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Africa/Global: Overcoming the Shadow Economy
AfricaFocus Bulletin
November 28, 2016 (161128)
(Reposted from sources cited below)
Editor's Note
"Knowledge of beneficial ownership of companies and bank accounts is
fundamental, both to ensure taxation and also to prevent and
prosecute crime and the money laundering that so often is associated
with it. ... Corporations, trusts, and foundations are creations of
the state--and as such, they have no inalienable rights. They are
created to facilitate societal welfare, and to ensure that they do
so, they need to be globally regulated--regulated in ways which
ensure full knowledge of beneficial ownership and full compliance
with all tax laws." - Joseph Stiglitz, in testimony to European
Parliament Panama Papers inquiry
Joseph Stiglitz and Mark Pieth decided to research and write their
report on the policy implications of the Panama Papers, after
resigning from the commission set up by the government of Panama on
the issue. Their protest was against the failure of Panama to agree
to publication of its own report, and that government's lack
of will to engage in a transparent investigation.
The Stiglitz-Pieth report has been hailed as a clear roadmap for
global policy action on tax havens and illicit financial flows.
Recognition of the need for such action has been growing rapidly
around the world, fueled by exposures such as the Panama Papers and
a host of other similar smaller exposés. But the authors stress that
the road ahead will be difficult because of entrenched opposition.
It will be made even more difficult by recent political developments
favoring forces hostile to financial transparency and friendly to
tax evasion and kleptocracy, most significantly the U.S.
presidential election.
Nevertheless, it is clear that the demands for curbing the drain of
wealth into secret jurisdictions will continue, and that this is an
essential front in movements for social justice and human rights.
Lives saved or lost depend on how much can be "clawed back" from
this global kleptocratic system to invest in urgent human needs,
including health and education. On this front, Africa has provided
an example worth wider global recognition and emulation, in a multitrack
mobilization to "stop the bleeding," involving international
and national government officials, civil society networks,
investigative journalists, accounting and legal professionals, and
others.
This AfricaFocus Bulletin contains brief excerpts from testimony by
Stiglitz to the European Parliament on his key conclusions.
The full 25-page report is available at
http://library.fes.de/pdf-files/iez/12922.pdf
However, the bulk of this AfricaFocus Bulletin consists of a guide to
priority resources on illicit financial flows and the Stop the
Bleeding Africa campaign, including short videos, articles, reports,
and more. This was compiled by Chris Root for the US-Africa Network
and is also available on the USAN website:
http://www.usafricanetwork.org
Other key resources written as part of USAN's support for the Stop
the Bleeding campaign include:
"Top 10 Questions About Illicit Financial Flows and Africa,"
prepared by Anita Plummer (http://tinyurl.com/zz4xr53)
and "From #BlackLivesMatter to #StopTheBleeding Africa," written by
Emily Williams and William Minter for Praxis (http://www.kzoo.edu/praxis), available at
http://www.africafocus.org/docs16/iff1609.php
For previous AfricaFocus Bulletin's on illicit financial flows and
related issues, visit http://www.africafocus.org/intro-iff.php
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Announcement for those attending the African Studies Association
conference in Washington, DC, December 1-3, 2016
Your AfricaFocus editor will be on two roundtable discussions:
- Friday December 2, from 1:00�2:30pm
"The Panama Papers and Stop the Bleeding Africa: Implications for
US-Africa Relations"
Group Discussion (new format for AfricaNow! session)
Chaired by Bill Fletcher, Jr., and including Imani Countess, Anita
Plummer, Emily Williams, and me
Location: Maryland A
and
- Saturday, December 3, from 8:30-10:15 am
Roundtable: "Digital Tools of Dissent: Black Youth, Social Media and
Social Justice" (Sponsored by the Association of Concerned Africa
Scholars)
Chaired by Anita Plummer, with presentations by Msia Kibona-Clark,
Phiwokuhle Nmyando, James Pope, Emily Williams, plus me as a
discussant.
Location: Delaware A
++++++++++++++++++++++end editor's note+++++++++++++++++
European Parliament, 2014-2019
Committee of Inquiry into Money Laundering, Tax Avoidance and Tax
Evasion
Exchange of views with Professor Joseph E. Stiglitz
Wednesday, 16 November 2016
[Excerpts. Full transcript at http://tinyurl.com/zz4ytq7]
In our report, Overcoming the Shadow Economy, Mark Pieth and I
present foundational principles for all countries in setting
nationally appropriate regulations. The intention of our Report was
not to present concrete legislative proposals, but rather to show
the magnitude of the task before the international community, and to
argue that the international community needs to take a comprehensive
approach, going well beyond those embodied in standard practices
today. I will now explain these principles and a more detailed set
of recommendations can be found in the Shadow Economy report.
