Multinational companies cheat $6bn from Africa every year – Oxfam

Winnie Byanyima

AFRICAN LEADERS NEED TO ACT:Executive Director of Oxfam International, Eng.Winnie Byanyima

 

Multinational corporations in the world’s richest countries are fleecing Africa for nearly $6 billion (18 trillion Shillings) a year, through one of the tricks used to reduce tax bills, a new report, ‘Africa: Rising for the few,’ released by Oxfam today shows.

The companies use a dodge called mispricing – where they artificially set prices for goods or services sold between its subsidiaries to avoid taxation. The companies also lobby hard for tax breaks as a reward for basing or retaining their business in African countries.

Tax breaks provided to the six largest foreign mining companies in Sierra Leone add up to 59 percent of the total budget of the country or eight times the country’s health budget.

The report observes that in 2010 multinational companies avoided paying tax on USD 40 billion (120 trillion Shillings) of income through a practice called trade mispricing –With corporate tax rates averaging out at 28 percent in Africa, this equates to USD11 billion (33 trillion) in lost tax revenues.

The study shows that the money avoided in tax is equivalent to six times the amount needed to plug the healthcare funding gap in Ebola affected countries of Sierra Leone, Liberia, Guinea and Guinea Bissau. “Africa is hemorrhaging billions of dollars because multinational companies are cheating African governments out of vital revenues by not paying their fair share in taxes.

If this tax revenue were invested in education and healthcare, societies and economies would further flourish across the continent,” Winnie Byanyima, Oxfam International’s Executive Director says. Byanyima added, “African leaders must not sit by while international tax reforms are agreed which give multinational companies free reign to sidestep their tax obligations in Africa.

Political and business leaders must put their weight behind the ever louder calls for the reform of global tax rules. African nations must also introduce a more progressive and democratic approach to taxation – including calling a halt to tax exemptions for foreign companies.”

The report states that existing international efforts to tackle corporate tax dodging such as the BEPS (Base Erosion and Profit Shifting) process, led by the Organization for Economic Cooperation (OECD) for the G20, will leave gaping tax loopholes that companies can continue to exploit.

Many African nations have been shut out of discussions on BEPS reform and will not benefit from them as a result. Oxfam’s findings come as African political and business leaders get set to attend the 25th World Economic Forum Africa in South Africa.

The main theme of the meeting will be how to secure Africa’s economic rise and deliver sustainable development. Oxfam is calling for the leaders of the G7 countries – Canada, France, Germany, Italy, Japan, United Kingdom and United States – to include action for ambitious tax reform in discussions about how the group can support economic growth and sustainable development on the continent.

In the United Kingdom, Oxfam is part of a coalition that has been calling on the newly-elected British government to show leadership by introducing a Tax Dodging Bill, which would make it harder for U.K. companies to avoid paying taxes in the countries in which they operate – practices which currently cost some of the world’s poorest countries billions each year.

According to another report by UNCTAD, developing countries as a whole lose an estimated USD100billion (UGx 302 trillion) a year through another set of tax avoidance schemes involving tax havens.