Photo: Liberia Government Democracy should be, ultimately, about citizens' collective input in decision-making and collective responsibility for socio-economic and political improvement. In Africa, however, it is about survival – about bread, butter, and invariably class or political domination. Depending on whom one asks, the reason is simply either that political power seekers are innately corrupt and self-seeking or that Africa's former colonial masters have yet to give economic independence to contemporary leaders of African democracies. Both views remained valid to a point, but the African opposition, irrespective of border, has agreed with western critics that the continent's problem is corruption. As popular as that view had been in international circles, though, it has been busted: African leaders might be corrupt, but western governments, through their multinational corporations, are their mentors and backers! Now, members of the group of eight wealthiest countries or G8, acting on the entreaty of former UN Secretary General Kofi Annan's Africa Progress Panel, have resolved to reverse the situation and rescue the peoples of Africa. The Analyst, reports.
The century-old suspected collusion between corrupt African political leaders and western government backed multinational corporations to loot the continent's meager resources through tax evasion and plunder stashing has come to the end of its tether.
The group of the world's eight wealthiest nations (G8), meeting in a 2-day summit in the Irish resort town of Lough Erne, vowed in a communiqué yesterday, to end the suspected collusion.
They will henceforth hold corrupt African leaders and the leaderships of multinational corporations accountable for the mismanagement of the continent's resources. The summit convened Monday, June 17, 2013, under the theme, "Taxes, Trade, and Transparency."
Backdrop
Former UN Secretary General and Chair of the Africa Progress Panel, Dr. Kofi Annan, had pleaded with the summit leaders to restrain investors from their individual countries by tackling the practices of brazen tax avoidance and anonymous company ownership.
"In this time of change, the G8 can make a difference. For example, company ownership – as well as revenue flows – can and must be made completely transparent thereby shining a light on a widespread method for hiding corruption. The G8 must establish registries on ownership of companies and trusts in all tax jurisdictions – and the registries need to be publicly available. Closely linked, tax avoidance and evasion are global issues that affect us all. The impact for G8 governments is a loss of revenue. But in Africa, it has direct impact on the lives of mothers and children," the African Progress Panel chair had pleaded.
He had noted further, "Throughout the world, millions of citizens now need the G8 leaders to take action on tax avoidance. Not just because of the palpable injustice of enormous tax avoidance by major multinationals including many headquartered in G8 countries. But also because to do so could save many, many lives around the world. Tax authorities in all regions struggle to prevent the erosion of their tax bases, but Africa struggles more than most. A G8 deal on the automatic exchange of tax information must include African authorities, giving them full access to relevant tax information."
Besides, he had said, "These demands may seem ambitious. But a shared agenda is emerging. This is critical, as mutually beneficial agreements are the only ones that will stand the test of time. And by the way, it is not just governments who are moving ahead, but several companies too. Given this enormous momentum towards a fairer world, where unethical tax avoidance and corrupt deals become harder to hide, the leaders of G8 can be on the right side of history, swimming ahead of the tide to make the world a safer, fairer place."
According to him, secret companies often incorporated in tax havens, or in the world's key financial centers were means "by which corrupt leaders and irresponsible businesses hide the proceeds of their crimes and misdemeanors".
He therefore called on leaders of the G8 to track and crack down on the use of secret companies by putting in place public registries of who owns and controls companies and trusts.
The Africa Progress Panel includes distinguished individuals from the private and public sectors, who advocate on global issues of importance to Africa and the world.
Prior to Mr. Annan's petition, members of the G8 had for weeks toyed with the idea of ending the unregulated transfer of cash and raw materials from the developing world without proper accountability and benefit to host nations and peoples.
"You're going to see concrete achievements today on changing the international rules on taxation, so individuals can't hide their money offshore, and companies don't shift their profits away from where the profit is made," British Treasury Secretary George Osborne had promised.
"Of course Britain's got to put its own house in order," he added, reportedly referring to companies' practice of funneling money between the British offshore territories and the City of London, the world's second-largest financial market.
