Multinationals are short-changing African governments of $11bn by moving profits abroad


Consortium companies have so far deprived African governments of $11 billion in taxes each year; a major concern that requires the immediate attention of G7 world leaders, who will be gathering for a summit this weekend. They will need to ensure that the summit not only focuses on resource efficiency and the development agenda in Africa, but also set up a new global body to regulate corporate taxation, Oxfam said on Monday.

“It’s absurd that there are international organisations for trade, health and football but not for tax,” Oxfam International executive director Winnie Byanyima said. For reasons such as this, the withholding of taxes in Africa has steadily increased, increasing concern among businesses. By shifting profits overseas to lower tax regimes, these companies are able to escape paying taxes to African countries. But considering the fact that this continent serves as a major source of revenue, the favour ought to be returned. How would Africa be able to advance towards the kind of development it seeks without adequate funds?

Collecting more taxes should make African countries less dependent on aid, thereby creating a more favourable environment for the new set of development goals aimed at ending extreme poverty by September. Claire Godfrey, Oxfam senior adviser and author of the report, explained that funding this agenda over the course of 15 years is crucial to making progress. She also added that tax reform would go a long way towards funding new commitments to improve schooling and healthcare. “G7-based companies alone avoid about $6 billion a year in taxes due to African governments, more than three times the amount the Ebola-affected countries of Sierra Leone, Liberia, Guinea and Guinea-Bissau need to plug their funding gaps to deliver free primary healthcare.”

Oxfam was able to deduce how much Africa loses from tax revenue annually from a United Nations report in April. This estimated $50 billion in illicit funds flow out of Africa each year- a large amount through corporate trade mis-pricing to avoid taxes or in transfers of illegitimate funds. This, when compared to the total financial aid the continent has received from the developed world, show that Africa can live without such handouts. Over the past 40 years, Africa has received $400 billion; a total of about $10 billion a year, five times less than the amount taken away.

Although the G7 summit, scheduled for June 7th and 8th in Bavaria, Germany, will largely focus on necessary measures to boost economic growth in Africa, there are other pressing matters. A paramount topic of discussion should revolve around reforming the global tax system.

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