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Africa/Global: "Stop the Bleeding" Updates
AfricaFocus Bulletin
June 22, 2016 (160622 )
(Reposted from sources cited below)
Editor's Note
"A new report by Tax Justice Network-Africa and ActionAid says that
East African countries (Tanzania, Kenya, Uganda and Rwanda) are
losing approximately $2 billion a year of revenue each year by
granting tax incentives to multinational companies. ... According to
Yaekob Metena, ActionAid Tanzania's country director, 'Though there
have been improvements in recent years in addressing the issue,
governments in East Africa continue to give away domestic resources
in tax incentives, funds that could pay for the regions' education
and health needs and meeting the development objectives.'"
This AfricaFocus Bulletin contains a press release on this new
report from two of the organizations actively involved in the
Panafrican civil society campaign to stop illicit financial flow
from the African continent, which has been endorsed by the African
Union and is gaining worldwide momentum from a series of reports
from the Panama Papers and other investigative journalism.
The first report, on tax incentives, concentrates on the legal but
illicit policies that enable bleeding of resources from Africa to
multinational corporations through tax breaks. The second, from the
UN Environment Programme and Interpol, highlights the rapid increase
is losses due to black-market environmental crimes such as ivory
smuggling, illegal logging, and toxic waste disposal. Such crimes
are now the 4th largest illicit enterprise sector worldwide,
following drug smuggling, counterfeiting, and human trafficking,
For brief talking points and previous AfricaFocus Bulletins on
illicit financial flows and the Stop the Bleeding Africa campaign,
visit http://www.africafocus.org/intro-iff.php
For a database of articles and reports on illicit financial flows, provided by the Stop the Bleeding Campaign but including data from many sources, visit http://iffoadatabase.trustafrica.org/
For another hard-to-excerpt but revealing expose released today, see
Finance Uncovered's investigative report on the shady financial
dealings holding up the renovation of the Rift Valley Railway (RVR).
The report is entitled "Trouble on the Lunatic Express," and results
from a collaborative investigation by Kenyan, Belgian, and British
journalists. See http://www.financeuncovered.org/ - direct URL:
http://tinyurl.com/zz5v77d
"We have discovered that the fabled RVR modernisation programme has
not resulted in the purchase of new trains as claimed by the owners
of the railway, Qalaa Holdings.
We have trawled accounts which show that Qalaa has created an
offshore structure of shell companies which has extracted millions
in advisory fees from RVR, despite the railway suffering losses in
recent years."
++++++++++++++++++++++end editor's note+++++++++++++++++
East Africa losing up to 2 billion dollars to unproductive tax
incentives
Governments have taken few positive steps to curb loss of revenue
http://www.taxjusticeafrica.net / direct URL:
http://tinyurl.com/gmrmhde
http://www.actionaid.org / direct URL: http://tinyurl.com/hthr9dj
Dodoma, 18 June 2016 - A new report by Tax Justice Network-Africa
and ActionAid says that East African countries (Tanzania, Kenya, Uganda and
Rwanda) are losing approximately $2 billion a year of revenue each
year by granting tax incentives to multinational companies. The
report follows the EAC report series produced by the two
organizations in April 2012, examining the impact of tax incentives
on the region and giving recommendations to the EAC on how to end a
race to the bottom. This follow up report assesses what has changed
since 2012.
The report, entitled 'Still Racing towards the Bottom? Corporate tax
incentives in East Africa', states that while statements indicating
commitments to revise tax incentive policies have been made by
policymakers of the region, many questions abound on how eliminating
tax incentives will be realized. It is unclear how these tax
incentives will be revised, costed and phased out in practice and
what resources and expertise are at the disposal of the governments
to carry out this work.
According to Yaekob Metena, ActionAid Tanzania's country director,
"Though there have been improvements in recent years in addressing
the issue, governments in East Africa continue to give away domestic
resources in tax incentives, funds that could pay for the regions'
education and health needs and meeting the development objectives."
East African governments have taken some positive steps to reduce
tax incentives, especially those related to VAT, which are
increasing tax collection and providing vital extra revenue that
could be spent on providing critical services. However, they are
still failing to eliminate all unnecessary tax incentives. Countries
are still providing generous tax breaks in the form of tax holidays,
capital-gains tax allowances and royalty exemptions and these East
African countries continue to lose colossal amounts of revenue
through unnecessary tax exemptions and incentives given to
corporations.
