By Justice Lee Adoboe ACCRA (Xinhua) --
The quest of African countries to carry out
economic stability and transformation is threatened by illicit
financial outflows through tax evasion and avoidance, a UN
expert observed here on Thursday.
He said the draining of
tax revenues and scarce foreign exchange resources stifled
growth and socio-economic development and weakened governance.
Kojo Busia (Ph D), Senior
Mineral Sector Governance Advisor, United Nations Economic
Commission for Africa (UNECA), made these remarks at the opening
of a two-day International Conference on Resource Taxation.
African Mining Vision – a
developmental vision adopted by the African Union in February
2009, advocates the use of Africa’s mineral resources for
It advocates the use of
Africa’s natural resources to transform the continent’s social
and economic development path.
“To achieve such a
transformative agenda of the AMV, Africa would have to
mobilize every dime and penny accruing from its natural
resource rents,” Busia averred.
He therefore urged African
leaders to tackle decisively the scourge of illicit financial
and capital outflows through tax avoidance, evasion and transfer
pricing so that the continent could harness the potential of its
mineral resources for transformative development.
Relying on data from Civil
Society Organizations (CSOs) such as ActionAid, the official
pointed out that developing countries lost three times more to
tax havens than they received in aid.
It is estimated that
between 1980 and 2009; roughly 1.2 trillion U.S. dollars and 1.4
trillion dollars left Africa in illicit financial flows.
“This amount roughly
equals Africa’s current gross domestic product, surpassing by
far the total amount of development aid received from outside
the continent over the same period,” Busia pointed out.
“Activities such as
transfer pricing, trade mis-pricing and over-invoicing in the
extractive sector are bleeding Africa off precious tax
revenues that could generate jobs, reduce poverty, build
stable democracies and eventually transform Africa and make
development assistance redundant,” he lamented.
Although he conceded that
the challenge was a complex one, he believed that, with a
multi-faced approach that included internal collaboration and
the strengthening of governance institutions within African
states, the battle would be won.
The official also called
for the full implementation of international principles such as
the EU Directives on Disclosure, the Organization for Economic
Cooperation and Development (OECD) guidelines on capital flight,
and the U. S. Dodd Frank Act were all necessary and should
continue to be fully implemented.
challenge can be overcome through internally driven processes
such as domestic accountability systems and regional
cooperation among African countries,” he insisted.
The more recent data from
the Global Financial Integrity released in 2013 exposes the
extent of illicit financial flows in Africa between 2002 and
In the first 30 out of 177
countries surveyed, three African countries, namely Nigeria,
South Africa and Sudan, all resource rich countries, were
reported to have lost 26.9 billion dollars to illicit financial
flows over a 10-year period.
“The AU must therefore
pass a Resolution on Guidelines against illicit financial
flows and integrate such measures with global efforts like the
OECD Guidelines and the G8 conventions,” urged Mohammed Amin
Adams, Executive Director for African Center for Energy
Policy, conveners of the two-day conference.
He also urged African
governments to show commitment to blocking extractive sector
revenue leakages, saying they must find innovative ways of
maximizing mineral revenues before they are depleted.
Adams expressed misgivings
about the decision of Ghana to suspend the introduction of the
proposed windfall taxes in the mining sector.
The two-day conference
brought together actors from Ghana, Kenya, Sierra Leone,
Mozambique, Uganda, and Tanzania to discuss issues of resource
taxes, capital flight and illicit financial flows from Africa’s
Africa urged to
build fair taxation systems to curb wealth inequality
HARARE (Xinhua) -- Unprecedented
economic growth in many African countries was going hand in hand
with soaring inequality, which national tax systems were failing
to address, a latest report reveals.
African governments have
been thus urged to build fair taxation systems that address
growing income inequality and poverty.
The report “Africa
Rising?- Inequalities and the Essential Role of Fair Taxation”
was launched at the African Forum and Network on Debt and
Development held in Harare on Wednesday.
The report, penned by two
NGOs—Tax Justice Network Africa (TJNA-A) and Christian Aid, says
that tax is one of the most potent tools at government’s
disposal to address inequality, but tax systems in many African
countries do not currently fulfill that function.
Instead, the current
taxation systems disadvantage the poor. Tax dodging and illicit
financial flows facilitated by off-shore secrecy have undermined
the distributive role of taxation, the report says. “There was
evidence that in many cases growth was taking place at the
expense of the poor, who are becoming increasingly
TJN-A spokesperson Alvin
Mosioma said the findings reflect the inability of governments
to tax the proceeds of growth either because much is given in
corporate tax breaks or has escaped offshore into tax havens.
He said inequality had
been worsened by the growth model in many countries which has
largely seen a concentration of income.
The report builds on an
earlier study conducted by AFRODAD, which urged the Zimbabwean
government to balance between the need to raise revenue and
alleviate the plight of the poor.
director, Collins Magalasi, urged African governments to embrace
global cooperation in nipping tax dodging and its vices of
transfer-pricing and trade mis-invoicing in the bud.
also need to prioritize the building of fair taxation systems
as one surest way of enhancing Africa’s domestic resource
mobilization efforts towards financing for development that
will ensure and end to inequality and the scourge of poverty,”
The report investigates
income inequality in eight sub-Saharan countries of Ghana,
Kenya, Malawi, Nigeria, Sierra Leone, South Africa, Zambia and
It also examines the
ability of the tax system in each country to redistribute wealth
compared to international taxation systems.