- Secrecy has to be attacked globally--offshore and onshore. There
can be no places to hide.
- The collection and exchange of information related to taxation,
ownership, and illicit activities is a shared global responsibility.
- While the traditional gatekeepers of this information are
financial institutions, addressing secrecy effectively will mean
tackling the entire industry that facilitates secrecy--including the
legal firms that have played a pivotal role in the creation of the
web of corporations.
- Knowledge of beneficial ownership of companies and bank accounts
is fundamental, both to ensure taxation and also to prevent and
prosecute crime and the money laundering that so often is associated
with it.
- Tax preferences are a privilege and not a right. Tax free zones
provide opportunities for money laundering, and those operating in
such zones should be held to a high standard.
- Corporations, trusts, and foundations are creations of the
state--and as such, they have no inalienable rights. They are
created to facilitate societal welfare, and to ensure that they do
so, they need to be globally regulated--regulated in ways which
ensure full knowledge of beneficial ownership and full compliance
with all tax laws.
- Complexity contributes to lack of transparency. Those seeking
secrecy understand this, and create complex webs of corporations and
trusts, to make it more difficult for enforcement agencies to trace
flows of illicit funds and to identify the true beneficiaries of
illicit activities. This has two implications: (a) The international
community should do what it can to impede the creation and
maintenance of these complex webs; and (b) to effectively fight for
transparency--to detect true beneficial ownership-- requires
resources beyond those available to enforcement agencies. In our
Report, we suggest concrete ways that this may be done.
- Transparency is a global public good, requiring global efforts.
To facilitate these efforts, every country must maintain publicly
searchable registries of the beneficial owners of each corporation,
trust, foundation, or other entity. But even if such searchable
registries are not made fully publicly accessible, they should be
accessible by law enforcement agencies.
- These financial centers (both onshore and offshore) are creations
of globalization--and should not be allowed to engage in regulatory
and tax arbitrage. Doing so undermines the positive effects of
globalization. If secrecy-havens serve as centers for tax avoidance
and evasion or in any way facilitate corruption or illicit
activities, they are acting as parasites, and should be cut off from
the global financial community.
- What matters is not just passing laws and regulations, but
enforcement. In the report, we elaborate on specific recommendations
for legislative action, but emphasize that merely passing laws is
insufficient.
...
While the United States preach about the vices of the offshore
centers, within their own borders there are pockets of secrecy where
these bad practices continue. Although the United States recently
adopted a Treasury rule (FinCEN) requiring financial operators to
report the beneficial owner(s) of legal entity customers by 11 May
2018, this reporting is to government authorities only and no
personal knowledge is necessary to verify the identity of the
beneficial owner, only documentation. Additionally, the United
States has yet to implement country-by-country reporting. There is a
bill in Congress that requires this reporting through disclosures to
the Securities and Exchange Commission, but it is still strongly
opposed by business. And now with President Trump in office, the
future of that bill is highly uncertain.
Having said this, though, the major players--US and EU countries--
are key in tipping the balance toward transparency. These countries
can effectively force others to comply with their standards, simply
by threatening to cut off access to their financial system. And in
fact, many in the United States have been calling for the government
to break off all connections with jurisdictions not conforming to
the global standards (even secrecy jurisdictions within their own
territories), effectively shutting down all secrecy-havens. There is
a widely shared perspective that these havens only exist because the
United States and Europe have looked the other way--influenced by their own one percent. These major players
have yet to pull the trigger, partly due to the delay in putting
their own houses in order.
Resources about Illicit Financial Flows from Africa
US-Africa Network
http://www.usafricanetwork.org / http://tinyurl.com/jsyg8el
[Compiled September 2016]
Tax Justice Network Africa, "Tax evasion" VIDEO 6 minutes
https://www.youtube.com/watch?v=0PtNeR03PmQ
Talk by Alvin Mosioma, founding Director of Tax Justice NetworkAfrica:
"More resources are flowing out of African countries than
are flowing in� These are deliberate economic designs� We need to do
something about it." March 2014.
The Panama Papers: Victims of Offshore VIDEO 4 minutes
https://panamapapers.icij.org/video/
Short case studies of bribery, arms deals, tax evasion, financial
fraud, and sex trafficking revealed in the Panama Papers. Corporate
taxes lost to Uganda exceed the country's health budget (starts at
2:06 in video). By International Consortium of Investigative
Journalists.
The Power of Tax VIDEO 3.5 minute
https://www.youtube.com/watch?v=ijtOErKjPMg
The case of Zambia Sugar shows how companies avoid paying taxes and
the impact this has on the Zambian government and people. By
ActionAid International. July 4, 2013.
