Global Financial Integrity (GFI) update on illicit financial flows,
covering 2004-2013 http://tinyurl.com/gq66oy6 - includes latest
estimate of IFF from sub-Saharan Africa $74.6 billion in 2013;
average of $67.5 billion a year over the 10-year period.
[Note from AfricaFocus editor: These numbers are estimates, and
almost certainly underestimates, as both GFI and the Mbeki report
acknowledge. But for those of you using figures from earlier reports
such as "in excess of $50 billion to $60 billion a year," it's now
time to update the numbers and start talking about at least $65
billion to $70 billion.]
Lowering The Bar: How American Lawyers Told Us How to
Funnel Suspect Funds into The United States
Brief excerpts only. For videos and full report go to the link
Global Witness has previously looked at a whole range of crimes, and
found they all had one thing in common. They were all carried out by
anonymous company owners, who are able to skirt U.S. laws and
launder money through our financial system. If these sham companies
did not exist, those crimes would be far harder to commit.
Anonymous companies do great damage to society. Warlords and
dictators use them to steal from their people and stash the loot in
places like the U.S. A violent Mexican drug cartel called the Zetas
used American companies to launder its profits. The Iranian
government has used them to evade sanctions. Credit card scammers,
mobsters, tax evaders and other criminals routinely use them to rip
off innocent citizens or threaten U.S. interests and get away with
The crazy thing is, these companies are often set up in the U.S. -
it is one of the easiest places in the world to do this legally.
To prove our point, we went undercover and approached 13 New York
law firms. We deliberately posed as someone designed to raise red
flags for money laundering.
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.
To be clear, the meetings with the lawyers were all preliminary.
None of the law firms took our investigator on as a client, and no
money was moved.
Nonetheless, the results were shocking; all but one of the the
lawyers had suggestions on how to move the funds. To see what some
of them said, watch the video below https://www.youtube.com/watch?v=j8pgI60GrvU
he key findings from the investigation are:
Lawyers from 12 of the 13 firms we visited suggested using anonymous
companies or trusts to hide the minister's assets. All but one of
these firms recommended using American companies.
One of the lawyers who provided suggestions on how to move the funds
was James Silkenat, the President of the American Bar Association at
Several lawyers suggested using their law firms' own bank accounts
to help prevent U.S. banks realizing whose money it really was, or
to have the lawyer act as a trustee of an offshore trust and use
this position to open a bank account.
While most of the lawyers asked for some information about the
minister, and his source of funds, only one lawyer refused to
provide assistance during the meeting itself.
A number, including Mr. Silkenat, indicated they would need to carry
out more checks before they could take our investigator on as a
client. Mr. Silkenat also indicated that he had to make sure that no
crimes had been committed and, if so, would have to report them.
None of the lawyers broke the law. To find out more about the
investigation, including the responses we received from the lawyers
featured read our briefing paper.
Ultimately, this is not about individual lawyers - it's about what
is wrong with the law. The tactics described in the film are
commonplace. It is simply too easy to hide who you you are and what
you are doing behind companies.
This has to change. You can help fix this problem, and help cut off
some of today's worst crimes at the source.
This is what is needed to fix the problem:
- The U.S. should put information about who ultimately owns and controls
American companies into the public domain for all to see.
At present, the lack of information available on the people
behind American companies is a gift to individuals who want to use
them to hide their identity and move their loot.
- The people who set up companies and trusts - lawyers, accountants
and company service providers - should be required to be on the
lookout for money laundering. At present none of these people are
required to carry out anti-money laundering checks on their
customers. They should be, especially when they are carrying out
activities such as setting up companies and managing clients'
Mistreated: How shady tax treaties are fuelling inequality and
February 23, 2016
http://www.actionaid.org - direct URL: http://tinyurl.com/zwlyynl
For more information, contact Savior Mwambwa, Tax Power Campaign
Manager, in Johannesburg. Email: firstname.lastname@example.org
Women and girls in the world's poorest countries need good schools
and hospitals. To pay for this, these countries urgently need more
tax revenue. A little-known mechanism by which countries lose
corporate tax revenue is a global network of binding tax treaties
between countries. This report marks the release of the ActionAid
tax treaties dataset - original research that makes these tax deals
made with some of the world's poorest countries easily comparable
and open to public scrutiny.
