AfricaFocus Bulletin
June 22, 2016 (160622 )
(Reposted from sources cited below)

Editor’s Note

“A new report by Tax Justice Network-Africa and ActionAid says that
East African countries (Tanzania, Kenya, Uganda and Rwanda) are
losing approximately $2 billion a year of revenue each year by
granting tax incentives to multinational companies. … According to
Yaekob Metena, ActionAid Tanzania’s country director, ‘Though there
have been improvements in recent years in addressing the issue,
governments in East Africa continue to give away domestic resources
in tax incentives, funds that could pay for the regions’ education
and health needs and meeting the development objectives.'”

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This AfricaFocus Bulletin contains a press release on this new
report from two of the organizations actively involved in the
Panafrican civil society campaign to stop illicit financial flow
from the African continent, which has been endorsed by the African
Union and is gaining worldwide momentum from a series of reports
from the Panama Papers and other investigative journalism.

The first report, on tax incentives, concentrates on the legal but
illicit policies that enable bleeding of resources from Africa to
multinational corporations through tax breaks. The second, from the
UN Environment Programme and Interpol, highlights the rapid increase
is losses due to black-market environmental crimes such as ivory
smuggling, illegal logging, and toxic waste disposal. Such crimes
are now the 4th largest illicit enterprise sector worldwide,
following drug smuggling, counterfeiting, and human trafficking,

For brief talking points and previous AfricaFocus Bulletins on
illicit financial flows and the Stop the Bleeding Africa campaign,
visit http://www.africafocus.org/intro-iff.php

For a database of articles and reports on illicit financial flows,
provided by the Stop the Bleeding Campaign but including data from
many sources, visit http://iffoadatabase.trustafrica.org/

For another hard-to-excerpt but revealing expose released today, see
Finance Uncovered’s investigative report on the shady financial
dealings holding up the renovation of the Rift Valley Railway (RVR).
The report is entitled “Trouble on the Lunatic Express,” and results
from a collaborative investigation by Kenyan, Belgian, and British
journalists. See http://www.financeuncovered.org/ – direct URL:
http://tinyurl.com/zz5v77d

“We have discovered that the fabled RVR modernisation programme has
not resulted in the purchase of new trains as claimed by the owners
of the railway, Qalaa Holdings.

We have trawled accounts which show that Qalaa has created an
offshore structure of shell companies which has extracted millions
in advisory fees from RVR, despite the railway suffering losses in
recent years.”

++++++++++++++++++++++end editor’s note+++++++++++++++++

East Africa losing up to 2 billion dollars to unproductive tax
incentives

Governments have taken few positive steps to curb loss of revenue

http://www.taxjusticeafrica.net / direct URL:
http://tinyurl.com/gmrmhde

http://www.actionaid.org / direct URL: http://tinyurl.com/hthr9dj

Dodoma, 18 June 2016 – A new report by Tax Justice Network-Africa
and ActionAid says that East African countries (Tanzania, Kenya,
Uganda and Rwanda) are losing approximately $2 billion a year of
revenue each year by granting tax incentives to multinational
companies. The report follows the EAC report series produced by the
two organizations in April 2012, examining the impact of tax
incentives on the region and giving recommendations to the EAC on
how to end a race to the bottom. This follow up report assesses what
has changed since 2012.

The report, entitled ‘Still Racing towards the Bottom? Corporate tax
incentives in East Africa’, states that while statements indicating
commitments to revise tax incentive policies have been made by
policymakers of the region, many questions abound on how eliminating
tax incentives will be realized. It is unclear how these tax
incentives will be revised, costed and phased out in practice and
what resources and expertise are at the disposal of the governments
to carry out this work.

According to Yaekob Metena, ActionAid Tanzania’s country director,
“Though there have been improvements in recent years in addressing
the issue, governments in East Africa continue to give away domestic
resources in tax incentives, funds that could pay for the regions’
education and health needs and meeting the development objectives.”

