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The leakage of the ‘Panama
papers’ last week got my heart racing fast and almost popping out of my chest.
The revelation that the names of some African technocrats, politicians and
their children appeared in the papers is absolutely no shocker, though i am not suggesting any wrong-doing. Infact, the
opposite would have been shocking. What this leakage, however brought back to
me, are some sad memories from my past as a tax assistant intern with a
public institution in my country. It justified the reason why I decided not to
continue in that employment though I was considered the best worker then. Many
were those who thought I was a fool. Well, I was not going to be given full
employment anyway because I had no political, regional or ethnic connections to
grab the very limited vacancies available; an effect of the World Bank’s freeze
on employment in the public sector which was a condition precedent to our
government signing a loan agreement. Sorry for the digression, back to the
subject!!
The Panama Papers have
revealed that Africa had lost at least $3 trillion in tax evasion and
avoidance apparently aided by ‘smart accounting’ and some corrupt officials.
Clearly the culprits are not only foreign and domestic multi-nationals but also aide camp technocrats and ‘political entrepreneurs’ as I call them. You may say that tax
avoidance, is perfectly legal but it’s very possible to use ‘smart accounting’
to avoid tax. That’s a whole topic for another day!! Before I continue, here’s
a short story.
The Story
I have often told this
story. It is a story that made me realize that I would never work in taxation
again, at least in this part of the world. You can call me a fool and by the
way, I am by no means an angel but I would die a happy man if I have to spend the
rest of my life in poverty than be employed in a well paid job as a tax
inspector ever again in this part of the world. It was a fine afternoon in the
office. My colleagues were on operations doing inspection whilst I was alone in
the office doing some data entry. I had just finished lunch and was about to
retire behind my work station when I heard a loud bang on the door. I beckoned
the person in. This sullen looking 60ish woman, almost in tears wobbled in
through the door and approached me in a very meek manner which really felt
embarrassing. She was probably the age of my mother. I gave her a seat
and she had a story to tell, a story too common in this part of the world. She
runs a small sachet water business on which she survived hand to mouth. From
this same revenue, she paid the school fees her grandchild who is an orphan and
also paid the rent and the bills. Now what was her problem? She has just been given
24hrs to settle all her tax bills by a tax team on operations or she would have
her business shut down. She had close to 2 years tax arrears. Broken down by
the amount she paid quarterly, that would be $20 in current terms. Her tear
drenched handkerchief, as she narrated her plight, couldn’t hold any more of it.
So what’s a man to do, right? Well, I did it and damned the consequences! Yes
you guessed right, I played ‘Robin Hood’! I changed data to prove that she
started her business less than a year ago and that she was entitled to just 2
quarters of tax payment in the current year because that was what she could
afford; I warned you I am not an angel, didn’t i? Was I wrong? Yes I was but I
was ready to take responsibility and live with the consequences of that action.
I could have paid for her but paying would have meant, I am in support of a
system which I have come to despise. There and then, I knew that this job was
not meant for me. Now, how does this relate to the Panama Papers?
Africa’s Tragedy
It used to be common rumour
that both foreign and domestic multi-nationals are engaged in ‘smart
accounting’ to avoid and evade paying appropriate taxes. However, several
reports on Africa prove that there is a major tax and royalty leakage and
capital flight out of Africa. Tax auditing reveals many loopholes that help
these multi-nationals to ferry huge sums of money out to unknown destinations; then
Switzerland, now Panama as revealed and most likely other obscure islands soon
to be revealed. They are very often than not, aided by corrupt technocrats and
politicians who get huge kick-backs in different forms. Some may be in cash and
some may even be in kind by paying the school fees of the children of corrupt
officials in top universities in various parts of the world. Yet small start-ups, table-top hand to mouth
businesses and little corner shops are constantly harassed by tax inspectors to
pay their taxes as in the case of my story. Don’t get me wrong, no country
develops without some form of financial contribution in the form of taxation
and having an offshore account is not illegal either. Every business small or
big, aligned within a given tax thresh-hold must pay taxes. However, where is
the equity and equality when firms with the financial muscle can buy their way
out whilst poor ordinary people are over-taxed?
Let’s Do A Little Common
Sense Economics
Now my dear good people, you
can imagine what $3 trillion can do for this continent, so let your imagination
run wild? There is no exact figure but there are claims that, Africa’s current
debt hovers around $600 billion; I stand to be corrected, though. If the
reports are accurate, then this simply suggests that Africa shouldn’t be
borrowing at all. Instead, a perpetual cycle of dependency has been created where
Africa would never be able to sufficiently service its debt, hence would always
negotiate from a weak position. It also means Africa would continuously be
under the grip of donor agencies and development partners as long as it loses
such huge amounts through tax leakages. Is this a deliberate manipulation
mechanism to keep developing countries under control? I have no evidence to
that effect! Is there a guarantee that, if this amount ends up with African governments,
it would not be drained down a corruption hole? No, but that does not mean that
Africa does not deserve its due.
High Unemployment = Illegal
Migration – The Inevitable Effect
Africa has been touted by expects as rising;
very true, too. Ironically, Africa is still very often analysed as a high
politically risky destination for investment. It seems this is an excuse to
justify inappropriate financial machinations. Therefore Africa attracts mainly
multi-nationals in the extractive industry who basically take advantage of the
weak systems and corruption to sign atrocious contracts that virtually give
away African resources for free. However, what the so-called expects have
ignored is that by ‘stealing taxes’ from Africa, Africa have been left with a
cycle of perpetual high unemployment which ends up haunting the west in the
form of illegal migration. If only foreign and domestic multi-nationals would
stop ‘stealing taxes’, if only they would pay the appropriate royalties, if
only the growing industry of ‘political entrepreneurship’ capital flight and
general corruption can be curtailed, only then, would massive employment be
created and the human trafficking industry, which encourages able bodied youth
to cross dangerous waters in search of ‘greener pastures', be disabled.
Opinion mine! I would be
glad to hear yours!