During the two-day G8 summit, Mr. Osborne helped explained Britain's agreement unveiled last week with its far-flung crown dependencies and overseas territories — including the Channel Islands, Gibraltar and Anguilla — to start sharing more information on which foreign companies bank their profits there.
Also hinting the resolve of individual members of G8 to ending the evil ring, reports had revealed that the office of Canadian Prime Minister Steven J. Harper, issued a statement outlining the steps Canada was taking to combat tax evasion, money laundering, and other financial crimes.
Heeding Annan's Plea
Annan's Africa Progress Panel might have presented as making a tall call to break a century-old corruption ring that observers say also sustains many western economies, but thanks to the panel's charm of confidence, its petition struck solid gold.
"Promoting growth and jobs is our top priority. We agreed to nurture the global recovery by supporting demand, securing our public finances and exploiting all sources of growth. The fight against unemployment, particularly long-term and youth unemployment remains critical in our domestic and collective agendas," the leaders of G8 said in yesterday's communiqué.
The G8 comprises U.K., Japan, Canada, the U.S., France, Germany, Italy, and Russia.
Affirming their commitment to achieving lasting reduction in global imbalances with hope that surplus and deficit nations will cooperate, the group further committed itself to establishing the automatic exchange of information between tax authorities.
The exchange, which becomes the new global standard when put into place, will work with the Organization for Economic Cooperation and Development (OECD) to develop rapidly a multilateral model, which will make it easier for governments to find and punish tax evaders.
"On tax avoidance, we support the OECD's work to tackle base erosion and profit shifting. We will work to create a common template for multinationals to report to tax authorities where they make their profits and pay their taxes across the world. We will support developing countries to collect the taxes owed them, with access to the global tax information they need. We agree to publish national Action Plans to make information on who really owns and profits from companies and trusts available to tax collection and law enforcement agencies, for example through central registries of company beneficial ownership," the group vowed.
The objective, observers say, is to track and punish corrupt political and corporate leaders who allegedly often siphon national wealth into untraceable or difficult-to-retrieve private accounts overseas.
The G8 nations also resolved to empower people to hold their governments and companies to account by establishing a "transformative Open Data Charter to make budget data and other government information public in an easily accessible way".
The group pledge further, "We will make progress towards common global reporting standards to make extractive industry payments more transparent. And we will work with resource-rich countries to help them better manage their extractive revenues so as to provide a route out of poverty and reliance on aid.
"We will continue to work with the poorest countries to help lift people out of poverty by keeping our aid promises and being accountable to the public for them. We will accelerate efforts to tackle the under-nutrition that blights millions of lives. We will work closely with African governments and citizens to promote sustainable growth."
In addition to these measures, the group commits to continuing a monetary policy that will support the recovery and be directed towards domestic price stability, according to the respective mandates of central banks.
The G8 nations will also ensure that their tax rules do not allow or encourage any multinational enterprises to reduce overall taxes paid by artificially shifting profits to low-tax jurisdictions.
Members further commit to sharing comprehensive and relevant information on the financial position of multinational enterprises to help all tax administrations effectively to identify and assess tax risks. "The information would be of greatest use to tax authorities, including those of developing countries, if it were presented in a standardized format focusing on high level information on the global allocation of profits and taxes paid," the group said.
It thereupon called on the OECD to develop a common template for country-by-country reporting to tax authorities by major multinational enterprises, taking account of concerns regarding non-cooperative jurisdictions.
"This will improve the flow of information between multinational enterprises and tax authorities in the countries in which the multinationals operate to enhance transparency and improve risk assessment," it said.
In order to achieve this feat, the G8 communiqué says African countries will have to be able to strengthen their tax base to help create stable and sustainable states; improve their ability to fund their budgets through their own domestic revenues; and increase ownership of their own development processes.
"We will continue to provide practical support to developing countries' efforts to build capacity to collect the taxes owed to them and to engage in and benefit from changing global standards on exchange of information, including automatic exchange of information. We welcome the OECD's feasibility study for its Tax Inspectors Without Borders proposal to assist tax administrations investigate specific and complex tax cases," the communiqué says.