East African governments have taken some positive steps to reduce
tax incentives, especially those related to VAT, which are
increasing tax collection and providing vital extra revenue that
could be spent on providing critical services. However, they are
still failing to eliminate all unnecessary tax incentives. Countries
are still providing generous tax breaks in the form of tax holidays,
capital-gains tax allowances and royalty exemptions and these East
African countries continue to lose colossal amounts of revenue
through unnecessary tax exemptions and incentives given to
corporations.

“There is need to shift the policy environment in the region on the
issue of incentives as; political and financial national and
institutional authorities have admitted that tax incentives are in
fact harmful to domestic revenue mobilization and need to be
revised, costed and in most cases eliminated. In fact, as our report
shows that giving tax incentives is still fueling competition at
1the EAC level, and derailing any meaningful progress towards
regional harmonization of tax policies. Regional competition for
investors through providing tax incentives is still alive and is
undermining integration,” said Metena.

The report follows the EAC report series produced by the two
organizations in April 2012, examining the impact of tax incentives
on the region and giving recommendations to the EAC on how to end a
race to the bottom. This follow up report assesses what has changed
since 2012. “Many leaders are promising to take greater measures
towards progress on this in the region but there is a need for
tangible actions to be taken towards that end,” said Tax Justice
Network-Africa’s Deputy Executive Director, Jason Braganza.

Evidence gathered suggests that collectively, the four East African
countries (Kenya, Uganda, Tanzania and Rwanda) could still be losing
around $1.5 billion and possibly up to $2 billion a year. The report
calls for East African governments to review the tax incentives they
are granting with a view to abolishing all unproductive incentives.
Any incentives that are determined to be effective should be
targeted at achieving specific social and economic objectives that
benefit East African citizens.

“The East Africa Community (EAC) must accelerate the harmonization
of its tax legislation with the EAC Agenda by ratifying the East
African Code of Conduct on Harmful Tax Competition and implementing
at national levels, the recommendations of the African Union High
Level Panel on Illicit Financial Flows that was adopted at the AU
Summit in January 2015,” added Braganza.

ENDS

Paulina Teveli
Communications Coordinator – ActionAid Tanzania
Tel: +255 (0) 22 2700596 | Mob: +255 755 706322
Email: Paulina.Teveli@actionaid.org.

Michelle Mbuthia
Assistant Communications Officer – Tax Justice Network-Africa
Tel: +254 724 994796
Email: mmbuthia@taxjusticeafrica.net

Editors’ Notes:

Four countries alone – Kenya, Uganda, Tanzania and Rwanda – could
still be losing around $1.5 billion and possibly up to $2 billion a
year through the granting of corporate tax incentives to foreign
companies. Uganda loses around US$370 million, Kenya around US$1.1
billion, and Rwanda up to US$176 million. This amounts to, total
revenue losses that would amount to up to $2 billion a year.

The 2 billion a year figure (less than the 2.8 billion a year figure
from our 2012 report) reflects a welcomed commitment by the EAC
government’s. Governments have taken some positive steps to reduce
tax incentives, especially those related to VAT, which are
increasing tax collections and providing vital extra revenues that
could be spent on providing critical services. However, the figure
is exceedingly estimated and may well be short of reality as
accurate reliable data in most cases does not exist for all
incentives given to foreign firms.

While welcome statements indicating commitments to revise tax
incentives have been uttered by politicians of the region, many
questions arise how eliminating tax incentives will be realised. It
is unclear how these tax incentives will be revised, costed and
phased out in practice and what resources and expertise are at the
disposal of governments to carry out this work.

For Burundi, determining the revenue losses due to tax incentives
was particularly challenging in this case owing to an almost
complete lack of data. However, Burundi’s President Pierre
Nkurunziza, recently indicated that at least 81 billion Burundian
Francs ($52 million) has been lost to companies or officials who
have been given tax exemptions to import goods to build
infrastructure and instead sold on the materials.

