Africa: New Campaign to Boost Tax Compliance in the Continent

A new campaign to stop Africa from ‘bleeding’ is to be launched today in Nairobi by the Tax Justice Network-Africa (TJN-A), a coalition of researchers and activists focused on the harmful impacts of tax avoidance, tax competition and tax havens.

The ‘bleeding’ is symbolic of a $50 billion, which is the minimum that the continent is estimated to lose every year in Illicit Financial Flows (IFFs), as recently reported by a high level panel chaired by former South African President Thabo Mbeki.

Mbeki’s report has since been adopted by the African Union with the aim of popularising its findings and push countries to deliberately pass policies that detect and stop the illicit flow of finances out of Africa.

“This is an indefinite campaign. It will go on until we have detected and significantly dealt with the issue of IFFs, which is costing Africa a great chunk of resources,” TJN’s Kwesi Obeng told The New Times.

The launch was preceded by a two-day training of journalists from over 10 countries in the Eastern and Southern African region on tax, illicit financial flows and domestic resource mobilsation.

“We want journalists across Africa to spread more awareness on the issue of IFFs and cause governments across the continent to do something,” Obeng added.

What’s at stake?

The three main categories of IFFs are commercial, criminal, and corrupt activities. According to the Mbeki report, illicit financial flows emanating from shady commercial activities, such as tax evasion, increased from $20 billion in 2001 to $60 billion or more in 2010.

According to Angel Gurría, thre secretary-general of the Organisation for Economic Cooperation and Development (OECD), the amount of money lost by Africa is IFFs is equivalent to three times the amount of official development assistance that the continent receives in form of aid.

The African Development Bank says Africa requires about $93 billion every year for infrastructure financing, but only half of that money is available, leaving a deficit of $43 billion a year.

Experts say the $50 billion lost annually in IFFs is enough not only to fill the current infrastructure investment deficit but also enough to build 56 million kilometres of roads across the continent.

In real terms, 56 million kilometres of roads would translate to at least one million kilometers for each country in Africa.

Also, the $50 billion lost annually, experts add, is enough for Africa to build 151000 modern boarding schools on the continent, divided equally among African countries; it would translate to at least 2,800 schools for each country.

The $50 billion lost every year in IFFs can also build 500 modern hospitals; that means at least 10 hospitals for each of the African countries, according to the sponsors of the ‘Stop Africa from bleeding’ campaign.

TJN-Africa’s campaign hopes to capture the attention of African governments under the framework of the African Union for collective efforts to move against IFFs but also the international community.

The initiative which already has the support of OECD member states and the United Nations Economic Commission for Africa hopes to get developed countries such as the G8 and G20 involved.

George Turner, from the UK-based Finance Uncovered, said getting members of the G20 involved is very vital for the campaign because most of the illicit outflows from Africa end up stashed away in banks located in developed countries.

“So it’s absolutely very important that countries such as the UK, Switzerland where money that is stolen from African countries sign up to this initiative and help stop the ‘bleeding,'” Turner said.

Make sense

Experts say the $50 billion lost annually in IFFs is enough not only to fill the current infrastructure investment deficit but also enough to build 56 million kilometres of roads across the continent.

In real terms, 56 million kilometres of roads would translate to at least one million kilometers for each country in Africa. Also, the $50 billion lost annually, experts add, is enough for Africa to build 151000 modern boarding schools on the continent, divided equally among African countries; it would translate to at least 2,800 schools for each country.

The $50 billion lost every year in IFFs can also build 500 modern hospitals; that means at least ten hospitals for each of the African countries, according to the sponsors of the ‘Stop Africa from bleeding’ campaign.