Stop the Bleeding campaign theme song VIDEO 4 minutes
https://www.youtube.com/watch?v=_nDPKiWSTXI
Winner of 2016 Honesty Oscar for Best Song. Featured Artists:
Livesoul, Synik, Pauline & The Kids; Credits: Music producer: Cutty
Beats (for Legendary Africa); Creative Director: Briggs Bomba;
Executive Producer: TrustAfrica
Stop the Bleeding � Africa IFF Campaign Declaration and Call to
Action
http://stopthebleedingafrica.org/sign/
The Campaign's statement critiques both illicit financial flows from
Africa and methods corporations and individuals use "to illicitly
siphon wealth from the continent [that] are perfectly legal yet
illegitimate and unjust." The Demands encompass actions needed by
both international institutions and African governments.
More Resources
1. Overview: The problem of illicit financial flows from Africa
Stop the Bleeding � Curbing Illicit Capital Flows VIDEO 16-minute
https://www.youtube.com/watch?v=lenH1SaOcIA
A summary of the findings of the High Level Panel report by several
members of that panel. The video also highlights the significance of
African civil society organizations working on this issue. By United
Nations Economic Commission for Africa.
The Panama Papers � What They Mean And Why They Are Important For
Africa
http://www.taxjusticeafrica.net/en/2016/06/2487/
By Jason Braganza, Tax Justice Network-Africa Deputy Executive
Director, June 6, 2016.
Poverty Amidst Plenty: How Africans Are Robbed Of Benefits Of
Mineral Wealth
http://tinyurl.com/z5uobfc
By Kwesi W. Obeng, Tax Justice Network-Africa Policy Lead in charge
of Tax and Extractives, June 23, 2016.
Report of the High Level Panel on Illicit Financial Flows from
Africa REPORT
http://tinyurl.com/pxocw2z
Report of Commission chaired by Thabo Mbeki, commissioned by the
African Union/United Nations Economic Commission on Africa
Conference of Ministers of Finance, Planning and Economic
Development, February 2015.(126 pages)
Viewing #SwissLeaks through a Different Lens
http://tinyurl.com/hw8tarc
A project of Financial Transparency Coalition and Christian Aid. The
significance of illicit flow of money from Africa secretly deposited
in offshore banks, considered as a proportion of Gross Domestic
Product (GDP).
Measuring Corruption in Africa: The International Dimension Matters
http://tinyurl.com/hb2gcwd
By United Nations Economic Commission for Africa, April 15,
2016.(124 pages)
Corporate Tax is a Feminist Matter
http://tinyurl.com/jury7l2
By Maria Hengeveld. September 12, 2016
2. Cases of illicit financial flows from Africa
Zambian miners paying more tax than mining company AUDIO PODCAST
5 minutes
https://youtu.be/uDo42IzCoSs
Continent of Secrets: Uncovering Africa's Offshore Empires GAME
http://tinyurl.com/jaro779
An online game about corporate profits from Africa going to offshore
tax havens revealed by the Panama Papers. Hovering over each
country shows examples.
International Consortium of Investigative Journalists (ICIJ) Panama
Papers Project
https://panamapapers.icij.org/
Browse for reports on revelations from the Panama Papers about
illicit financial flows from Africa involving oil and gas, diamonds,
other natural resources, and safari operators.
Finance Uncovered
http://www.financeuncovered.org/home-1/blog/
Blog contains reporting on Africa about global financial flows,
especially such issues as tax abuse, corruption, and money
laundering.
A Few Examples of Illicit Financial Flows cited in AfricaFocus
Bulletins, 2013-2015
http://www.africafocus.org/docs15/iff1507.php
Examples compiled by AfricaFocus, including Lonmin in South Africa,Philia (oil) in Congo (Brazzaville), mining companies in Sierra Leone, Swiss oil trading companies, Equatorial Guinea, South African diamonds, Nigerian oil, Zambia and the cost of tax avoidance, trade mis-invoicing, fisheries and forests, and tax havens.
Liberia/Global: Financial Secrecy at Work
http://www.africafocus.org/docs16/iff1606.php
South Africa: Disappearing Diamond Revenue
http://www.africafocus.org/docs14/dia1406.php
Africa/Global: Accounting Tricks with Coca-Cola
http://www.africafocus.org/docs16/coke1602.php
Africa: Tax Tricks, Mobile Phones, and Beer
http://www.africafocus.org/docs15/td1510.php
The West African Giveaway: Use & Abuse of Corporate Tax Incentives
in ECOWAS REPORT
http://tinyurl.com/pqu9x9e
By ActionAid International and Tax Justice Network-Africa, August
2015.(20 pages)
3. The international politics of stopping illicit capital flows
Making Violence Visible: From #BlackLivesMatter to #StoptheBleeding
Africa
http://www.kzoo.edu/praxis/making-violence-visible/
By Emily Williams and William Minter. Published by PraxisCenter,
September 20, 2016.