In Tanzania, revenue losses from tax incentives given in 2014/15
were likely to be around US$790 million; although this figure
predates the new VAT law which is claimed will result in extra
revenues of US$500 million.

Kenya, the amount of revenue lost through tax incentives is likely
to be near the KShs100 billion (US$1.1 billion) a year level.

In Uganda, it remains unclear how much Uganda is losing to tax
incentives since government figures do not appear to provide full
figures, but the amount is likely be around US$370 million.

In Rwanda, estimates suggest that Rwanda is losing between Rwf 87
billion (US$115 million) and Rwf123 billion (US$176 million) a year.

ActionAid is a global movement of people working together to achieve
greater human rights for all and defeat poverty. We believe people
in poverty have the power within them to create change for
themselves, their families and communities. ActionAid is a catalyst
for that change.

Tax Justice Network-Africa (TJN-A) is a Pan-African initiative
established in 2007 and a member of the Global Alliance for Tax
Justice. It is a network of 29 members in 16 African countries.
Through its Nairobi Secretariat, TJN-A collaborates closely with
these member organisations in tax justice activities at the
national, regional and global level. TJN-A seeks to promote socially
just and progressive taxation systems in Africa, advocating for pro-
poor tax policies and the strengthening of tax systems to promote
domestic resource mobilisation. TJN-A aims to challenge harmful tax
policies and practices that favour the wealthy and aggravate and
perpetuate inequality.

*******************************************************

Environmental crime now the world’s fourth largest illicit
enterprise, says new report

June 13, 2016

http://www.africaeconews.co.ke/ – Direct URL –
http://tinyurl.com/jnjo59x

Environmental crime is now the world’s fourth largest illicit
enterprise after drug smuggling, counterfeiting and human
trafficking.

According to a joint report by the UN Environment Programme (UNEP)
and Interpol (see full report at
http://unep.org/documents/itw/environmental_crimes.pdf), it is
estimated that the value of the black market industry behind crimes
such as ivory smuggling, illegal logging and toxic waste dumping has
jumped by 26 per cent from 2014 to between US$91 billion and US$258
billion annually depriving countries of future revenues and
development opportunities.

“Environmental crime has impacts beyond those posed by regular
criminality. It increases the fragility of an already brittle
planet,” observed Mr Achim Steiner, UN Under-Secretary General and
Unep Executive Director.

Interpol Secretary General Jürgen Stock says an enhanced law
enforcement can help address this worrying trend.

“There are significant examples worldwide of cross-sectoral efforts
working to crack down on environmental crime and successfully
restore wildlife, forests and ecosystems. Such collaboration,
sharing and joining of efforts within and across borders, whether
formal or informal, is our strongest weapon in fighting
environmental crime,” says Mr Stock.

Environmental crimes cover not only the illegal trade in wildlife,
but also forestry and fishery crimes. It includes illegal dumping of
waste including chemicals and use of ozone-depleting substances.

Destruction of natural flora and fauna, pollution, landscape
degradation and radiation hazards, with negative impacts on arable
land, crops and trees adds to the list.

The debate on environmental crimes also includes exploitation of
natural resources such as minerals, oil, timber and marine
resources.

In recent years, the joint report says, the debate has reached the
global stage due to its serious and deleterious impact on the
environment and ecosystems, as well as on peace, security and
development.

Environmental Crimes makes simpler for Illicit Financial Outflows

Illegal exploitation of natural resources, including ITW, has
negative consequence on potential revenues from tourism, timber,
mining, gold, diamonds, fisheries and even oil and charcoal.

These natural resources could have produced revenue for development
needs in health care, infrastructure, schools and sustainable
business development.

Indeed, the illegal trade especially in natural resources like fish,
timber and minerals undermine legal and sustainable businesses
through unfair competition and non-payment of legitimate taxes for
social benefits.

Currently, the scale of different forms of environmental crime is
likely in the range of USD 91–259 billion or twice the size of
global official development assistance (ODA).

