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Illicit Financial Flows and Tax Justice

This page updated on-line at http://www.africafocus.org/intro-iff.php.

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Talking Points

  • Inequality and tax evasion are growing both within and between countries, while the rich on all continents funnel their wealth into secret bank accounts scattered around the world. This erodes the public sector, starves countries of funds needed for development, and drives up deficits.

  • The trend is worldwide as multinational companies shuttle money and subsidiaries between countries to minimize taxes, while the ultra-rich and organized crime hide their assets in untraceable shell accounts. But the toll in Africa is enormous, with losses estimated at $50 billion to $80 billion a year due to illicit capital flight.

  • One recent study, for example, estimated at least US$60.8 billion in losses due to transfer pricing in or out of 5 African Countries (Ghana, Kenya, Mozambique, Tanzania, and Uganda), from 2002-2011.

  • The good news is that governments and multilateral agencies around the world are waking up to this issue, and the pressure for transparency in financial reporting is growing. The same technical mechanisms that have been used to track funds of drug traffickers and terrorist networks can now be used, if there is political will, to track monies lost to illicit financial flows and tax evasion.

The Stop the Bleeding Africa Campaign led by six continent-wide African civil society networks is seeking support from African and global organizations as it continues to lobby African and other governments to stop illegal and illegitimate financial flows that are draining resources for the continent.

Sign up to the Campaign and find more background on the websites of the Campaign and of Tax Justice Network - Africa.

USAN: Top Ten Questions on IFF and Africa | Resources on IFF and Africa | Top Ten Books on IFF and Tax Evasion | National and Global Inequality

Most recent bulletins on illicit financial flows and tax justice

March 8, 2021  USA/Global: Taxing the Tech Giants http://www.africafocus.org/docs21/dig2103.php
    “How should we determine the corporate tax a big tech company should pay in each country where they operate? There are many ways that this could be calculated, but most recommendations suggest looking at their sales, their assets and the number of employees they have in each country. In the absence of transparent reporting, collecting such data is not easy, but we can get a useful estimate through looking at a proxy indicator: the number of users they have in each country. For example, in just 20 developing countries there are nearly 1.5 billion internet users accessing Google, about 900 million people using Microsoft on their desktops and over 750 million Facebook users. For these companies, the number of users is a good indicator of both their sales and their assets.” - ActionAid

February 22, 2021  Africa/Global: The Inequality Virus http://www.africafocus.org/docs21/ineq2102.php
    “COVID-19 has been likened to an x-ray, revealing fractures in the fragile skeleton of the societies we have built. It is exposing fallacies and falsehoods everywhere: The lie that free markets can deliver healthcare for all; The fiction that unpaid care work is not work; The delusion that we live in a post-racist world; The myth that we are all in the same boat. While we are all floating on the same sea, it’s clear that some are in super yachts, while others are clinging to the drifting debris.” – António Guterres, UN Secretary General

December 14, 2020  Africa/Global: State of Tax Justice 2020 http://www.africafocus.org/docs20/tax2012.php
    “Of the $427 billion in tax lost each year globally to tax havens, the State of Tax Justice 2020 reports that $245 billion is directly lost to corporate tax abuse by multinational corporations and $182 billion to private tax evasion. Multinational corporations paid billions less in tax than they should have by shifting $1.38 trillion worth of profit out of the countries where they were generated and into tax havens, where corporate tax rates are extremely low or non-existent. Private tax evaders paid less tax than they should have by storing a total of over $10 trillion in financial assets offshore.” - Tax Justice Network, November 2020.

June 8, 2020  Africa/Global: Thinking Post-Covid-19 http://www.africafocus.org/docs20/post2006.php
    “Calls for debt relief—or more timid debt service moratorium—are drops in the ocean. Something much more ambitious and radical should be envisaged. This crisis allows us to think big. … [F]or these exceptional times, we need exceptional solutions. This virus does offer Africa an opportunity to exercise agency and embark on a more robust structural transformation process. Building on the gains of the last few years and the resilience of its population, there will probably be no better time to fast-track change.” - Carlos Lopes, former Executive Secretary of the United Nations Economic Commission for Africa

February 24, 2020  USA/Global: National and Global Inequalities Are Intertwined http://www.africafocus.org/docs20/iff2002.php
    The recession that began in 2008 brought new life to the public debate on class and racial inequality in the United States. The #OccupyWallStreet demonstrations in 2011 may have left no institutional legacy, but they shined a spotlight on a yawning wealth gap and the role of the “one percent.” #BlackLivesMatter and related movements challenged complacency on entrenched racism … Public awareness of inequality, like awareness of climate change, was rising even before President Trump took office. But his administration’s sharp turn toward denial and regression on both issues has spurred active opposition and cut into the complacency of conventional Democratic Party politics.

