Category: Blog

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Spotlight on tax evasion: Connecting with citizens and activists working on tax justice campaigns across Africa

Tax evasion, corruption and illicit financial flows rob countries around the world of billions in revenue which could be spent on improving life for citizens.

That much can be agreed. But how many billions are lost, who is responsible and which countries are worst affected? Those are difficult questions to answer given the lack of transparency and public disclosure in many tax jurisdictions.

The consensus is that it is the economies of the world’s poorest countries which are proportionally most affected by this revenue loss, with African governments estimated to be losing between $30 billion and $60 billion a year to tax evasion or illicit financial flows, according to a 2015 report commissioned by the African Union and United Nations.

International bodies have been slow to produce solutions which fight for the equitable sharing of tax revenues with lobbying leading to a retrenchment of proposed transparency measures and scuppering efforts to create a global tax body under the auspices of the UN.

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More transparency and public information is needed to understand the true extent of these issues. To that end, Open Knowledge International is coordinating the Open Data for Tax Justice project with the Tax Justice Network to create a global network of people and organisations using open data to improve advocacy, journalism and public policy around tax justice.

And last week, I joined the third iteration of the International Tax Justice Academy, organised by the Tax Justice Network – Africa, to connect with advocates working to shed light on these issues across Africa.

The picture they painted over three days was bleak: Dr Dereje Alemayehu laid out how the views of African countries had been marginalised or ignored in international tax negotiations due in part to a lack of strong regional power blocs; Jane Nalunga of SEATINI-Uganda bemoaned politicians who continue to “talk left, walk right” when it comes to taking action on cracking down on corrupt or illicit practices; and Professor Patrick Bond of South Africa’s Witwatersrand School of Governance foresaw a rise in violent economic protests across Africa as people become more and more aware of how their natural capital is being eroded.

Several speakers said that an absence of data, low public awareness, lack of political will and poor national or regional coordination all hampered efforts to generate action on illicit financial flows in countries across Africa. Everyone agreed that these debates are not helped by the opacity of key tax terms like transfer pricing, country-by-country reporting and beneficial ownership.

“…an absence of data, low public awareness, lack of political will and poor national or regional coordination all hampered efforts to generate action on illicit financial flows”

The governments of South Africa, Nigeria, Kenya and Tanzania may have all publicly pledged measures like creating beneficial ownership registers to stop individuals hiding their wealth or activities behind anonymous company structures. But at the same time a key concern of those attending the academy was the closing of civic space in many countries across the continent making it harder for them to carry out their work and investigate such activities.

Michael Otieno of the Tax Justice Network – Africa told delegates that they should set the advocacy agenda around tax to ensure that human rights and development issues could be understood by the public in the context of how taxes are collected, allocated and spent. He encouraged all those present to combine forces by adding their voices to the Stop the Bleeding campaign to end illicit financial flows from Africa.

This blogpost was drafted by Stephen Abbott Pugh, a portfolio manager for Open Knowledge International and project manager of the Open Data for Tax Justice project. 

You can also find the post here.

https://creativecommons.org/licenses/by/4.0/

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ADDIS FfD CONFERENCE: ANOTHER MISSED OPPORTUNITY

Discussions on Illicit Financial Flight (IFFs) and ways of addressing them have never been more urgent yet; the world has just missed the opportunity at the just concluded Finance for Development (FfD) conference held in Addis Ababa, Ethiopia. Africa and the rest of the developing world remain the biggest losers in this circus.

Despite its impact on both developed and developing countries, discussions on how to tackle IFFs have been hijacked by Organisation for Economic Co-operation and Development (OECD) member states, with little or no input by countries most affected.

Each year, more than US$50 billion is estimated to exit the African continent by way of IFFs. This is almost 20 per cent more than Official Development Assistance (ODA) coming into the region.
It was hoped that the Addis FfD conference would address systemic issues on tax and illicit flows, gender inequality and ODA. It was further anticipated that reaching a consensus on the above issues would greatly contribute towards the eradication of poverty and financing sustainable development. The final outcome document fell short.

On the positive side, this was the first time the world united in reaching a consensus on Illicit Financial Flows by committing to redouble efforts to reduce them by 2030 and eventually eliminate them.

Immediate initiatives that were proposed to facilitate this were the formation of a Tax Inspectors Without Borders and the Addis Tax initiative.

The downside of the outcomes is that, once again, the world has lost an opportunity to tackle the structural injustices in the current global financial and economic systems by defining measures and ensure that development finance is people-centered and protects the environment. The outcome of the Addis Conference does not prescribe the necessary leadership, ambition, deliverables and practical actions needed for the resolutions and commitments to be operationalised. Instead it undermines prior agreements in the Monterrey Consensus and the Doha Declaration. Most importantly, the conference did not address international systemic issues in macroeconomic, financial, trade, tax, and monetary policies in a comprehensive manner. Neither did it scale up existing financial resources, nor commit new and additional ones. These weak commitments will inevitably impact on upcoming discussions on financing the Post-2015 sustainable development agenda.

Tax fraud including tax evasion and tax avoidance especially by big multinational companies severely limit the capacity of developing countries especially in Africa to raise domestic resources to implement their development agenda to improve the quality of life of their populations.

This challenge would have been addressed by the formation of a global tax body that would improve the fairness, transparency, efficiency and effectiveness of international tax systems.

Currently, international tax standards are crafted behind closed doors by rich countries, mainly OECD countries and here developing countries have no say. The proposed body was critical as it would have provided the world with a central point for the development of a coherent global tax system with less complexity, a platform for stronger cooperation between tax administrations from all countries, a better business environment; and increase finance for development in the poorest countries and fair and consistent global action against tax havens and other tax malpractices.

Despite the lost opportunity, the struggle must go on and we need to arm ourselves with relevant knowledge on how African governments can seal the many tax loopholes exploited particularly by big multinational companies and rich individuals to increase their domestic revenue collection.

This discussion is key post the Addis FfD conference and the International Tax Justice Academy, planned for 10th -14th August, offers this platform. The theme for this year’s Academy is “Financing Africa’s Economic Development? Where is the money?”

By Alvin Mosioma,
Executive Director,
Tax Justice Network-Africa