This total amount of USD 91–259 billion is a loss to society because
the commercial activity takes place as an illegitimate enterprise.
It undermines governance, legal tax-influenced price levels, and
particularly legitimate business. An unknown proportion will
nonetheless be re-introduced into the legitimate economy through
money laundering.

A research by Development Initiatives (DI) on foreign aid and
stimulating domestic revenue mobilisation in Kenya and Uganda
revealed that tax revenue makes up the largest proportion of total
revenue, which is over 85 per cent for Kenya in the last three years
(and over 80 per cent in Uganda). It also found that ODA to domestic
revenue mobilisation in Kenya and Uganda amounted to close to US$
21.5 million in 2014 (with more funding to Uganda than Kenya).

DI suggests in order for the country’s efforts to mobilise domestic
revenue to bear more fruit, there is need to develop approaches that
increase tax revenue without necessarily increasing the tax burden.
However, broadening the tax base to mobilise more domestic revenue
might be undermined if attention is not given to leakages including
illicit financial flows.

Meanwhile, the Panama Papers showed that illicit financial flows are
not only an Africa problem, and that there is a need for global
collaboration to track them.

“Countries such as Kenya and Uganda should target job-creating
economic growth, and shift away from growth based solely on
extractive industries – oil and gas – and services that require the
employment of fewer people,” says the joint report. About 10 per
cent of the total amount is estimated loss of revenue to
governments. The number is based on two assumptions: That the
criminal activity generates an average profit of 30 per cent, and
that government tax revenues could be 30 per cent of the profits, if
the environmental crime activities had been legal and legitimate.

For an approximate comparison the average world total tax rate
percentage of commercial profits was 40.8 in 2015 according to the
World Bank. For the USD 91–259 billion range, with a profit of USD
27–78 billion, the tax income, which is loss for government revenue,
would be 8–23 billion, or 8.8 per cent of the total amount, giving
an average loss of government revenue of USD 9–26 billion.

The report points out an escalating species extinction due to wanton
wildlife poaching and trafficking. Illegal logging and trade results
in climate change emissions from deforestation and forest
degradation.

The reports adds that illegal, unreported and unregulated fishing
has resulted into fish stocks depletion, loss of revenues for local
fishmongers and states. Most targeted fish species are Tuna,
Toothfish and Sharks.

Criminals exploit the lack of international consensus and the
divergence of approaches taken by countries. What may constitute a
crime in one country, is not in another. This effectively enables
criminals to go “forum shopping” and use one country to conduct
poaching, and another to prepare merchandise, and export via a third
transit country.

According to UNODC, corruption is the most important enabling factor
behind illegal wildlife and timber trade. Identifying the optimal
legal framework for preventing, combating and prosecuting
environmental crimes requires careful consideration.

There are proposals, according to the UN report on environmental
crime; firstly, designating any violation of wildlife or
environmental laws and regulations to be designated as “serious
crimes”. Another proposal is to designate illicit trafficking in
protected species of wild fauna and flora involving organised
criminal groups” as serious crimes.

In as much as the UN Convention on Transnational Organised Crime
(UNTOC) defines organised criminal groups, the new report recommends
a broader applicability of the convention on new and emerging forms
of crime.

In 2014, the Interpol General Assembly passed a Resolution on
Interpol’s response to emerging threats in Environmental Security
(Resolution AG-2014-RES-03). In that resolution, instead of defining
environmental crime, Interpol instead focused on “environmental
security” by recognising the impact that environmental crime and
violations can have on a nation’s political stability, environmental
quality, its natural resources, biodiversity, economy and human
life.

Interpol also recognises that criminal networks engaged in financial
crime, fraud, corruption, illicit trade and human trafficking are
also engaged in or facilitating environmental crime.

