Illicit Financial Flows and Tax Justice
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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
May 31, 2021 Mozambique/Global: Fossil Fuels, Debt, and Corruption
“The scandal of Mozambique’s “hidden debts” has already cost the
country at least 11 billion US dollars, and has plunged an
additional two million people into poverty, according to a detailed
study of the costs and consequences of the debt published on Friday
by the anti-corruption NGO, the Centre for Public Integrity (CIP),
and its Norwegian partner, the Christian Michelsen Institute. The
term “hidden debts” refers to illicit loans of over two billion US
dollars from the banks Credit Suisse and VTB of Russia in 2013 and
2014 to three fraudulent, security–linked Mozambican companies –
Proindicus, Ematum (Mozambique Tuna Company), and MAM (Mozambique
Asset Management).” - report by Centre for Public Integrity
(Mozambique) and Christian Michelsen Institute (Norway)
March 8, 2021 USA/Global: Taxing the Tech Giants
“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
“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
“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
“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
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
“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
“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
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
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?
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
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.