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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

June 6, 2017  South Africa: #Guptaleaks - Will Heads Roll? http://www.africafocus.org/docs17/saf1706.php
    "The Guptas have until now escaped investigation from the state agencies because they have purchased indemnity. You have to hand it to the Guptas; the way they went about capturing the state is quite impressive. Not only did they buy the president and his son, they targeted key people in government that could act as their minions. When people were resistant to their agenda, they scouted for bootlickers and had them appointed. They paid off people in the security agencies to make sure they would not be bothered with criminal investigations." - Daily Maverick, June 5, 2017

May 24, 2017  Nigeria: Corruption Undercuts Boko Haram Fight http://www.africafocus.org/docs17/nig1705.php
    "Nigeria's corrupt elites have profited from conflict; with oil prices at a record low, defence has provided new and lucrative opportunities for the country's corrupt kleptocrats. Former military chiefs have stolen as much as US $15 billion a sum equivalent to half of Nigeria's foreign currency reserves through fraudulent arms procurement deals." - new report on "Weaponizing Tranparency"

April 17, 2017  Africa/Global: New Reports Show Massive Tax Losses http://www.africafocus.org/docs17/tax1704.php
    On April 15, "tax day" in the United States, tens of thousands of demonstrators in over 200 communities around the country marched to demand that President Trump make public his tax returns ( http://taxmarch.org/home/). Protesters also denounced his use of taxpayer funds for his personal profit and military escalation while his administration continues its assault on spending for urgent public needs at home and around the world. There is no sign that the President will comply with the demand for transparency. But the award of a Pulitzer Prize last week to the international consortium that exposed the Panama Papers was only one indicator that the drive to expose tax evasion, tax avoidance, and corruption around the world will continue.

April 3, 2017  South Africa: Rising Outcry for Zuma to Go http://www.africafocus.org/docs17/sa1704.php
    "We call on Ministers and leaders of the ANC who care about the future of democracy and the Constitution to speak up and call on the President, in the best interests of the country, to step down. We call on the parliamentary leadership of the ANC, supported by all opposition parties, to insist that parliament be recalled immediately to debate a motion of no-confidence, proposed by the ANC leadership in parliament. We call on all members of Parliament to unite and support a motion of no-confidence." - Statement by the Nelson Mandela Foundation and the Ahmed Kathrada Foundation, March 31, 2017

March 28, 2017  Liberia: Mining, Displacement, and the World Bank http://www.africafocus.org/docs17/lib1703.php
    "The roots of the New Liberty Gold project stretch back before 1995, when a resource extraction license was issued by former warlord turned president Charles Taylor to a mysterious company called KAFCO. The permit changed hands a few times and, today, Avesoro holds its permit via a wholly-owned subsidiary, Bea Mountain Mining Corp a company created in 1996 by Keikurah B. Kpoto, one of Taylor's closest associates. In 1998, foreign interests bought Bea Mountain Mining. The beneficiaries of the sale were well hidden. According to a document IRIN procured, three quarters of its capital belonged to a company incorporated in the British Virgin Islands. The rest was held by owners of bearer shares." - IRIN investigative report, March 21, 2017

February 28, 2017  Africa/Global: Open Data for Tax Justice http://www.africafocus.org/docs17/tax1702.php
    "Multinational companies typically publish global, consolidated accounts - and international accounting standards now allow these to roll into one all financial information on the substance of their economic activities, or at best to provide regional figures. This means that country-level information on profits, revenues, taxes, borrowings and employees, for example, are not provided. ... As the name suggests, the longstanding proposal for country-by-country reporting (CBCR) would make multinational companies break down and publish their results for each country. This is essential for citizens to know what companies and their affiliates are doing where they live, and what contributions they are making." - Open Data for Tax Justice announcement

February 7, 2017  Africa/Global: Transparency Setback, African Agendas http://www.africafocus.org/docs17/iff1702.php
    In the world of large multinational corporations, secrecy is more than the rule rather than exception. Despite this reality, there have been some advances in recent years, including U.S. legislation and regulations requiring disclosure of payments by U.S. oil, gas, and mining companies to foreign governments. Last week, the U.S. Congress revoked this Security and Exchange Commission rule, a year before it was actually to be implemented. Although comparatively little noticed in comparison to the tumult around White House actions, this was an indication that the Republican Congress as well was determined to reverse even modest steps to fight corporate corruption and other similar abuses.

January 23, 2017  South Africa: State Capture & Energy Policy http://www.africafocus.org/docs17/saf1701.php
    "Eskom, accused of overly cozy ties with the Guptas featured heavily in the report, with 916 mentions. ... it's Eskom's chief executive, Brian Molefe, who comes out looking the worst. According to cell phone records, Molefe had 58 phone calls with the eldest of the Gupta brothers, Ajay Gupta, between August 2015 and March 2016, just before the Guptas purchased South Africa's Optimum coal mine for 2.15 billion rand ($160 million). Eskom, which prepaid the Gupta's Tegeta Exploration and Resources 600 million rand for coal, had been accused of helping to finance the Guptas' coal mine deal through preferential treatment." - Quartz Africa

November 28, 2016  Africa/Global: Overcoming the Shadow Economy http://www.africafocus.org/docs16/iff1611.php
    "Knowledge of beneficial ownership of companies and bank accounts is fundamental, both to ensure taxation and also to prevent and prosecute crime and the money laundering that so often is associated with it. ... Corporations, trusts, and foundations are creations of the state--and as such, they have no inalienable rights. They are created to facilitate societal welfare, and to ensure that they do so, they need to be globally regulated--regulated in ways which ensure full knowledge of beneficial ownership and full compliance with all tax laws." - Joseph Stiglitz, in testimony to European Parliament Panama Papers inquiry

October 18, 2016  Ghana: New Debt Trap http://www.africafocus.org/docs16/gh1610.php
    "Ghana is in a debt crisis. Despite having had significant amounts of debt canceled a decade ago, the country is losing around 30% of government revenue in external debt payments each year. Such huge payments are only possible because Ghana has been able to take on more loans from institutions such as the International Monetary Fund (IMF), which are used to pay the interest on debts to previous lenders, whilst the overall size of the debt increases. "

September 21, 2016  USA/Africa: From #BlackLivesMatter to #StopTheBleeding Africa http://www.africafocus.org/docs16/iff1609.php
    The direct and indirect toll resulting from illicit financial flows reflects the unequal value today's world places on human lives by race and place ... Reflecting the legacy of the slave trade and colonialism, the African continent and Black people around the world are disproportionately located at the bottom of a global system that systematically sucks wealth upward, toward the top "1 percent." ... there can be no doubt that the number of deaths caused by these structural economic inequalities rivals or likely even exceeds those lost due to bombs, guns, or machetes.

September 14, 2016  Gabon: High Demand for Democracy, Short Supply http://www.africafocus.org/docs16/gab1609.php
    "Among 36 African countries surveyed in 2014/2015, Gabon ranks at or near the bottom on every indicator of election quality and fairness, according to citizen responses collected in September and October 2015. ... Gabon ranks dead last in public trust in the election commission. ... [at the same time] Gabon ranks near the top in favoring multiparty competition and term limits on presidents, as well as in disapproving of one-party and one-man rule." - Afrobarometer

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