Experts say the approach by both Interpol and the Commission on
Crime Prevention and Criminal Justice (CCPCJ) in regarding
environmental crimes more as a collective term, makes the
criminalities fall under already established laws on serious crimes,
including, but not limited to, serious financial and corporate
crimes, forgery, fraud including tax fraud, terrorist finance. Such
an approach provides prosecutors with far more powerful tools for
prosecution and prevention and importantly – proportionality between
offense, intent and punishment.

UN Security Council Resolution S/RES/2195 (2014), recognised that;
natural resources are increasingly driving conflicts.

Three conventions control the international trade and movement of
hazardous waste and dangerous chemical substances by setting
procedures and standards for import and export. Both the environment
and human health are exposed to hazardous waste and chemicals
through the cycle these products go through from production,
transport, use to disposal.

There are three interlinked conventions: the Basel Convention on the
Control of Trans-boundary Movements of Hazardous Wastes and their
Disposal, which primarily covers wastes trade; the Rotterdam
Convention on the Prior Informed Consent Procedure for Certain
Hazardous Chemicals and Pesticides in International Trade and The
Stockholm Convention on Persistent Organic Pollutants which
primarily covers chemicals, including restrictions on production.

The consensus based on Montreal Protocol of 1987, which controls
ozone depleting gasses (ODS), has been ratified by 197 parties,
making it universal. Projects worth USD 3.2 billion have been
approved by its executive committee to phase out over 450,000 tonnes
of substances with ozone depletion potential including the
implementation of Project Sky Hole Patching by the Regional
Intelligence Liaison Office of the World Customs Organisation in the
2000s. Unep, Unido, UNDP and the World Bank are the implementing
agencies of the protocol.

Unep Governing Council’s Decision 27/9 is the first internationally-
negotiated document to establish the term “environmental rule of
law”.

The decision emphasised the role of organised criminal groups in
trafficking hazardous waste, wildlife and illegal timber. The
Council recognised that environmental crime undermines sustainable
development, the successful implementation of environmental goals
and objectives, the rule of law, and effective governance.

The council also noted that these issues have been recognised in UN
General Assembly resolution A/RES/67/1 (2012) and A/RES/67/97 (2013)
which urged member states to address transnational organised crime’s
impact on the environment.

United Nations Environment Assembly (UNEA) reaffirms the need to
making illicit trafficking in protected species and forest products
into a serious crime as defined by UNTOC.

World Environmental Law Congress in Rio in April 2016, where the
Chief Justices, Heads of Jurisdictions, Attorneys Generals, Auditors
General, Chief Prosecutors and other high-ranking representatives
were gathered, agreed on a list of seven core principles to
strengthen the environmental rule of law.

The congress passed recommendations not limited to linking
environmental crimes to other crimes such as money laundering, and
strengthening courts’ capacity as guarantors of the environmental
rule of law.

*****************************************************

AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with a
particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.

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AfricaFocus Bulletin
June 13, 2016 (160613)
(Reposted from sources cited below)

Editor’s Note

From solar TVs in rural Kenya to modular concrete for windmills in
Iowa, the pace of technological advance continues to accelerate,
making renewable fuels more and more competitive with fossil fuels.
Technology alone will not be sufficient, of course. But these
trends, combined with worldwide climate activism and increasing
awareness among the public and government policy-makers, are leading
even establishment analysts to conclude that, in the words of the
Financial Times, “fossil fuel producers face a future of slow and
steady decline.”

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The extent of damage already being felt and determined by current
emissions levels means that “slow and steady” decline is by no means
enough. Resistance by policy-makers and businesses to the transition
is still formidable. Although South African activists, for example,
headline their campaign “Don’t Be a Fossil Fool,” the South African
government (and many others) continue to pursue such destructive and
outdated policies. Fracking is still being advanced in the United
States, the UK, and Canada as a legitimate “transition.” But it is
telling that such enterprises are no longer good bets for the
rational business or investor.

This AfricaFocus Bulletin contains several articles relevant to
these developments, including news reports from Kenya, Iowa, and
South Africa, plus an analytical review from Jeremy Leggett, who
provides a monthly update in his blog on “The Great Transition.”