The group acknowledges that the lack of knowledge about who ultimately controls, owns and profits from companies and legal arrangements, including trusts, does not only assist those who seek to evade tax, but also those who seek to launder the proceeds of crime, often across borders.
"Shell companies can be misused to facilitate illicit financial flows stemming from corruption, tax evasion, and money laundering. Misuse of shell companies can be a severe impediment to sustainable economic growth and sound governance. We will make a concerted and collective effort to tackle this issue and improve the transparency of companies and legal arrangements. Improving transparency will also improve the investment climate; ease the security of doing business and tackle corruption and bribery. It will support law enforcement's efforts to pursue criminal networks, enforce sanctions, and identify and recover stolen assets," the communiqué says.
Based on the foregoing commitments, the G8 has developed an 8-point "Action Plan Principles to Prevent the Misuse of Companies and Legal Arrangements".
The principles, which include the identification of company ownership, the availability of company tax information to host nations, the availing of risk indices on investors' ability to operate fairly, and the imposition of "effective, proportionate and dissuasive sanctions" on offending companies, will counter money laundering and tax evasion, according to the communiqué.
Partially grateful Annan, hopeful Sirleaf
Commenting on the communiqué yesterday from Geneva, Switzerland, the partially grateful Africa Progress Panel chair and former UN secretary general, Kofi Annan, commended the G8 leaders for making "bold and practical commitments for a fairer, more transparent tax system". He however noted, without offering more details, that more needed to be done on beneficial ownership.
"This is a tremendous breakthrough for fair taxation and corporate transparency that will eventually bring benefits for millions of people in Africa. I am delighted to see the G8 declare its commitment to establish the automatic exchange of information between tax authorities and to recognize that all countries must benefit from this exchange," Dr. Annan said.
He noted further, "G8 leaders have confirmed that it is not acceptable for global citizens to carry the cost of tax avoidance by multinational companies. However, more work now needs to be done to tackle beneficial ownership in order that resource-rich countries around the world can benefit fully from the resources beneath their soil."
Meanwhile, President Ellen Johnson-Sirleaf, who is currently in the UK as guest of the G8 summit along with four other African leaders, has addressed the group on "transparency and trade".
Prior to the Lough Erne summit, the hopeful Liberian leader held a series of meetings with philanthropist George Soros, founder and Chairman of the Open Society Initiative, and with Mrs. Cherie Blair, the wife of former British Prime Minister Tony Blair.
The Sirleaf-Blair meeting likely centered on the Africa Governance Initiative (AGI), which is supported by the Blair Foundation.
Comments Post a comment
Many ordinary Liberians have lost trust in President Sirleaf's leadership of Liberia with the exception of her ministers, deputies, cronies, and the well connected. The president says one thing but her actions speak volumes on corruption, transparency, judiciary reform, and development. After 7.5 years in power, Monrovia and its environs have no electricity, no safe drinking water, education and health care are in the toilet. Why must she speak on transparency when there is no transparency in her administration. All audits reports have been shelved because those implicated are her cronies. President Sirleaf in collaboration with the corrupt Liberian legislature have made matter worse. They allocate the national budget to their benefits and salaries. Why should Liberia spent US $224,000.00 on a lawmaker per year when children are not going to school and selling in market places? How can a minister or director receive 500-1000 gallons of gasoline on monthly basis when he or she is not going anywhere. The mistakes of past are being repeated. Nepotism is on the rise in government. Corruption has over taken to a point where it is done in the open, banks, place of business, air port, every where in Liberia. Thanks to President Sirleaf's leadership.
the emphasis shouldn't be place only on multinational companies , but members of the G8 nations , these nations sometimes turn a blind eye to curruption in African countries , once the policies of these currupt African leaders suit their countries ( members of G8 )interest , example Paul Biya's Cameroon , France says nothing about his long stay in power and his currupt policies that is causing young cameroonian to flee their nation , the late Omar Bongo give all his countries wealth to france , while his people were suffering , America back the currupt regime of the late president Samuel Doe of Liberia , the members of G8 need to also speak out against curruption , even if the policies of these currupt African leaders suit their interest .