Monday, December 15, 2014

HOW AFRICA CONTINUES TO DEVELOP THE WEST

Fact: Illegal transfer of wealth out of Africa exceeds aid and foreign direct investment flowing I to the continent annually.

Fact: Funds from bribery and embezzlement account for less than five percent of these illicit fund transfers with upto six in every dollars of these come from the activities of multinational companies, otherwise legitimate companies with above board operations but through accounting dodges are often able to transfer more of their income abroad than they ordinarily should.

According to a report by the Organisation for Economically Developed Countries (OECD) illicit fund transfers amounting to at least $65b are secreted out of the continent annually compared to the $63b received in aid and Foreign direct investment (FDI).

And even the OECD fears that it is understating the reality spectacularly.

These are such scary facts that at the recent group of 20 most developed nations meeting in Australia last month it was on the agenda though no substantive resolutions were made to stem these immoral flows.

Immoral because, especially with multinationals they often constitute tax avoidance than tax evasion. The latter is criminal and the former is considered shrewd business.

Last week at the Africa Center of Media Excellence (ACME) journalists from he East African region were given a primer on how to recognize and report on these financial flows.

However there is only so much the media can do, their limited ability to decipher financial statements notwithstanding. Often these companies by setting up parent companies in offshore jurisdictions -- even these are hidden within convoluted webs that are impossible to make head or tail of, that offer favorable tax benefits, shift their costs to these places denying the country where the economic benefit is being generated from getting a fair shake.

The champions of these practices argue that these countries still benefit from job creation and technology transfers. That maybe so but the evidence suggests that there is a disproportionate benefit to the companies than our countries.

"These findings burst the myth that western companies are doing us a favour investing in our capital starved countries while in fact we are supporting their economies with massive repatriation of funds that prop up an unsustainable way of life while keeping our continent in poverty. Not unlike the massive repatriation of of capital during the slave trade and subsequently during the colonial era...

But the governments of the multinationals' home countries are only waking up to the fact if these companies can do it to us they have no qualms about doing it at home either.

Last week the UK government moved to plug loopholes that allowed US giants Google, Amazon and Starbucks to pay minimal taxes on their profits with the appropriately named Google tax.

The developed countries while horrified by how their treasuries are not getting their fair dues are also coming to the realization that these same networks are being employed by organized criminals and terrorists to launder and transfer funds.

But even more dangerous is that these dodges are facilitating the subversion of their own democracies. Not only do these ruses serve to concentrate prodigious amounts of wealth in very few hands, but his wealth, connected individuals then leverage their resources to have whole governments doing their bidding regardless of the impact on the general population.

They are not waking up to the centuries' old scam because of their concern for us, the wretched of the earth.

A rough estimate that as much as $21 trillion dollars or twice the size of the US economy is being shuffled between 60 countries around the world with as far flung addressees as Macau to the Isle of Man and the Bahamas.

Given the scale of the industry there is very little individual countries can do. Even the UK's latest attempt is seen by observers as mere playing to the gallery, as no serious inroads can be made unilaterally.

It's obvious why we should care, this money could be used to improve the quality of our lives and divorce us from our dependence on foreign aid.

However it is a war that pits the severely, disjointed opposition against networks of power and influence that have been in place since even before the Middle Ages.

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