Tax avoidance strategies used by some multinational corporations
deprive the world's most impoverished communities of vital revenues.
Tax revenue is one of the most important, sustainable and
predictable sources of public finance there is. It is a crucial part
of the journey towards a world free from poverty - funding lasting
improvements in public services such as health and education. The
communities that ActionAid works with around the world are demanding
increased public funds to promote development - particularly for the
realisation of women and girls' human rights.
Tax treaties - agreements between countries that carve up tax rights
- play a facilitating role in many of these tax avoidance schemes.
Tax treaties have played a part in most well-known cases of
aggressive tax planning, such as in Google's and Amazon's tax
schemes. Many of the tax treaties that ActionAid has scrutinised are
ensuring that money flows untaxed from poor to rich countries,
making the world more unequal and exacerbating poverty.
Tax treaties have so far received little public scrutiny - but this
is changing. ActionAid has commissioned original research that makes
the content of more than 500 binding treaties signed by lower-income
countries (those classified as low and lower-middle income by the
World Bank) in Asia and sub-Saharan Africa available to the public
and open to scrutiny for the first time. These important tax
agreements decide when, how and even if some of the world's poorest
countries can tax foreign-owned corporations that are making money
within their borders.
Global corporations use tax treaties to limit their tax
contributions in the lower-income countries where they generate
profits. Tax treaties that aggressively lower tax contributions in
lower-income countries are harming revenue collection in these
countries and the rights of the world's most vulnerable people. They
have no place in the 21st century. The era of outdated and
unscrutinised tax treaties that create opportunities for
multinational tax avoidance must come to an end. It's time to ensure
that all investors pay their fair share and put an end to
aggressively lowered taxes and double non-taxation on investment
Developing countries lose billions
Bangladesh is losing approximately US$85 million every year from
just one clause in its tax treaties that severely restricts its
right to tax dividends. With an annual total health expenditure of
approximately US$25 per capita, remedying this alone could pay for
health services for 3.4 million people.
In 2004, Uganda signed a tax treaty with the Netherlands that
completely takes away Uganda's right to tax certain earnings paid to
owners of Ugandan corporations, if the owners are resident in the
Netherlands. A decade later, as much as half of Uganda's foreign
investment is owned from the Netherlands, at least on paper. The
result of the current treaty is lost tax revenue in Uganda, which
could have paid for essential public services for the Ugandan
ActionAid has identified the most restrictive treaties
All tax treaties restrict the right to levy tax, but some treaties
take away far more tax power than others. The ActionAid tax treaties
dataset shows that the overall number of tax rights that lowerincome
countries give up varies widely from treaty to treaty.
ActionAid's new research identifies the treaties that remove more
tax rights than most - which we call very restrictive treaties. It
finds that the United Kingdom and Italy are tied as the countries
with the largest number of very restrictive treaties with lowerincome
Asian and sub-Saharan African countries, followed by Germany.
China, Kuwait and Mauritius also have a rapidly growing number of
very restrictive treaties with some of the world's poorest
Treaties that lower-income countries have with OECD countries (a
club of rich, industrialised countries) take away more rights to tax
than those with non-OECD countries. Worryingly, the deals struck
with OECD countries are getting worse over time.
Tax treaties with tax havens such as Mauritius can come at a
particularly high cost. Money is often routed through tax havens as
part of tax avoidance strategies that rely on tax cuts contained in
treaties signed by those havens.
