Africa Progress Report 2013

Relentless Plunder: Extractives: Poor Governance, Corruption, Tax Evasion, Illicit Financial Transfers.

Progress “will require strengthened governance backed by international cooperation to stem the hemorrhage of revenues associated with tax evasion, secret deals and illicit financial transfers” — Kofi Annan, on the release of the Africa Progress Report 2013.

See article in the New York Times/International Herald Tribune: Stop the Plunder of Africa:

“…Natural resource exports have propelled Africa into the world’s high-growth league….

…Unfortunately, the rising tide of wealth is not lifting all boats. Poverty has been falling far too slowly, and in some countries — including Zambia and Nigeria — it has increased. Few governments have used the increased revenues generated by resource exports to counteract rising inequality, build better health care and education systems or strengthen smallholder agriculture. Moreover, corruption remains endemic.

African governments themselves must step up to the plate and address these issues. They need to recognize the urgency of converting their country’s resource wealth into the human capital and investments in infrastructure on which sustained and inclusive growth depend. And they should follow the example of countries like Liberia and Guinea that are combating corruption by posting all mining contracts online for public scrutiny.

In other areas, action by African governments alone will not succeed. As we highlight in this year’s Africa Progress Report, no region has suffered more from tax evasion, aggressive tax planning and plunder of national wealth through offshore-registered companies. These are global problems that demand multilateral solutions.

The scale of the losses sustained by Africa is not widely recognized. Transfer pricing — the practice of shifting profits to lower tax jurisdictions — costs the continent $34 billion annually — more than the region receives in bilateral aid. Put differently, you could double aid by cutting this version of tax evasion. The extensive use made by foreign investors of offshore-registered companies operating from jurisdictions with minimal reporting requirements actively facilitates tax evasion. It is all but impossible for Africa’s understaffed and poorly resourced revenue authorities to track real profits through the maze of shell companies, holding companies and offshore entities used by investors.

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