"There is need to shift the policy environment in the region on the
issue of incentives as; political and financial national and
institutional authorities have admitted that tax incentives are in
fact harmful to domestic revenue mobilization and need to be
revised, costed and in most cases eliminated. In fact, as our report
shows that giving tax incentives is still fueling competition at
1the EAC level, and derailing any meaningful progress towards
regional harmonization of tax policies. Regional competition for
investors through providing tax incentives is still alive and is
undermining integration," said Metena.
The report follows the EAC report series produced by the two
organizations in April 2012, examining the impact of tax incentives
on the region and giving recommendations to the EAC on how to end a
race to the bottom. This follow up report assesses what has changed
since 2012. "Many leaders are promising to take greater measures
towards progress on this in the region but there is a need for
tangible actions to be taken towards that end," said Tax Justice
Network-Africa's Deputy Executive Director, Jason Braganza.
Evidence gathered suggests that collectively, the four East African
countries (Kenya, Uganda, Tanzania and Rwanda) could still be losing
around $1.5 billion and possibly up to $2 billion a year. The report
calls for East African governments to review the tax incentives they
are granting with a view to abolishing all unproductive incentives.
Any incentives that are determined to be effective should be
targeted at achieving specific social and economic objectives that
benefit East African citizens.
"The East Africa Community (EAC) must accelerate the harmonization
of its tax legislation with the EAC Agenda by ratifying the East
African Code of Conduct on Harmful Tax Competition and implementing
at national levels, the recommendations of the African Union High
Level Panel on Illicit Financial Flows that was adopted at the AU
Summit in January 2015," added Braganza.
ENDS
Paulina Teveli
Communications Coordinator - ActionAid Tanzania
Tel: +255 (0) 22 2700596 | Mob: +255 755 706322
Email: [email protected].
Michelle Mbuthia
Assistant Communications Officer - Tax Justice Network-Africa
Tel: +254 724 994796
Email: [email protected]
Editors' Notes:
Four countries alone - Kenya, Uganda, Tanzania and Rwanda - could
still be losing around $1.5 billion and possibly up to $2 billion a
year through the granting of corporate tax incentives to foreign
companies. Uganda loses around US$370 million, Kenya around US$1.1
billion, and Rwanda up to US$176 million. This amounts to, total
revenue losses that would amount to up to $2 billion a year.
The 2 billion a year figure (less than the 2.8 billion a year figure
from our 2012 report) reflects a welcomed commitment by the EAC
government's. Governments have taken some positive steps to reduce
tax incentives, especially those related to VAT, which are
increasing tax collections and providing vital extra revenues that
could be spent on providing critical services. However, the figure
is exceedingly estimated and may well be short of reality as
accurate reliable data in most cases does not exist for all
incentives given to foreign firms.
While welcome statements indicating commitments to revise tax
incentives have been uttered by politicians of the region, many
questions arise how eliminating tax incentives will be realised. It
is unclear how these tax incentives will be revised, costed and
phased out in practice and what resources and expertise are at the
disposal of governments to carry out this work.
For Burundi, determining the revenue losses due to tax incentives
was particularly challenging in this case owing to an almost
complete lack of data. However, Burundi's President Pierre
Nkurunziza, recently indicated that at least 81 billion Burundian
Francs ($52 million) has been lost to companies or officials who
have been given tax exemptions to import goods to build
infrastructure and instead sold on the materials.
In Tanzania, revenue losses from tax incentives given in 2014/15
were likely to be around US$790 million; although this figure
predates the new VAT law which is claimed will result in extra
revenues of US$500 million.
Kenya, the amount of revenue lost through tax incentives is likely
to be near the KShs100 billion (US$1.1 billion) a year level.
In Uganda, it remains unclear how much Uganda is losing to tax
incentives since government figures do not appear to provide full
figures, but the amount is likely be around US$370 million.
In Rwanda, estimates suggest that Rwanda is losing between Rwf 87
billion (US$115 million) and Rwf123 billion (US$176 million) a year.
ActionAid is a global movement of people working together to achieve
greater human rights for all and defeat poverty. We believe people
in poverty have the power within them to create change for
themselves, their families and communities. ActionAid is a catalyst
for that change.
Tax Justice Network-Africa (TJN-A) is a Pan-African initiative
established in 2007 and a member of the Global Alliance for Tax
Justice. It is a network of 29 members in 16 African countries.
Through its Nairobi Secretariat, TJN-A collaborates closely with
these member organisations in tax justice activities at the
national, regional and global level. TJN-A seeks to promote socially
just and progressive taxation systems in Africa, advocating for propoor
tax policies and the strengthening of tax systems to promote
domestic resource mobilisation. TJN-A aims to challenge harmful tax
policies and practices that favour the wealthy and aggravate and
perpetuate inequality.
