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ICRICT Independent Commission for the Reform of Corporate Taxation

Corporate Tax Dodging and other forms of Illicit Financial flows from Africa

Dereje Alemayehu

Chair Coordination Committee of the Global Alliance for Tax Justice

Senior Economic Policy Advisor Tax Justice Network Africa

Taxation a long neglected development issue in

Africa and in international development

cooperation

False start

Vicious circle of poverty & entrenchment of aid dependency syndrome

ODA FDI and Foreign Loans as almost the only sources of development finance

False remedy after the onset of the development crisis : SAP

Privatisation excessive concessions to FDI

Competitive tax regimes the beginning of race to the bottom tax competition between African countries,

Capital account liberalisation opening the gates for IFF

More regressive tax systems exemptions for FDI and the well off extortion of the less well off

Perceptions and Reality: Africa on life support

from rich countries or subsidising the rich?

The emergence of new perspectives:

Academia Lonce Ndikumana & James K. Boyce: New Estimates of Capital Flight From Africa

Think thanks Global Financial Integrity: Illicit Financial Flows from Developing Countries

Civil Society TJN, Christian Aid, Oxfam, Action Aid and their case studies

Cases of foreign investors in Africa in business for over a decade, allegedly making no profits but also not going bankrupt

Despite export boom in primary products government revenue stagnating or decreasing

SABMiller - A multinational beer company paying less tax than a kiosk beer vendor?

IFF- from CSO on Pan-African Institutions

agenda

The Finance Ministers from the African Union and the Economic Commission for Africa commission a High-level Panel on Illicit Financial Flows from Africa (2013)

The Panel Report was endorsed by the African Union Summit and launched (January 2015)

In addition to loss of badly needed revenue for financing development in general, and provision of basic services in particular, the Panel

Report also looks at some political and socio-economic consequences of

IFF. According to the Report, IFF directly and indirectly contribute to :

- Erosion of state legitimacy

- Prevalence of rent-seeking behaviour among political and economic

actors;

- Worsening inequality

- Lack of effective voice in political and policy processes

Main findings of the HLP

The continent is losing in excess of $50 billion to $60 billion a year through illicit financial outflows.

large commercial corporations are by far the biggest culprits of illicit outflows.

The practice by which multinational corporations shift profits to subsidiaries in low-tax or secrecy jurisdictions is one of the

biggest single sources of illicit outflows.

In many cases, those subsidiaries exist on paper only, mostly with one or two employees, while the bulk of the activities of

the company occur in another country.

large corporations (have) the means to retain the best available professional legal, accountancy, banking and other expertise to

help them perpetuate their aggressive and illegal activities

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Main recommendations of the HLP report

To curb illicit flows created by deficiencies in the international tax system, the

Panel recommended the following reforms:

National and multilateral agencies should make fully and freely available, and in a timely manner, data on pricing of goods and services in international transactions.

Automatic exchange of tax information among African countries and global automatic exchange of tax information, subject to national capacity and to

maintaining the confidentiality of price-sensitive business information.

Publicly available disaggregated, country-by-country reporting of financial information for multinational companies incorporated, organized or regulated in their

jurisdictions.

The Panel asks that the global community in all of its institutions, including parliaments, take all necessary steps to eliminate secrecy jurisdictions, introduce

transparency in financial transfers and crack down on money laundering.

IFF and African CSO

The report of the High Level Panel on IFF represents a major milestone for the tax justice movement in Africa and globally.

However, as highlighted in the report, the figure $50-60 bn a year is a very conservative estimate. It does not capture the major part of tax dodging through transfer (mis)pricing; Forgone and forsaken revenue through ill advised tax and investment policies are

not considered Loss of revenue due to non-transparent tax policy enforcement are not assessed

Finally, African Countries should be able to participate in consultations and negotiations to reform international tax rules and standards on an equal footing

We believe the UN system, with all its shortcomings, is the only framework within which a reform of international tax rules and standards can take place for all countries rich and poor to benefit from its outcomes.

We therefore join others in demanding the establishment of an inclusive intergovernmental body on tax matters and the elaboration of a new international convention on international cooperation in tax matters under the auspices of the UN