Tax treaties limit poor countries the most
ActionAid is deeply concerned that the balance of tax rights created
by tax treaties is not fair. In practice, the taxing restrictions
within tax treaties impose an unfair burden on lower-income
countries compared to wealthier countries. While both parties to a
tax treaty give up some tax rights, the dominant model treaty
squeezes the tax rights of the capital-importing (lower-income)
country more than the capital-exporting (wealthier) country.
In 2015-16, the OECD, the European Parliament and the European
Commission have acknowledged that the balance of tax rights in tax
treaties is a problem for developing countries.
Some treaties result in multinational corporations not paying
certain types of taxes either in the lower-income country where they
operate, or in the country where they are based, so called double
non-taxation. This practice cuts urgently needed tax contributions
in some of the world's poorest communities. Uganda's tax deal with
the Netherlands blocks Uganda from taxing income that investors
bring home from Uganda and the income is routinely not taxed in the
Netherlands either. These investors enjoy double non-taxation while
Uganda misses out on vital tax contributions.
Political action is needed
Tax treaties are voluntary; they can be renegotiated and cancelled.
Rwanda's successful renegotiation with Mauritius in 2013 is a strong
example, and included five important triumphs that re-established
Rwanda's rights to tax construction sites, business services,
interest and royalty payments. Mr Moses Kaggwa, Commissioner for tax
policy at the Ugandan Ministry of Finance, Planning and Economic
Development said in 2014: "We have stopped negotiations of any new
agreement until we have a policy in place that will not only offer
guidelines but give clear priorities of what our interests and
Lower-income countries should not sign bad tax deals with other
governments that take away their taxing power. Wealthier countries
can act to align the rules of their tax treaties with development
ActionAid is calling for governments to:
- Urgently reconsider the treaties that restrict the tax rights of
low and lower-middle income countries most.
- Subject treaty negotiation, ratification and impact assessments to
far greater public scrutiny.
- Take a pro-development approach to the negotiation of tax treaties
by adopting the UN model tax treaty as the minimum standard.
ActionAid is calling for multinational corporations to:
- Be transparent about their interactions with developing country
governments regarding treaty terms and refrain from lobbying
governments to conclude tax treaties that are particularly
advantageous to their own business interests, but of limited or
unclear benefit to the developing country concerned.
OECD invites developing countries to join anti-tax avoidance plan,
but only after the rules have been written
The OECD's plan to open BEPS system after it has already been
designed highlights the need for a truly universal tax body
February 23, 2016
Financial Transparency Coalition (http://www.financialtransparency.org)
Ahead of this week's G20 Finance Ministers meeting, the Organization
for Economic Cooperation and Development announced plans to invite
non-member countries to join in its anti-tax avoidance system
http://tinyurl.com/j7o8vdf). The Base Erosion and Profit Shifting (BEPS) project aims to tackle the problem of corporate tax dodging. Although the invitation for inclusion comes as the global discussion about tax dodging reaches new heights, the bones of the plan have been in place for years, leaving no room for substantive input.
"Inclusion after the fact is a poor substitute for a voice in how
the standards are designed," said Oriana Suárez of the Latin
American Network on Debt, Development, and Rights. "Developing
countries now being invited into the BEPS system did not have a say
while the rules were being set."
"The OECD is certainly one part of the global fight against tax
evasion and tax avoidance, but it's not well-positioned to be the
sole standard bearer for the globe," added Porter McConnell of the
Financial Transparency Coalition. "Having its members speak on
behalf of the rest of the world's countries is patronizing and it's
"Again, we're seeing an attempt by the OECD to get global buy-in for
a system that was designed by the few," said Alvin Mosioma of the
Tax Justice Network-Africa. "G77, a group of 134 developing
countries, have for years been demanding a stronger voice and a true
seat at the table, but the latest OECD proposal fails to respond to
"The frustrating reality is that we've already seen proposals to
create an inclusive intergovernmental UN body for setting global
standards, but it has repeatedly been blocked by the same OECD
countries that are asking others to join their system," added Pooja
Rangaprasad of the Financial Transparency Coalition. "Despite the
latest announcement by the OECD, a UN body continues to be the most
effective and inclusive global solution."