Environmental crime now the world's fourth largest illicit
enterprise, says new report
June 13, 2016
http://www.africaeconews.co.ke/ - Direct URL -
http://tinyurl.com/jnjo59x
Environmental crime is now the world's fourth largest illicit
enterprise after drug smuggling, counterfeiting and human
trafficking.
According to a joint report by the UN Environment Programme (UNEP)
and Interpol (see full report at
http://unep.org/documents/itw/environmental_crimes.pdf), it is
estimated that the value of the black market industry behind crimes
such as ivory smuggling, illegal logging and toxic waste dumping has
jumped by 26 per cent from 2014 to between US$91 billion and US$258
billion annually depriving countries of future revenues and
development opportunities.
"Environmental crime has impacts beyond those posed by regular
criminality. It increases the fragility of an already brittle
planet," observed Mr Achim Steiner, UN Under-Secretary General and
Unep Executive Director.
Interpol Secretary General Jürgen Stock says an enhanced law
enforcement can help address this worrying trend.
"There are significant examples worldwide of cross-sectoral efforts
working to crack down on environmental crime and successfully
restore wildlife, forests and ecosystems. Such collaboration,
sharing and joining of efforts within and across borders, whether
formal or informal, is our strongest weapon in fighting
environmental crime," says Mr Stock.
Environmental crimes cover not only the illegal trade in wildlife,
but also forestry and fishery crimes. It includes illegal dumping of
waste including chemicals and use of ozone-depleting substances.
Destruction of natural flora and fauna, pollution, landscape
degradation and radiation hazards, with negative impacts on arable
land, crops and trees adds to the list.
The debate on environmental crimes also includes exploitation of
natural resources such as minerals, oil, timber and marine
resources.
In recent years, the joint report says, the debate has reached the
global stage due to its serious and deleterious impact on the
environment and ecosystems, as well as on peace, security and
development.
Environmental Crimes makes simpler for Illicit Financial Outflows
Illegal exploitation of natural resources, including ITW, has
negative consequence on potential revenues from tourism, timber,
mining, gold, diamonds, fisheries and even oil and charcoal.
These natural resources could have produced revenue for development
needs in health care, infrastructure, schools and sustainable
business development.
Indeed, the illegal trade especially in natural resources like fish,
timber and minerals undermine legal and sustainable businesses
through unfair competition and non-payment of legitimate taxes for
social benefits.
Currently, the scale of different forms of environmental crime is
likely in the range of USD 91�259 billion or twice the size of
global official development assistance (ODA).
This total amount of USD 91�259 billion is a loss to society because
the commercial activity takes place as an illegitimate enterprise.
It undermines governance, legal tax-influenced price levels, and
particularly legitimate business. An unknown proportion will
nonetheless be re-introduced into the legitimate economy through
money laundering.
A research by Development Initiatives (DI) on foreign aid and
stimulating domestic revenue mobilisation in Kenya and Uganda
revealed that tax revenue makes up the largest proportion of total
revenue, which is over 85 per cent for Kenya in the last three years
(and over 80 per cent in Uganda). It also found that ODA to domestic
revenue mobilisation in Kenya and Uganda amounted to close to US$
21.5 million in 2014 (with more funding to Uganda than Kenya).
DI suggests in order for the country's efforts to mobilise domestic
revenue to bear more fruit, there is need to develop approaches that
increase tax revenue without necessarily increasing the tax burden.
However, broadening the tax base to mobilise more domestic revenue
might be undermined if attention is not given to leakages including
illicit financial flows.
Meanwhile, the Panama Papers showed that illicit financial flows are
not only an Africa problem, and that there is a need for global
collaboration to track them.
"Countries such as Kenya and Uganda should target job-creating
economic growth, and shift away from growth based solely on
extractive industries � oil and gas � and services that require the
employment of fewer people," says the joint report. About 10 per
cent of the total amount is estimated loss of revenue to
governments. The number is based on two assumptions: That the
criminal activity generates an average profit of 30 per cent, and
that government tax revenues could be 30 per cent of the profits, if
the environmental crime activities had been legal and legitimate.
For an approximate comparison the average world total tax rate
percentage of commercial profits was 40.8 in 2015 according to the
World Bank. For the USD 91�259 billion range, with a profit of USD
27�78 billion, the tax income, which is loss for government revenue,
would be 8�23 billion, or 8.8 per cent of the total amount, giving
an average loss of government revenue of USD 9�26 billion.
