“Africa cannot do this alone. The [corporate] tax evasion, avoidance, secret bank accounts are problems for the world… so we all need to work together, particularly the G8 as they meet next month, to ensure we have a multilateral solution to this crisis.
–Kofi Annan, ex-UN Chief
Tax avoidance, secret mining deals and financial transfers are depriving Africa of the benefits of its resources boom, ex-UN chief Kofi Annan has said.
Firms that shift profits to lower tax jurisdictions cost Africa $38 billion a year,
says a report produced by a panel he heads.
Mr. Annan told the BBC:
“Africa loses twice as much money through these loopholes as it gets from donors.”
It was like taking food off the tables of the poor, he said.
The Africa Progress Report is released every May – produced by a panel of 10 prominent figures, including former Nigerian President Olusegun Obasanjo and Graca Machel, the wife of South African ex-President Nelson Mandela.
African countries needed to improve governance and the world’s richest nations should help introduce global rules on transparency and taxation, Mr Annan said.
The report gave the Democratic Republic of Congo as an example, where between 2010 and 2012 five under-priced mining concessions were sold in “highly opaque and secretive deals”.
This cost the country, which the charity Save the Children said earlier this week was the world’s worst place to be a mother, $1.3 billion in revenues. This figure was equivalent to double DR Congo’s health and education budgets combined.
DR Congo’s mining minister, Martin Kabwelulu, disputed the findings, saying the country had “lost nothing.”
[He] told Reuters news agency:
“These assets were ceded in total transparency.”
The report added that many mineral-rich countries needed “urgently to review the design of their tax regimes”, which were designed to attract foreign investment when commodity prices were low.
It quotes a review in Zambia which found that:
Between 2005 and 2009, 500,000 copper mine workers were paying a higher rate of tax than major multinational mining firms.
Africa loses more through what it calls “illicit outflows” than it gets in aid and foreign direct investment, it explains.
Mr Annan told the BBC’s Newsday programme:
“We are not getting the revenues we deserve often because of either corrupt practices, transfer pricing, tax evasion and all sorts of activities that deprive us of our due. Transparency is a powerful tool. [I urge African leaders to put] “accountability centre stage.”
Mr Annan said African governments needed to insist that local companies became involved in mining deals and manage them in “such a way that it also creates employment”. He said:
“Africa cannot do this alone. The tax evasion, avoidance, secret bank accounts are problems for the world… so we all need to work together particularly the G8, as they meet next month, to work to ensure we have a multilateral solution to this crisis.
“if a company avoids tax or transfers the money to offshore account what they lose is revenues.
“Here on our continent, it affects the life of women and children – in effect in some situations it is like taking food off the table for the poor.”