The former president of the Republic of South Africa, Thabo Mbeki, stressed that the abuse of corporate taxes on the continent should not be forgotten.
Mbeki, who chairs the African Union’s high-level panel on illicit financial outflows, says Africa is being robbed of billions of dollars a year.
It is estimated that Africa loses about US$60 billion a year 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 stressed that Africa needs to solve the problem of the lack of an inclusive architecture of international tax cooperation.
He goes on to say that the continent must resist attempts to block this important step forward and called on the international community to support Africa’s initiatives to combat the phenomenon.
Forms of tax evasion
According to the report, first published in The Conversation, tax evasion is used to describe all the ways – tax avoidance, corruption and offshore accounts – that companies and wealthy individuals use to reduce their tax bills. They lobby the government for tax breaks and lower corporate tax rates, exploit obscure tax loopholes or shift profits to tax havens.
A 2015 report by the United Nations Conference on Trade and Development noted that profit shifting by multinational companies costs developing countries $100 billion a year in lost corporate income tax. Another report by researchers at the International Monetary Fund estimated that developing countries could be losing up to US$213 billion a year to tax evasion. In addition, Oxfam estimates that developing countries lose between $100 billion and $160 billion annually to corporate tax evasion.
Resource-rich African countries are easy victims of aggressive tax planning and tax evasion enabled by offshore companies. As the 2020 United Nations Conference on Trade and Development reported, high volumes of intra-company trade, secrecy that shrouds foreign investment activities and loopholes in agreements make African countries vulnerable to tax evasion. Governments in sub-Saharan Africa lack the human, financial and technical resources to stem this outflow of wealth.