The report points out an escalating species extinction due to wanton
wildlife poaching and trafficking. Illegal logging and trade results
in climate change emissions from deforestation and forest
degradation.
The reports adds that illegal, unreported and unregulated fishing
has resulted into fish stocks depletion, loss of revenues for local
fishmongers and states. Most targeted fish species are Tuna,
Toothfish and Sharks.
Criminals exploit the lack of international consensus and the
divergence of approaches taken by countries. What may constitute a
crime in one country, is not in another. This effectively enables
criminals to go "forum shopping" and use one country to conduct
poaching, and another to prepare merchandise, and export via a third
transit country.
According to UNODC, corruption is the most important enabling factor
behind illegal wildlife and timber trade. Identifying the optimal
legal framework for preventing, combating and prosecuting
environmental crimes requires careful consideration.
There are proposals, according to the UN report on environmental
crime; firstly, designating any violation of wildlife or
environmental laws and regulations to be designated as "serious
crimes". Another proposal is to designate illicit trafficking in
protected species of wild fauna and flora involving organised
criminal groups" as serious crimes.
In as much as the UN Convention on Transnational Organised Crime
(UNTOC) defines organised criminal groups, the new report recommends
a broader applicability of the convention on new and emerging forms
of crime.
In 2014, the Interpol General Assembly passed a Resolution on
Interpol's response to emerging threats in Environmental Security
(Resolution AG-2014-RES-03). In that resolution, instead of defining
environmental crime, Interpol instead focused on "environmental
security" by recognising the impact that environmental crime and
violations can have on a nation's political stability, environmental
quality, its natural resources, biodiversity, economy and human
life.
Interpol also recognises that criminal networks engaged in financial
crime, fraud, corruption, illicit trade and human trafficking are
also engaged in or facilitating environmental crime.
Experts say the approach by both Interpol and the Commission on
Crime Prevention and Criminal Justice (CCPCJ) in regarding
environmental crimes more as a collective term, makes the
criminalities fall under already established laws on serious crimes,
including, but not limited to, serious financial and corporate
crimes, forgery, fraud including tax fraud, terrorist finance. Such
an approach provides prosecutors with far more powerful tools for
prosecution and prevention and importantly � proportionality between
offense, intent and punishment.
UN Security Council Resolution S/RES/2195 (2014), recognised that;
natural resources are increasingly driving conflicts.
Three conventions control the international trade and movement of
hazardous waste and dangerous chemical substances by setting
procedures and standards for import and export. Both the environment
and human health are exposed to hazardous waste and chemicals
through the cycle these products go through from production,
transport, use to disposal.
There are three interlinked conventions: the Basel Convention on the
Control of Trans-boundary Movements of Hazardous Wastes and their
Disposal, which primarily covers wastes trade; the Rotterdam
Convention on the Prior Informed Consent Procedure for Certain
Hazardous Chemicals and Pesticides in International Trade and The
Stockholm Convention on Persistent Organic Pollutants which
primarily covers chemicals, including restrictions on production.
The consensus based on Montreal Protocol of 1987, which controls
ozone depleting gasses (ODS), has been ratified by 197 parties,
making it universal. Projects worth USD 3.2 billion have been
approved by its executive committee to phase out over 450,000 tonnes
of substances with ozone depletion potential including the
implementation of Project Sky Hole Patching by the Regional
Intelligence Liaison Office of the World Customs Organisation in the
2000s. Unep, Unido, UNDP and the World Bank are the implementing
agencies of the protocol.
Unep Governing Council's Decision 27/9 is the first internationallynegotiated
document to establish the term "environmental rule of
law".
The decision emphasised the role of organised criminal groups in
trafficking hazardous waste, wildlife and illegal timber. The
Council recognised that environmental crime undermines sustainable
development, the successful implementation of environmental goals
and objectives, the rule of law, and effective governance.
The council also noted that these issues have been recognised in UN
General Assembly resolution A/RES/67/1 (2012) and A/RES/67/97 (2013)
which urged member states to address transnational organised crime's
impact on the environment.
United Nations Environment Assembly (UNEA) reaffirms the need to
making illicit trafficking in protected species and forest products
into a serious crime as defined by UNTOC.
World Environmental Law Congress in Rio in April 2016, where the
Chief Justices, Heads of Jurisdictions, Attorneys Generals, Auditors
General, Chief Prosecutors and other high-ranking representatives
were gathered, agreed on a list of seven core principles to
strengthen the environmental rule of law.
The congress passed recommendations not limited to linking
environmental crimes to other crimes such as money laundering, and
strengthening courts' capacity as guarantors of the environmental
rule of law.
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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