October 9, 2019  Africa/Global: Targeting Corporate Shell Games http://www.africafocus.org/docs19/iff1910.php
    “Across the world, citizens who want their governments to implement policies to reduce inequalities, address climate change and looming ecological disaster, provide better public services and amenities, ensure social protection, generate quality employment and so on, are always confronted with one question: where is the money? We are constantly told that governments cannot afford the necessary expenditure; that running fiscal deficits will lead to financial chaos and crisis; and that raising taxes will simply drive away investment. But this is not just misleading; it is simply wrong. Governments are constrained in their resources because they tolerate widespread tax evasion and avoidance. ” - Professor Jayati Ghosh, Jawaharlal Nehru University

August 12, 2019  Africa/Global: #MauritiusLeaks Reveals Tax Dodges http://www.africafocus.org/docs19/iff1908a.php
    “Based on a cache of 200,000 confidential records from the Mauritius office of the Bermuda-based offshore law firm Conyers Dill & Pearman, the investigation reveals how a sophisticated financial system based on the island is designed to divert tax revenue from poor nations back to the coffers of Western corporations and African oligarchs, with Mauritius getting a share. The files date from the early 1990s to 2017.” - International Consortium of Investigative Journalists

August 12, 2019  Africa/Global: Tax Avoidance 101 http://www.africafocus.org/docs19/iff1908b.php
    Aircastle Ltd., a Connecticut-based global company specialized in leasing airplanes, is not alone among large American companies lowering their taxes through creative accounting, which also include well-known giants such as Amazon and Apple. But the recent revelations on Aircastle´s use of Mauritius as a tax haven provide a helpful window into how such tax dodges can make use of off-shore companies set up primarily for that purpose.

April 30, 2019  Africa/Global: Fighting Tax Evasion and Tax Avoidance http://www.africafocus.org/docs19/eca1904.php
    The UN Economic Commission for Africa (ECA), in its annual Economic Report on Africa, focused on financing development in Africa, highlighted the urgency to curb what it termed “revenue leaks” through tax evasion and tax avoidance, as well as through misguided government policies. Multinational corporations, corrupt officials, and financial intermediaries around the world siphon off African wealth, leaving national budgets starved for resources to invest in health, education, and sustainable economic growth.

January 8, 2019  Mozambique/Global: Who Pays for Transnational Corruption? http://www.africafocus.org/docs19/moz1901.php
    The line-up of those involved in this $2.2 billion fraudulent loan deal, now implicated in a case in the U.S. District Court of the Eastern District of New York, is multinational. The five named individuals indicted include the former Minister of Finance of Mozambique, a Lebanese businessman representing Privinvest (an international shipping conglomerate in Abu Dhabi), and three London-based bankers, citizens of New Zealand, Great Britain, and Bulgaria, employed at the time of the loans by the giant Swiss bank Credit Suisse. Three more names are redacted in the indictment and 5 others, three Mozambicans and two additional employees of Privinvest, are cited but not named in the text of the indictment.

November 12, 2018  Africa: Africa Mining Vision http://www.africafocus.org/docs18/amv1811.php
    The Africa Mining Vision (AMV) was adopted by Heads of State at the February 2009 African Union summit following the October 2008 meeting of African Ministers responsible for Mineral Resources Development. An action plan was adopted in December 2011, and the African Minerals Development Centre (https://www.uneca.org/amdc) launched in December 2013. The lead role in developing the vision was taken by African professional staff at the United Nations Economic Commission for Africa (UNECA), in consultation not only with African governments but also with civil society organizations and specialists on the mining sector.

November 12, 2018  Africa: Why Mining is Hard to Tax http://www.africafocus.org/docs18/tax1811.php
    "In Africa as elsewhere in the world, while energy companies might be somewhat undertaxed, mining companies typically are greatly under-taxed. Indeed, it is only a slight exaggeration to say that, with a few significant exceptions, notably Botswana’s diamond mines, mining in Africa is barely taxed at all. One reliable source indicates that contemporary African governments collect about 55% of the total value of energy production in tax revenue, but only 3% of the value of mining production." - Taxing Africa

Complete listing of bulletins on illicit financial flows, tax justice, and debt, 2003-present