As conferences continue to be held in Africa about the theft of monies due to us by multinationals, the continent continues to be short-changed by lack of collaboration and information sharing.
The numbers range from hundreds of millions of dollars to a billion, even a trillion, depending on whom you ask. Until African countries build a system to share information on tax evasion, as they should, the dream of stemming illicit capital flows will remain just that.
In 2015, former South African president Thabo Mbeki presented a report on the money siphoned from Africa by illicit means by multinational corporations. He pegged the figure at $50 billion, which was a conservative estimate even back then.
Barely three years since he presented the report of his high-level panel on illicit financial flows from Africa, it was recorded - at a Conference of Finance held in Addis Ababa by the UN Economic Commission for Africa (Uneca) - that this figure had doubled to $100bn.
Illicit capital flows are funds that rightfully belong to the fiscal pool of African and other developing countries, but instead are channelled out through aggressive tax planning by multinational corporations.
They do this with the help of professional tax experts, hired by banks, financial advisory or asset management companies and firms providing professional services. The service goes by many innocuous names, including transfer pricing.
In brief, transfer pricing and its cousins thrive on structuring a corporate maze to make the diversion of funds look legal.
Professional services firms and their allies hire very competent tax advisors, who study the tax laws of different countries to help their clients move the bulk of their taxable income to tax havens in order to pay as little tax as possible.
Jurisdictions such as the Bahamas, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Channel Islands, the Cook Islands - even Hong Kong and Mauritius are among the well-known tax havens.
The governments of these countries attract investment by offering unrealistically low tax rates. Multinational corporations then register their companies in these jurisdictions, while operating their businesses elsewhere.
Instead of paying their due taxes in the countries where they generate their income, they shift every expense to the tax haven (or their home country), in order to pay as little tax as possible. Such companies easily operate a loss-making enterprise for years in one country, burdening it with group expenses and costs.
While these entities are stealing money from emerging markets, lots of them in Africa, our leaders are holding conferences about an issue that they are already well informed about. Since the Mbeki report in 2015, many multinational corporations have been caught for alleged tax evasion, or similar offences. Some of them end up settling with the governments concerned to avoid drawn-out disputes.
In Africa, notable examples include the $300m settlement between Tanzania and the world’s largest gold producer, Barrick Gold Corporation. Barrick’s Acacia Mining had been accused of operating illegally in the country and evading taxation. When the settlement was agreed upon in October 2017, the management of Acacia did not concede culpability, but let go of its CEO Brad Gordon and chief financial officer Andrew Wray two months later.
In April, the finance ministry of Angola reported recovering a sum of $500m, illegally transferred from the National Reserve Bank of Angola to an HSBC account in London, allegedly by José Filomeno dos Santos, son of the country’s former president. In Nigeria, in December 2017 the last $320mn of the $700m stolen by former ruler of the country, Sani Abacha, was repatriated.
The Panama Papers and the Paradise Papers were two massive revelations of how companies and individuals, from sports stars to actors and politicians, were stashing money away in schemes that bordered on controversial, if not downright illegal.
For their failure to collaborate in rooting out this corruption, African governments are as guilty as the multinational corporations and the fraudsters and their banks in diverting funds that should go towards attempting to improve the quality of life of the continent’s hundreds of millions of poor people.
* Kgomoeswana is the author of Africa is Open for Business, a media commentator and public speaker on African business affairs, and a columnist for Destiny Man.
The Sunday Independent