Multinational corporations are making away with more than 6 percent of the continent’s GDP – mainly due to tax avoidance, an IEA report has revealed.
The report, dubbed ‘Africa is not poor, we are stealing its wealth’, revealed that out of the US$203billion that is leaving the continent annually, US$68billion is money lost from dodged taxes alone.
“There is US$203billion leaving the continent. Some of this is direct, such as US$68billion mainly in dodged taxes. Essentially, multinational corporations steal much of this—legally—by pretending they are really generating their wealth in tax havens.
“These so-called illicit financial flows amount to around 6.1 percent of the continent’s entire gross domestic product (GDP), or three times what Africa receives in aid,” he said.
Tax evasion and illicit financial flows in Africa have been pointed as among of the main causes of poverty on the continent.
The UN Food and Agriculture Organisation estimates that 233 million people in sub-Saharan Africa were hungry or undernourished in 2014-6. It further states sub-Saharan Africa was the area with the second-largest number of hungry people, as Asia had 512 million – principally due to the much larger population of Asia when compared to sub-Saharan Africa.
In 2012, 501 million people – or 47 percent of sub-Saharan Africa’s population – lived on US$1.90 a day or less, a principal factor in causing widespread hunger, World Bank sub-Saharan Africa Poverty and Equity data has shown.
Due to this, countries are taking measures to end or mitigate tax evasion and avoidance on the continent.
Ghana, for example, has laid a new bill before parliament to enable the Ghana Revenue Authority (GRA) exchange information with other tax administrations in the world regarding certain financial accounts of entities or individuals, in a bid to curb tax evasion.
The bill is named Standard for Automatic Exchange of Financial Account Information and was presented to Parliament by Deputy Finance Minister Kweku Kwarteng, who indicated that critical to the fight against tax evasion is cooperation among tax administrations – and a key aspect of that cooperation is exchange of information.
According a memorandum accompanying the bill, the new global standard has led to development of a model for automatic exchange of financial account information referred to as the Common Reporting Standard – allowing for jurisdictions to automatically exchange financial account information with their exchange partners.
The object of the bill is to provide a legal framework for implementation of the Common Reporting Standard approved by the Council of the Organisation for Economic Cooperation and Development on July 15, 2014.
The bill has been referred to the Finance Committee for consideration, and its report will subsequently be presented to Parliament for debate and approval.
It is the outcome of a global effort in combating offshore tax evasion and improving transparency through the development of a platform for multilateral exchange of information.
Furthermore, the bill will seek to implement the common reporting standards approved by Council of the OECD, which designates the Commissioner-General as the competent authority to ensure improved international tax compliance – by imposing on financial institutions an obligation to report information regarding certain financial accounts of an individual or an entity to the GRA.