Also of interest: a recent report by the International Energy Agency
concludes that price trends are not yet enough for renewable energy
to advance: investors also need policy support from governments to
insure that projects can be funded with adequate capital. See Green
Tech Media for June 7: http://tinyurl.com/z2dzkza

For previous AfricaFocus Bulletins on Climate and related issues,
see http://www.africafocus.org/intro-env.php

++++++++++++++++++++++end editor’s note+++++++++++++++++

This solar-powered TV brings global news to rural Africa

By Sophie Morlin-Yron

CNN, June 3, 2016

http://tinyurl.com/hd7njc8

CNN)In rural Kenya, people walk for miles in the blistering sun
after work just to watch television in the nearest town.

At 7pm, in the village restaurants, the music turns off, and the
news turns on.

In this nation of 45 million people — where many live without
electricity — only 30% of Kenyans have their own television.

Now a start-up has developed a 16-inch TV which runs on the sun’s
rays, bringing communication to the masses.

“There are some 5 million homes in Kenya that don’t have
electricity,” says Jesse Moore, founder of M-KOPA Solar.
“And the product most people living off-the-grid want to get is a
television.”

Staying current

The M-KOPA Solar TV connects to Kenya’s digital television network
of about 30 free channels, screening soap operas, premier league
football games and marathons.

But culturally Kenyans are very engaged in politics and business,
and it is news broadcasts that attracts the most viewers, Moore
says.

“If you travel around Kenya, you see people veraciously reading the
newspapers … People want to consume information about their
society and about their government.”
M-KOPA has sold around 5,000 sets since the launch in February, and
Moore says they are struggling to keep up with the growing demand.

“It’s feeling of, ‘Hey, I can live in a rural area, but I’m not cut
off’.”

How it works

The new kit adds a 16″ TV to the original package.

The Solar TV is an extension of a more basic solar panel kit to
power lights, radios and mobile phones, which the company has sold
to 340,000 households in Kenya, Uganda and Tanzania.
Now it can also power a TV.

Users simply fix the solar panel to a sunny area outside their home
and connect it to their television via a power cord.

Power on loan

M stands for “mobile” and KOPA is Swahili for “to borrow” — the
business is tailored to people in less affluent areas who are unable
to buy solar panels, or a TV, up front.

“Most of our customers live at, or below, $2 per day per capita,”
says Moore.

Using a mobile payment system provided by partner company,
Safaricom, customers pay between 50 cents and $1.25 a day over 1 to
2 years, depending on their payment plan.

The TV and solar panel cost $500 in total — once that is paid, the
kit is no longer on loan, and all power is free for as long as the
sun shines.

Mobile payment paved the way

Moore, a former aid worker from Canada, says mobile payment systems
like M-PESA are crucial to business in Africa.

“It allows everybody in this country to move money seamlessly
through their mobile phones in a way that’s almost to the envy of
the UK or Canada.”

Moore saw an opportunity to bring social change to remote
communities with affordable solar power kits — and started M-KOPA
Solar in 2011 together with Nick Hughes, Chief Product Officer, and
Chad Larson, Chief Credit Officer.

Today, the company has 2,000 employees and offices in five
countries.

*********************************************

Don’t be a fossil fool: how South Africa’s coal addiction is costing
us

Daily Vox, May 11, 2016

http://tinyurl.com/zg24uef

For videos and photos from demonstrations, visit
http://southafrica.breakfree2016.org.

For the May BreakFree demonstrations world-wide, including
disruptions of fossil-fuel facilities in Australia, Germany, Brazil,
UK, Turkey, and USA, see http://breakfree16.org

Ahead of their three-day long campaign against fossil fuels and its
impact on people’s livelihood, climate change organisation, 350.org
held a press briefing to detail the structure of the campaign, Break
Free from Fossil Fuels. 350.org, together with other organisations
presented a mouthful at the briefing and THE DAILY VOX sums up the
nitty-gritty.