Notes to Editors:
 The OECD proposal will be presented to G20 Finance Ministers at
their next meeting on 26-27 February in Shanghai, China.
 The issue of a UN tax body was subject of negotiations at the
3rd Financing for Development Conference in Addis Ababa, Ethiopia in
July 2015 (http://tinyurl.com/h3969sd).
 The BEPS Project, agreed to by G20 Leaders at the 2015 G20
Summit in Turkey, aims to tackle corporate tax avoidance and tax
evasion. The plan was developed by members of the Organization for
Economic Cooperation and Development, a group of 34 wealthy
Contact: Christian Freymeyer , Financial Transparency Coalition
Tax Reform Should Close Offshore Loopholes, End Tax Haven Abuse
February 24, 2016
FACT Coalition Submits Comments to House Ways and Means Committee
Ahead of International Tax Reform Hearing
http://www.thefactcoalition.org / direct URL:
Washington, D.C. - Ahead of a planned hearing on international tax
reform, the FACT (Financial Accountability and Corporate
Transparency) Coalition today submitted comments to the U.S. House
Committee on Ways and Means urging lawmakers to focus reform efforts
on closing offshore loopholes and ending tax haven abuse.
"Offshore loopholes and tax haven abuse cost U.S. taxpayers $150
billion per year," said Clark Gascoigne, Interim Director of the
FACT Coalition, upon submitting the comments to the Committee. "It's
an enormous amount of lost revenue that must instead be shouldered
by small businesses, domestic corporations, and ordinary
"At the same time, tax haven abuse facilitates the outflow of
trillions of dollars from developing countries—exacerbating global
poverty and inequality and increasing our national security risks,"
continued Mr. Gascoigne. "It's high time that Congress reform our
tax code to close these loopholes—protecting the most vulnerable
among us and evening the playing field for domestic businesses to
compete fairly with multinational corporations. We hope that the
Committee chooses to move in this direction."
The FACT Coalition's submission to the Ways and Means
Committee—which is co-signed by 12 of the coalition's
members—specifically highlights a number of issues, including:
- How the tax code is riddled with loopholes inserted by special
interests resulting in the ability for large, multinational
corporations to shift their tax responsibilities to small businesses
and average taxpayers.
- How companies use the current system of deferral to indefinitely
put off paying taxes until the profits are "brought back" to the
- The practices of inversions and earnings stripping, where a
domestic company purchases a foreign firm that's usually much
smaller and reincorporates overseas in a low or no tax jurisdiction.
The company then loads down the domestic entity with so much debt as
to obviate any potential tax payments.
- How Congress should avoid embracing changes to the tax code that
provide false "solutions" like a shift to a territorial tax system
or proposals to create patent or innovation boxes.
The Coalition proposes policy solutions along the lines of the Stop
Tax Haven Abuse Act (S. 174, H.R. 297), the Stop Corporate
Inversions Act (S. 198, H.R. 415), and ending the ability of
multinational corporations to indefinitely defer paying taxes on
Notes to Editors:
Download a PDF of the FACT Coalition's submission (
Full signatories of the submission include: American Sustainable
Business Council, Americans for Tax Fairness, Citizens for Tax
Justice, FACT Coalition, Fair Share, Global Financial Integrity,
Jubilee USA Network, Main Street Alliance, New Rules for Global
Finance, Oxfam America, Public Citizen, Tax Justice Network USA, and
U.S. Public Interest Research Group (PIRG).
Learn more about the hearing on the website of the House Ways and
Means Committee (http://tinyurl.com/gskfqqz).
Journalist Contact: Clark Gascoigne, FACT Coalition
email@example.com +1 202.813.0290
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