One year after Addis Ababa, rich countries blocking UN from working
on tax, again
http://tinyurl.com/gvw252f
By Pooja Rangaprasad, Policy Coordinator for the Financial
Transparency Coalition (FTC), and Christian Freymeyer, FTC's Press &
Digital Media Officer. July 21, 2016
Why It Really Matters and The Hypocrisy of Immediate Reciprocity
http://www.swissleaksreviewed.org/#why-it-matters
A project of Financial Transparency Coalition and Christian Aid
Interview with Clark Gascoigne of the FACT Coalition by Sonali
Kolhatkar VIDEO 17 minutes
https://vimeo.com/180932643
Gascoigne discusses the issue of tax havens, with the example of the
Apple corporation tax payments to Ireland, and the loss of taxes in
the U.S. due to tax havens. September 2016.
The Shape of Battle to Come: Illicit Financial Flows (IFFs) from
Africa SLIDESHOW
http://tinyurl.com/jspfnfa
[Click on first presentation to download slideshow.]
By Dereje Alemayehu, Chair of the Global Alliance for Tax Justice,
August 2015.
4. Organizations working on tax justice in Africa and elsewhere
Tax Justice Network Africa
http://www.taxjusticeafrica.net/en/home/
A network of 29 members in 16 African countries established in 2007
and a member of the Global Alliance for Tax Justice
Facebook: https://www.facebook.com/TaxJusticeNetworkAfrica/
Stop the Bleeding
http://stopthebleedingafrica.org/
Campaign of six African-based civil society organizations to end
illicit financial flows from Africa
Facebook: https://www.facebook.com/StoptheBleedingAfrica
Campaign song video:
https://www.youtube.com/watch?v=_nDPKiWSTXI
FACT Coalition
http://thefactcoalition.org/
Washington, D.C.-based coalition lobbying and researching about tax
evasion and avoidance, incorporation transparency, and anti-money
laundering issues in the United States.
Facebook: https://www.facebook.com/FACTCoalition
Subscribe to listserv: http://tinyurl.com/huxd7s8
Global Alliance for Tax Justice
http://www.globaltaxjustice.org/
Facebook: https://www.facebook.com/globaltaxjustice
Financial Transparency Coalition
https://financialtransparency.org/issues/
Facebook: https://www.facebook.com/FinancialTransparencyCoalition
5. Other sources covering illicit financial flows and Africa
Africa Focus: Illicit Financial Flows and Tax Justice
http://www.africafocus.org/intro-iff.php
Links to Africa Focus bulletins with coverage of this issue;
approximately monthly bulletins, beginning in June 2015.
Tax Justice Network � Africa
http://www.taxjusticeafrica.net/
Global Financial Integrity
http://www.gfintegrity.org/
6. Background readings
Special issue of Association of Concerned Africa Scholars Bulletin,
"Africa's Capital Losses: What Can Be Done?," Fall 2012(62 pages)
http://concernedafricascholars.org/bulletin/issue87/, particularly:
"Plundering a Continent" by Raymond Baker
http://tinyurl.com/hw9zckr
"Rich Presidents of Poor Nations: Capital Flight from Resource-Rich
Countries in Africa " by Léonce Ndikumana and James K. Boyce
http://tinyurl.com/zaad6kq
"The Benefits of Country-by-Country Reporting" by Richard Murphy
http://tinyurl.com/gpsfn4o
Secret Offshore Deals Deprive Africa of Billions in Natural Resource
Dollars
http://tinyurl.com/jn5tuvu
By Will Fitzgibbon July 25, 2016. The Panama Papers show politicians
and mining, oil and gas interests benefit from secrecy and dubious
multimillion dollar transfers.
Still racing towards the bottom? Corporate tax Incentives in
East Africa
http://tinyurl.com/hthr9dj
By ActionAid International and Tax Justice Network-Africa, June
2016.
The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers,
and the Theft of Africa's Wealth BOOK
by Tom Burgis. London: William Collins, 2015.
http://amzn.to/2gsbAEw
For understanding how the connections between Africa and the
international partners in the system of illicit financial flows
work, this book should be your first stop.
Treasure Islands: Uncovering the Damage of Offshore Banking and Tax
Havens BOOK
By Nicholas Shaxson. New York, NY: Palgrave Macmillan, 2011.
http://treasureislands.org/the-book/
An overview in very readable language. 2011. Prologue and part of
chapter 1 can be read for free on Google books.
Top Ten Books on Illicit Financial Flows, Tax Justice, and Africa
http://www.africafocus.org/iff-books.php
The ten best books on this subject selected by William Minter,
editor of AfricaFocus.
Acronyms and Abbreviations about Illicit Financial Flows
http://tinyurl.com/zqlshk5
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with a
particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
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