‘Corporate tax abuse accounts for 80% of all illicit financial outflows from developing countries’ – Experts

By Abubakar Jimoh

The Global Financial Integrity has said the estimated corporate tax abuse accounted for 80% of all illicit financial outflows from developing countries.

This fact was made known recently by Thomas Pogge, Professor of Philosophy and International Affairs, Yale University, in a paper titled “How are Human Rights and Financial Transparency Connected?” presented at a two day Conference on “Fostering Greater National and Regional Economic Opportunity in Africa through Human Rights and Financial Transparency organized by  Friedrich-Ebert-Stiftung in Johannesburg, South Africa.

He said: “…corporate tax abuse accounts for 80% of all illicit financial outflows from less developed countries, or about $6.6 trillion during the 2003–12 period and about $1 trillion in 2012 alone. These illicit outflows constitute 3.9% of the GDP of the developing countries (5.5% in Africa), are larger than incoming total foreign direct investment and also vastly larger than the sum total of all official development assistance flowing into these countries, which officially amounted to some $127 billion in 2012.”

Pogge, who revealed that through profit-and-tax-diminishing capital outflows governments of less developed countries have lost tax revenues in the order of $160 billion annually, observed that if such money was judiciously expended on health services, it could save the lives of 350,000 children under the age of five every year.

“Clearly, massive reductions in existing human rights deficits could be achieved by allowing poor countries to collect reasonable taxes from multinational corporations and from their own most affluent nationals, assuming the resulting revenues were appropriately spent.  One might fault various groups of agents for poor countries’ current inability to do so and for the resulting human rights deficit.”

He continued: “There are the secrecy and tax haven jurisdictions (including Switzerland, Ireland, the UK and the US) that structure their tax and legal systems so as to encourage tax abuse and also typically protect bank secrecy against the tax authorities of less developed countries. There are the individuals and corporations who erode the tax base of poor countries by using tax havens to dodge or reduce taxes on their wealth and profits. And there are a number of bankers, lawyers, accountants and lobbyists who devise, implement and “legalize” these schemes.”

“While all these agents surely share responsibility, it is quite unrealistic to hope that the problem can be meaningfully reduced through their morally motivated self-restraint. Even if many of them could be convinced to desist, their former dirty business would continue to thrive so long as it provides attractive and safe rewards.

Pogge further urged concerted effort toward tackling the problem of illicit financial outflows in the developing countries through persistent pressure by citizens on their governments to improving their institutions and policies and to beef up their enforcement capacities toward curtailing illicit financial outflows.

He advised developing countries to be realistic in their pursuit of economic development and be wary of statistical figures presented by international organization that do not truly reflect the standards of living and general well-being of their citizens.

Commenting on the paper at the Conference, Communication and Information Officer of Civil Society Legislative Advocacy Centre (CISLAC), Abubakar Jimoh recalled that while most Nigerians were living in destitution, in 2014, the government officially rebased its gross domestic product (GDP) data, which pushed it above South Africa as the continent’s biggest economy. However, the civil society and other well-meaning Nigerians began to wonder how such has impact positively in the standards of living of the citizens. He said the “rebasing” has changed nothing in lives of Nigerian population.

Jimoh said African government must avoid being carried away by unrealistic statistical estimations, and focus more on socio-economic transformation and development that will impact meaningfully in live of the citizens.

He also mentioned as part challenges facing effective monitoring and tracking of revenue leakages in Nigeria, lack of coordination among various agencies of the government such as Central Bank of Nigeria, Federal Inland Revenue Service (FIRS), and Nigeria National Petroleum Corporation (NNPC).

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