Annan says corruption and tax evasion must be dealt with

May 10, 2013 12:58 pm
Former UN secretary general Kofi Annan/FILE
Former UN secretary general Kofi Annan/FILE

, CAPE TOWN, May 10 – The Group of Eight (G8) economic powers must adopt tough new rules for the energy and mining sectors to tackle corruption and tax evasion that is bleeding wealth from Africa, according to former UN secretary general Kofi Annan.

In a report published on Friday, Annan’s 10-member Africa Progress Panel called for countries and companies to be more transparent in dealings with the resource-rich continent, which is struggling to make the most of current economic growth in Asia and the Americas.

“In many African countries natural resource revenues are widening the gap between the rich and the poor,” Annan said at the launch of the report at the World Economic Forum on Africa in Cape Town.

The continent loses twice as much in illicit financial outflows as what it receives in international aid, the 120-page study found.

Annan recommended that G8 leaders back new rules on disclosure of company ownership and simultaneously crackdown on tax havens when they gather for a June summit in Northern Ireland.

Africa lost $1.2 to $1.4 trillion between 1980 and 2009 to illicit outflows, according to a separate joint report by the African Development Bank and advocacy group Global Financial Integrity which will be launched later this month.

“You’re looking at something like 1.3 trillion dollars which has left Africa in the last 30 years or so and this is an under-estimate we think as well,” the bank’s vice president and chief economist Mthuli Ncube told AFP.

Volume-wise the top ten affected countries included those with immense natural riches such as Nigeria, Libya, the Republic of Congo and Angola.

“It is a space of leakages. Africa could easily plug its resource gap just by plugging these leakages,” Ncube said on the sidelines of the WEF meeting.

Nigeria, South Africa and Egypt saw the biggest dollar value illicit outflows.

In 2009 alone, illicit financial outflows were over three times the amount of aid received, the report found.

“It’s a big outflow. Certainly it is hurting Africa’s ability to develop,” said Ncube about the overall losses.

While much corruption is blamed on African governments, the impact of lax rules in rich countries is increasingly coming under the microscope as well.

Tax evasion alone is estimated to cost developing countries $160 billion each year, according to Christian Aid.
Transfer pricing, anonymous company ownership

Annan’s measures, if adopted, would make it more difficult for individuals and firms to syphon cash through secret bank accounts or shell companies.

“It is unconscionable that some companies, often supported by dishonest officials, are using unethical tax avoidance, transfer pricing and anonymous company ownership to maximise their profits,” the report said.

“(Mean)while millions of Africans go without adequate nutrition, health and education,” it added.

Switzerland, Britain, the United States and Japan were singled out for weak finance and company registration rules.

“Companies registered in G8 countries should be required to publish a full list of their subsidiaries and information on global revenues, profits and taxes paid across different jurisdictions,” the report said.

Switzerland is not a member of the G8, which comprises Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States.

The report also singled out mining powerhouses Australia, Canada and China, demanding they “actively support the emerging global consensus on disclosure.”

Representatives from mining giant Rio Tinto, the world’s number three gold producer AngloGold Ashanti and leading advisory firm Wood Mackenzie were part of a group consulted for the report.

Firms were also asked to introduce independent audits of their dealings to make sure no bribes were paid by staff or partners in securing concessions.

With commodity prices still supported by China’s spectacular growth and major new energy finds in Madagascar, Mozambique and Tanzania, quick reforms could be timely.

Last month the European Union inched toward measures to force big mining companies to make public the payments they make to governments.


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