Mzansi’s [South Africa’s] addiction to coal has resulted in the
doubling of CO2 (carbon dioxide) emissions in the past 56 years. We
are ranked the 12th largest CO2 emitter worldwide and the
environmental impacts of the coal sector are huge. 350.org is
calling on South African government to stop clinging to volatile
fossil fuels and consider a cleaner and fairer renewable energy.

From May 12 – 14, a series of events is planned by 350.org to keep
coal under the ground and lead the fight against coal mining and the
sector’s corruption. The events, under the umbrella Break Free from
Fossil Fuels will include protests and a visit to South Africa’s
coal mining hub, Emalahleni in Mpumalanga to raise awareness. The
campaign will speak out against fossil fuels, climate change, and
their impact of drought and hunger.

Yes fossil fuels, climate change, drought and food crisis are
connected. Here’s how:

Climate crisis and fossil fuels

Coal-fired power plants are the biggest source of man-made CO2
emissions, making coal energy the greatest threat facing our
climate. People are already living the impacts of the climate
crisis, with 2014 and 2015 recorded as the hottest years. South
Africa’s El Niño-induced drought is exposing weaknesses in the
state’s response. 2015 was the driest year on record for SA. Harsher
and longer droughts, heat waves and extreme rainfall can’t be
separated from the causal impact of climate change.

Climate change, drought and hunger

South Africa’s drought is affecting millions of people and
increasing starvation. Climate change is further exposing the
problems with a corporate-controlled food system. All measures of
food prices are showing a dramatic increase in food inflation, with
year on year increase of staples particularly. The biggest increases
have been in mealie meal, samp, cooking oil and potatoes. Food
profiteering denies us the right to food under the constitution.

The hunger crisis and high food prices

Food price inflation has increased by 13.4 % since November 2015. In
January 2016, food prices had increased by 6.9%. Bread companies are
taking advantage of the drought and artificially increasing their
prices. A brown loaf now costs 5.73% more than it did last year.

While the state is responding to commercial farmers, it is not doing
enough for smaller scale farmers and poor communities. Moreover,
food inflation has eroded the value of social grants. According to
PACSA (Pietermaritzburg Agency for Community Social Action, the
total of old age pension (R1, 510 in April/October 2016) cannot
actually cover the cost of a food basket (R1,879.24 in February
2016). Moreover, a minimum food basket for a household of four costs
R2, 420.77 in February 2016. In South Africa, 27 million people earn
less than R3, 000 per month. With food price increases, particularly
of staples, hunger is going to worsen. Already, one in five children
suffers from malnutrition and learning disabilities.

**********************************************

The tallest wind power tower in the US, assembled in one hypnotizing
video

Vox, June 1, 2016

Watch the video at
http://www.vox.com/2016/6/1/11820920/concrete-wind-turbine

Wind power engineering is governed by a simple fact: The higher you
go, the stronger and steadier the wind gets and the more power you
can generate. So the evolution of wind power over the years has
largely been a process of building bigger and bigger blades and
perching them atop higher and higher towers.
The turbine being assembled in this video, by MidAmerican Energy,
will be the tallest land-based wind turbine ever built in the US,
with a hub height (ground to center of blades) of 115.5 meters (379
feet) and a capacity of 2,415 kW. It’s not quite up to the level of
the best turbines in Europe, but it’s mainly meant as an experiment.
Wind towers in Europe now routinely reach 120 to 140 meters (over
500 feet).

US wind towers are catching up with Europe’s

The US has not quite caught up. Since 2011, average hub height in
the US has stalled out at about 80 meters (or 262 feet):

What explains this? Part of it is the fact that US wind resources
are generally stronger, especially in the upper Midwest, which
somewhat reduces the incentive to build higher. Some of it is cost
and regulations. But a surprisingly big piece is transport.

