African Countries Partner To Stop Multinational Company Tax Evasion

African countries have united in order to improve domestic revenue collection and put an end to tax evasion by multinational companies doing business in Africa.

A group of Kenyan tax experts will be heading to Botswana early next year on a mission to help the country improve domestic tax collection to finance national development projects, according to the Guardian.

This decision was made at the Second Global Partnership for Effective Development Cooperation Conference held in Nairobi, Kenya, between November 28th and December 1st.

“This is a great example of south-south cooperation that has the critical effect of boosting local systems while ensuring international companies that specialize in paying tax to nobody are compliant with local laws and contribute to domestic resource mobilization,” United Nations Development Program (UNDP) Administrator Helen Clark said.

The conference brought together representatives of governments, the private sector, civil society, and UN officials who agreed to come together in the fight against tax evasion and help build local audit capacities.

This initiative is part of a wider project dubbed “Tax Inspectors Without Borders” (TIWB), which specializes in improving local audit capacities to fight tax evasion, particularly by multinational companies.

TIWB, which was launched last year, has so far managed to net $100 million through tax audits in Zimbabwe and another $160 million from other African, Asian, and Latin American countries, according to James Karanja, the head of TIWB.

Partnering with the African Tax Administration Forum (ATAF), the project’s main mandate is to help countries recover revenue from multinationals that have been avoiding taxes.

Clark also urged African governments to look beyond relief from donors and seek long-term solutions by enhancing their local revenue-collection capacities.

The Art of Cheating Africa

In a report published in June 2015, Oxfam, an international human rights organization, revealed that Africa was cheated out of more than $11 billion in 2010 by multinational companies through the reduction of tax bills.

The report further revealed that international firms in Africa avoid paying their fair share in taxes through a common practice called “trade mispricing,” where a company artificially sets the prices for goods or services sold between its subsidiaries to avoid taxation.

The United Nations Conference on Trade and Development (UNCTAD) says developing countries generally lose about $100 billion annually through another form of tax evasion scheme by multinational companies involving tax havens.

These multi-billion-dollar companies also lobby extensively for tax breaks as a reward for retaining their businesses in African countries.

The initiative by TIWB, ATAF, and other transparency organizations in Africa is a welcomed move as it will help the continent boost her domestic-revenue-generation capacities.