South Africa’s former President Thabo Mbeki has stressed that corporate tax abuse on the continent must not be forgotten.
Mbeki, who is the chairperson of the African Union High-Level Panel on Illicit Financial Outflow, says Africa is being robbed of billions of dollars per annum.
It is estimated that Africa loses about US$60 billion per annum through Illicit Financial Outflows. It has been seven years since the world adopted the first-ever target to reduce illicit financial outflows including corporate tax abuse.
Mbeki has emphasised that Africa needs to address the lack of inclusive architecture for international tax cooperation.
He further says the continent must resist attempts to block this important step forward and called for the international community to support Africa’s initiatives in dealing with the phenomenon.
Forms of tax dodging
According to a report first published on The Conversation, tax dodging is used to describe all of the ways – tax avoidance, tax evasion, corruption and offshore accounts – that companies and rich individuals employ to reduce their tax bills. They lobby governments for tax breaks and lower corporate tax rates, exploit obscure loopholes in tax laws or shift profits into tax havens.
A 2015 report by the UN Conference on Trade and Development estimated that profit-shifting by multinational companies costs developing countries US$100 billion a year in lost corporate income tax. Another report, by International Monetary Fund researchers, estimated that developing countries may be losing as much as US$213 billion a year to tax avoidance. In addition, Oxfam estimated that developing countries lose between US$100 billion to US$160 billion annually to corporate tax dodging.
African countries, rich in resources, easily fall prey to aggressive tax planning and tax evasion enabled by offshore companies. As the UN Conference on Trade and Development reported in 2020, high volumes of intra-company trading, the secrecy cloaking foreign investment activities, and loopholes in treaties leave countries in Africa vulnerable to tax avoidance. Governments in sub-Saharan Africa lack the human, financial, and technical resources to stem this outflow of wealth.