The plundering of Africa continues. According to highly regarded estimates from the Washington-based think tank Global Financial Integrity, the cost of “illicit financial flows” from the continent to the rest of the world sits at around $50 billion per year in lost revenues. This equates to nearly 6% of African GDP which trumps the continent’s spending on healthcare and exceeds all the external aid and foreign direct investment. In short, Africa subsidises the rest of the world.
Most of these losses stem from tax evasion by global multinationals. For example, take a company that mines £500 million worth of diamonds from Tanzania for export to the UK. To cut its tax bill it may choose to report only £300 million to the local tax authorities. To facilitate the fraud, it sets up a shell company in a tax haven – to which it claim it exports the diamonds. It then collects an invoice from its shell associate for £300 million which it delivers to the Tanzanian authorities. Meanwhile the shell company “re-sells” £500 million worth of gems to UK importers. Other ruses include overstating costs.
Of course, such tactics are also employed in the rest of the world, including the UK. George Osborne is in the privileged position of having a squadron of tax officials who can forensically examine the books of suspected domestic miscreants, including one well-known US coffee chain, yet this is not widely shared. However, he is much less forthcoming when it comes to helping uncover similar practices by UK companies abroad. Surprising, that.