[DEBATE] : (Fwd) Sharife on tax havens
pbond at mail.ngo.za
Wed May 13 04:16:04 BST 2009
*Tax havens are at the heart of the corruption that is sucking the
/By Khadija Sharife/
When we hear the words "rogue state," we tend to think of the Burmas and
Guineas of the world - countries ruled by despotic leaders who oppress
their people through militarized rule. We don't tend to imagine bucolic
mountain pastures populated by cud-chewing cattle, or pristine lakefront
cities teeming with international businessmen in smartly pressed,
Maybe the comparison is a little over the top. But one could nonetheless
make a strong case that Switzerland - or, for that matter, Britain, home
to more than a quarter of the world's tax havens -- belongs in the
category of countries whose unwillingness to follow international norms
has harmful spillover effects around the world.
Take Africa, whose poverty is often portrayed as the inevitable product
of history and geography. Africa has immense natural riches; they've
just been sucked dry by wealthy individuals and multinationals who rely
on countries with lax tax regulations and excessive traditions of
secrecy to disguise the full extent of their earnings. In other words,
Jersey, the Cayman Islands, and other tax havens and offshore financial
centers are at the heart of Africa's resource curse.
The numbers are staggering. Each year, more than $1 trillion exits
developing countries, and more than $140 billion of comes from Africa.
That's almost four times as much as the continent gets in official
development aid. Sub-Saharan Africa may be the world's poorest region,
but it's also its leading net creditor.
The key players in this shadow economy are corporations. Globally, more
than 60 percent of capital flight comes from multinationals operating in
resource-rich regions. Here's how it works: Instead of declaring profits
where they earn them, companies use a mechanism called transfer pricing,
wherein internal corporate revenues are "moved" from one part of a
company to another. Each year, African countries lose billions in tax
revenue to home countries or tax havens as a result. Meanwhile,
instruments such as "tax competition" designed in theory to attract
foreign direct investment, are primarily utilized in practice by
corporations seeking to exploit finite natural resources.
African officials, of course, are often complicit in this organized
theft. Equatorial Guinea stores $2 billion worth of oil revenue
offshore, according to the IMF, some of which was likely used to buy the
$35 million Malibu mansion purchased by the country's president in 2006.
Still, compared with the scale of capital flight, the infamous
corruption of African officials is pennies, amounting to just 3 to 5
percent of the billions exiting Africa.
Watchdog groups like Transparency International (TI), self-described as
the ‘leading global organization devoted to combating corruption,' have
yet to hold tax havens account for the pernicious impact they have on
the developing world. Switzerland, the recipient of one third of global
capital flight, ranks fifth-best in the world on TI's latest Corruption
Nor are wealthy countries adequately focused on the problem. The G-20's
London summit, which saw British Prime Minister Gordon Brown boldly
declare, "The era of banking secrecy is over," was a good start. But
G-20 leaders, focused on tax evasion in their countries, failed to
notice that the developing world loses an estimated $385 billion to tax
abuse annually*. *They failed to call for country-by-country reporting
or mandatory automatic exchanges of information about where corporate
profits are going. Nor were there any calls to recover and return the
estimated $11.5 trillion currently stashed in tax havens dotting the
globe. Instead, the G-20 countries proposed bilateral tax arrangements
related to "suspected" tax evasion, and this, on "request" only. Good
luck getting complicit African governments to turn on their
For Africa, the era of banking secrecy is far from over.
/Khadija Sharife is an investigative journalist, researcher with the Tax
Justice Network and a visiting scholar at the Center for Civil Society
in South Africa./
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