03 June 2015, Abuja – Multinationals have been accused of cheating Nigeria and other African countries of more than N2tn.
According to a new report entitled, ‘Africa: Rising for the few,’ by Oxfam, an international organisation working to provide solutions to poverty and injustice around the world, multinational organisations cheated Nigeria and its African counterparts of $11bn in 2010 through tax evasion.
Oxfam’s findings, which were released on Tuesday, came as African political and business leaders were getting set to attend the 25th World Economic Forum Africa in South Africa.
“Africa is haemorrhaging billions of dollars because multinational companies are cheating African governments out of vital revenues by not paying their fair share in taxes. If this tax revenue were invested in education and health care, societies and economies would further flourish across the continent,” Oxfam International’s Executive Director, Winnie Byanyima, said.
In 2010, the last year for which data is available, multinationals were said to have avoided paying taxes on $40bn of income through a practice called trade mispricing (where a company artificially sets the prices for goods or services sold between its subsidiaries to avoid taxation).
With corporate tax rates averaging out at 28 per cent in Africa, this equates to $11bn in lost tax revenues, Byanyima stated.
Trade mispricing, she added, was just one of the ways that multinationals were avoiding paying their fair share of taxes. According to the United Nations Conference on Trade and Development, developing countries as a whole lose an estimated $100bn a year through another set of tax avoidance schemes involving tax havens.
The report noted that companies also lobbied hard for tax breaks as a reward for basing or retaining their business in African countries.
Byanyima added, “African leaders must not sit by while international tax reforms are agreed, which give multinational companies free reign to sidestep their tax obligations in Africa.
“Political and business leaders must put their weight behind the ever louder calls for the reform of global tax rules. African nations must also introduce a more progressive and democratic approach to taxation – including calling a halt to tax exemptions for foreign companies.”
She stated further that existing international efforts to tackle corporate tax dodging, such as the ‘Base Erosion and Profit Shifting process’, led by the Organisation for Economic Cooperation for the G20, would leave gaping tax loopholes that multinational companies could continue to exploit across the developing world.
According to her, many African nations have been shut out of discussions on the BEPS reform and will not benefit from them as a result.