Out of Africa: How corporate taxes work around

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African countries annually 50 billion U.S. dollars in taxes are lost – more than the sum of the development aid for the continent. Also, corruption is a multi does not stop national companies.

Again and again, organizations don’t beat government Alarm: African countries would have cheated them out of billions in tax revenue – especially by large foreign companies from the energy and raw materials sector, but increasingly also by small and medium-sized companies, such as operators of Safaris in countries such as Kenya, Tanzania, South Africa or Egypt. The annual losses exceeded $ 50 billion, even the amount of development aid payments to Africa, noted the Organisation for Economic co-operation and development last year. 100 billion to the UN economic Commission for Africa, other estimates are much higher.

Particularly problematic is the fact that this money is missing in the affected countries, says Lisa big man from the “tax justice network”, a consortium of German non-governmental organizations, in the fight against tax evasion and the shadow economy around the world. “Especially in the poorest countries, the lack of tax, make revenue and have a negative impact – from the non-existent transport infrastructure, lack of schools or hospitals, and a functioning public service,” big man in a DW Interview.

East Africa: Low tax revenues in the raw materials sector

The example of East Africa: large-scale international consortia, Gas, coal or rare earths in Tanzania or Mozambique to promote, but pay the countries taxes. Based on the subsidiaries in one of the many tax havens in the world. Revelations of the International consortium of investigative journalists (ICIJ) show that companies operate in Africa, international best practices of tax avoidance. A large part of the in Africa, the group’s net profits is officially in the tax haven, though the company is only on the paper active. The risks are limited: The bureaucracy is minimal, the authorities in the tax havens provide no unpleasant questions – and raise no or minimal taxes on profits.

Also read: Panama Papers: How local rulers and elites in Africa to plunder

Gold from Tanzania – profits for international companies?

In Mozambique, the NGO “Centro de Integridade Pública” published in the last year, a study according to which the country is, for years, unable to collect taxes. Especially the large international corporations, the Oil and Gas in Mozambique, this study found that hardly up to their obligations. Because the state is unlikely to be able to check your Actions and balance sheets. Thus, Mozambique lost revenues in the millions. Corruption and mismanagement of the economy and generally weak governance aggravated the Situation extremely, so the authors in the summer of 2018, the study published.

Criminal energy, to the detriment of the African population

Another popular tax avoidance method: The company to provide to the tax authorities lead to excessive operating costs – for example, for the search and exploration of new raw material deposits in or for the accommodation of its staff in the luxury villas and count your profits and thus your tax burden down.

At least 50 billion US-dollars in taxes escape Africa annually

“When it comes to resources, it is common practice that the mining companies make false statements to your Profit. Quite a lot of Numbers are invented or faked, just so at the end of the tax is very low,” says Dr. Jörg Wiegratz, who conducts research fraud at the University of Leeds on the topic of economic and tax. The evidence are obvious. More and more high government would have bribed officials in Africa: “The large companies to jumps you money and in return you get the protection of the state actor and its authority,” says Wiegartz. “Of course there is also corruption in the investigative authorities, should deal with economic fraud, there it is, then Let this group alone.” The limited legal means would even lead to that instead of the large corporations, sometimes small would be prosecuted local intermediary.

Enterprises and branch offices, disentangle

Experts agree: the tax legislation that has achieved international was the global tax justice is rather detrimental. Companies are not yet required, per country: the breakdown, where they generate profits and where they pay taxes. Multi-national corporations can hide, apart from a few scandals, the revelations to light, – undisturbed by the Public, their profits, and thus the rich and the poor countries of the tax revenues Bouncing due to them.

Lisa Großmann

“The change,” says Lisa big man from the tax justice network. The main requirement of the network: the multinationals would be obliged to make public where they are economically active and where you can generate profits, so they pay exactly their taxes. “No one can claim that Apple has on the Bermudas is a large economic activity. Also it is not in the European commodity companies, which recorded profits in the Netherlands or in Luxembourg, although the economic activity takes place in these countries.” Solution approaches there are long: “A solution could be that the group with its many subsidiaries and branches to consider for tax purposes as a single company,” says Lisa. “The big tax pie, this single company could be among the countries divided, in which the company operates.” So you can see how many employees have the company in a given country, how much revenue will be achieved and how many resources would be consumed in the country in question.

Against the double standards of Europe

In Europe, tax avoidance strategies are not seen. On several occasions, the EU Commission ruled in the sense of citizens ‘ protests, that the US would have to pay companies like Google, Apple or Amazon enough taxes. On the other hand, under the practice of large operating in Africa by European companies is different from the practice of U.S. companies in Europe, says Lisa. Jörg Wiegratz, University of Leeds agrees: “If we find fraud in tax matters or in other sectors – then this shows us that European and German companies in the countries have very much Power. Otherwise, they could not receive these practices.”

How is the practice of German companies in Africa – and the contribution this could make to the German Mittelstand to a greater tax justice? The DW wanted to obtain the opinion of the Africa-Association of the German economy. However, the Association that occurs as the external economic Association of German companies in Africa was not to request in the position to identify, in the short term, a conversation partner on the topic.