As several African governments examine the possibility of setting up their own 'offshore' financial centres, the trade name for tax havens, campaigners are calling for transparency and fair tax regimes.
'We need pan-African action,' says Alvin Mosioma, coordinator of the Tax Justice Network Africa, an organisation that advocates fair tax regimes to promote economic and social development.
'The African Union has established a special panel on illicit financial flows, in which Thabo Mbeki participates, and the African Tax Administrators Forum meeting held in 2008 was also a promising start, but Africans have been too silent too long on the issue of financial transparency.'
'With the current preoccupations with terrorism and political instability on the continent, adding financial instability and sheltering corruption in local tax havens would be catastrophic,' Mosioma concludes.
'There is an emerging trend in Africa towards establishing our own offshore centres. One argument we hear is that it would modernise the African financial sector, and streamline the red tape in many countries,' says Mosioma.
The nefarious impact of tax havens on developing countries’ economies is increasingly well documented. Recent research establishes that secrecy jurisdictions in the British Isles or the Caribbean are a major conduit for billions of dollars siphoned out of low-income countries each year.
Africa is far from immune. The Isle of Jersey, one of the world's most famous jurisdiction for 'offshore finance', announced in early August it would open negotiations with the government of Kenya over its share of the 10 million dollars in bribes recovered from bank accounts allegedly held by a former Kenyan cabinet minister and the former head of the national power company on the island.
Some African states have a long-standing tradition of ensuring banking and legal secrecy on their territory. Liberia is internationally famous for its lax shipping register, ensuring cheap and confidential registration of sea vessels regardless of their seaworthiness and ownership.
Mauritius has long been a tax haven, sheltering fortunes from the prying eyes of African tax authorities and facilitating 'round tripping', the discrete harbouring of funds from India later artificially re-invested under the very favourable guise of foreign direct investments. Djibouti and the Seychelles have also been qualified as tax havens in the past.
Botswana, in southern Africa, set up its International Finances Services Centre in 2003, facilitating the easy transfer and repatriation of funds to avoid withholding and capital gains tax, thus earning the moniker of 'Switzerland of Africa' in an article of the Harvard International Review in 2010.
Much more recently, Ghana, a west-African country, which recently struck oil, contemplated the benefits of setting up its own offshore financial centre.
Kenya announced in March that it was considering establishing the Nairobi International Financial Centre. The project seems to be an attempt at competing with Johannesburg, in South Africa, the financial powerhouse of the continent, and Mauritius, already a secrecy jurisdiction.
'This is not yet official government policy, as far as we know,' Mosioma says. 'But there are related concerns being raised regarding Kenya’s Special Economic Zones granting telecoms and banking operations special tax regimes,' he explains.
Financial advisor and international institutions have, until recently, been marketing Western economies’ deregulation as the successful path to economic growth throughout the world. The global financial meltdown of 2008 and current debt crises in Europe and the U.S.A. seem to have had little effect on this discourse so far.
'The global financial sector is still advocating the liberalisation of financial flows into and out of countries as a 'best practice', and increasingly so in developing countries,' says Mosioma.
But recent developments may have thwarted some African temptations to create regional fiscal paradises. Ghana’s proposed offshore centre was recently disavowed by the government, which withdrew the offshore banking license it had granted to Barclay’s bank.
The move was blamed by the financial group on Ghana’s inadequate legislative framework. But the Central Bank seems to have reacted to concerns regarding the possibility of regional money laundering. 'It’s very heartening to see that Ghana seems to have come through in this regard,' says Nicholas Shaxson, author of the recently published 'Treasure Islands: Tax Havens and the Men who Stole the World', a history of the global offshore financial system.
'The specific risks of tax havens for African countries is that tax haven exacerbate the 'resource curse', the economic hardships hitting countries that rely mainly on commodities exports,' Shaxson explains.
'A country like Nigeria has billions in oil money flooding in, but the ordinary people tend not to be better off, as it sets off inflation and impedes exports of job-creating sectors, such as agriculture or manufacturing,' he says. 'If a country’s financial sector were suddenly to cause a massive influx of money, it would undoubtedly have the same effect on its population.'
Despite the risks, the issue of offshore financial centres is not yet on most international organisations’ radars. The OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes is one of the only institutions monitoring offshore finance. It narrowly spared Ghana a slot on its black list, in light of the recent development.
According to Shaxson: 'Civil society is in its early phase of waking up to the importance of the issue: Brazil’s government is hosting an upcoming seminar on international tax justice, and India has its own drivers, with rising public anger at what they call ‘black money’.'
© Inter Press Service (2011) — All Rights ReservedOriginal source: Inter Press Service
Latest News Headlines
Read the latest news stories:
- Free Press a Casualty of Pakistan's Terror War Monday, May 02, 2016
- Grilled for a Retweet: Press Freedom in Kenya Monday, May 02, 2016
- Black Colombian Activists Continue Our Struggle For Rights Sunday, May 01, 2016
- Media Freedom in Africa Remains Under Attack Saturday, April 30, 2016
- West Papuans Turn to Africa for Support in Freedom Bid Saturday, April 30, 2016
- “Together, Civil Society Has Power” Saturday, April 30, 2016
- Opinion: Illicit Financial Flows Friday, April 29, 2016
- World Farmers’ Organisation Meeting Eyes New Markets, Fresh Investment Friday, April 29, 2016
- Can the UN Security Council Stop Hospitals Being Targets in War? Friday, April 29, 2016
- El Nino-Induced Drought in Zimbabwe Friday, April 29, 2016