Sub-Saharan African countries still mobilise less than 17
per cent of their gross domestic product in tax revenues due to money earned
either illegally, transferred illegally or utilized illegally.
Transfer pricing is whereby a mine sells at very low prices its product to a sister company abroad for further processing after which the processed product is sold at high prices in the international market, thus the mine can make losses so that its sister company outside makes super profits which the home country cannot tax.
Re-invoicing is whereby a mining company forms a commodity
brokering company in another country to which it sells the minerals for a song.
The brokering company just resells, without further processing the minerals,
for high prices.
Thin capitalisation is whereby a mining company is funded by
its parent company outside by very high-interest loans. That way the local
company makes little profit or heavy losses due to interest payment to the
parent company outside.
All these are methods of shifting profit from the country
where resources are being exploited to developed countries or other countries
thereby swindling the country hosting the mineral resources.
There was a huge disparity on production figures, a
situation that paints a picture of secrecy on operations of the sector. There
is an indication that most of the minerals and subsequently the revenue are not
coming into the fiscus, they are sold through the black market. The
inconsistency on the figures shows that the country is being deprived of
revenue by the officials in the companies and government officials who control
mining.
Mineral resource extraction is a sector where we extract a finite
resource. Where the mining government should have the maximum benefits. The
reasons why the minerals are not benefiting much is leakages. It comes with
corruption, illegal resource exploitation and illicit financial flows. The
mining companies are using loopholes within the tax systems to avoid paying
taxes. The diamond and gold sectors have serious undercovers, opaque networks
which can only be located in powerful capital pockets. This means no taxes or
royalties being paid. The net effect is that revenue to the government is so
low and they cannot offer quality services to the people in terms of
infrastructure development, provision of clean water, good medical services
among others. It will also result in the government introducing more taxes and
the poor will continue to be burdened through taxes.
Tax havens, the report pointed out, are the major
facilitators of the illicit movement of resources out of developing countries,
particularly in Africa, as they create incentives for corporations to shift
their profits. "Apart from offering low to no taxes at all, tax havens
offer very strong banking secrecy to both companies and individuals, making it
extremely difficult, and in most instances impossible, for foreign authorities
to obtain information about the account holders and the source of money," a
joint study by the African Development Bank and Global Financial Integrity
said. "Weak tax administrations coupled with multinational tax-avoidance
schemes, engagement of multinational corporations in transfer pricing and other
cross-border, intragroup transactions, negotiation of tax holidays and
incentives and use of offshore investment accounts constitute about 60 per cent
of illicit financial flows globally,"
These financial leakages, the report noted, amounted to
about $528.9billion (about N105.3trillion)) over the decade ending 2012,
compared to $348.2billion (about N62.3 trillion) in official development
assistance and $284billion (about N56.5trillion) in net inward foreign direct
investment.
Perhaps Bob Geldof should concentrate on the theft by existing "investors", rather than promoting the interests of new thieves
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