Foreign tax avoidance leaves Africa poorer

The recent exposé by the International Consortium of Investigative Journalists might as well be called the UN of Tax Avoiders. It is a mesh of lines connecting millions of dots – all with one thing in common: links to foreign companies or entities created to avoid tax with the help of professional services experts.

The concept of tax avoidance, which these professionals eloquently distinguish from tax evasion, must
be refashioned. It is perfectly legal,
the experts say, but that does not cut
it any longer.

Pierre Moscovici, the European commissioner for economic and financial affairs, seems to agree, judging by his tweet: “Time to complete the EU’s anti-tax evasion toolbox with swift decisions.”

His colleague, Eva Joly, took it further: “If all this is ‘legal’, then it is necessary to change the laws.”

To use a South Africanism, we can be grateful to whoever “touched the developed world on their tax revenue studio”; it looks like that long overdue change is about to kick in.

Africa has been denied its rightful dues under this pretext.

This is not the first spotlight on
tax avoidance, including the recent High Panel on Illicit Financial Flows from Africa.

In 2011, the Joint AU Commission/UN’s Economic Commission for Africa created the panel to stem the flows, which were estimated to be no less than $50billion a year, at its Conference of African Ministers of Finance, Planning and Economic Development.

The panel leader, former president Thabo Mbeki, said the figure mainly comprised the proceeds of tax avoidance.

Professional services firms operate vibrant businesses under names like transfer pricing, which help multinationals domiciled in rich countries to siphon the bulk of their business revenue from poorer jurisdictions to their home countries via tax havens – exactly the types used by those fingered in the
Paradise Papers.

It is not surprising that one of the people named, ace Formula One racing driver Lewis Hamilton, was able to use shell companies in the British Virgin Islands (BVI), the
Isle of Man and Guernsey to eschew
a £3.3million VAT bill in 2013. This
was for his imported £16.5m Bombardier aircraft, brought into England from Canada.

The Guardian reports that an “Isle of Man customs hosted a private meeting with an EY (accounting firm) adviser during which details of the structure were discussed, and agreed to fast-track the paperwork”.

Duties and levies are commonly used by countries to protect their…

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