The taller a wind tower gets, the bigger the diameter of the base.
But at this point, those giant cross sections of steel tower are
getting so big that they can’t be transported via interstate. …

Tower sections bigger than the standard (80-meter) kind have to be
transported via special trucks, and only on certain highways. It’s a
huge bottleneck.

(Another reason EU turbines are taller is that more of them are in
the ocean, where transport can be done by boat.)

Concrete turbine towers can get around transport restrictions

So engineers and designers have begun looking to concrete. The
advantage of concrete towers, besides the fact that concrete is an
extremely well-understood material with a well-developed industry
behind it, is that they are modular. They come in smaller pieces,
which can be transported via regular trucking and safely assembled
on site.

(Theoretically, steel could be cut in smaller pieces too, but
assembling steel pieces, i.e., welding, on site is much more
difficult and technical than snapping concrete Legos together.)

It’s still a fairly new idea — only a few concrete wind towers are
currently in operation — but as the drive to push turbines ever
higher continues, it could take off.

The MidAmerican Energy turbine in Iowa is testing the concrete
model. If it succeeds, there is little limit to how tall towers
could get, though at a certain point land use considerations come
into play. Concrete is extremely carbon-intensive at present, but
there’s lots of work underway to make it lighter, stronger, and
greener. (There’s also work being done to develop hybrid
concrete/steel towers.)

It would be somewhat ironic if concrete, one of the oldest and most
boring elements of industry, were the future of wind.

**********************************************

“State of the Transition, May 2016: Talk of Twilight

http://www.jeremyleggett.net/2016/06/

Jeremy Leggett, June 5, 2016

World records tumbled in renewable energy this month. Utilities,
facing short-term existential threat in the face of clean-energy
growth, continued to wrestle with the imperative of escaping the
energy incumbency. Oil and gas companies, facing longer term threat
to business-model viability, read dire assessments of their
prospects in places they could not have imagined possible until
recently. Investors continued to awaken to climate risk, and a
critical mass of governments stayed broadly on course for the
current and future action that the Paris Agreement requires of them.
None of this, however, happened as fast as the recent run of world-
record monthly average temperatures merits. Unprecedented wildfires
and die offs of coral reefs were harsh reminders this month of the
race against time that civilisation is running.

The latest solar auction, in Dubai, saw a power plant proposal come
in below 3 cents a kilowatt hour for the first time: cheaper than
any other form of power today. It remains to be seen if such a plant
can be built at a profit, but this world-first shows that the solar
industry has a cost-down roadmap with yet more mileage in it. The
cost-down megatrends of solar and wind are driving solid growth in
grid penetration by renewables. Germany generated almost all its
power from renewables one day in May. Portugal managed four straight
days of 100% renewable power. UK energy from coal hit zero for first
time in over 100 years …several times in a week.

Growth in jobs reflects the energy transition unfolding. We learned
in May that more than 8 million people now work in renewables. Solar
photovoltaics is the biggest employer with 2.8 million, while 1.1
million work in wind. In the USA the 769,000-plus people employed in
renewables  – on an upward trend of 20% in 2015 – dwarf the 187,000
in oil and gas and the 68,000 in coal mining, sectors that are both
on strong downward trends.

Storage continues to race into the frame. Figures for 2015 showed
fully half the small solar PV plants installed in Germany were built
with storage. This story involves far more than the headlines
generated in April by Tesla. For example, Nissan announced a
residential battery product for Europe, scheduled for a September
launch.

Eon and RWE, the two giant German utilities who have admitted their
old business model is dead, continue to pursue radical
restructurings. Analysts are questioning whether they will have
strong enough balance sheets to execute their u-turns. In the US, a
study for the Investor Responsibility Research Center Institute
showed that the top 25 investor-owned electric utilities spent over
$400 million lobbying against clean energy in the past four years.
Had they deployed that capital embracing the future rather than
defending the past, they could have accelerated the revolution
considerably. For example, had they used the cash underwriting loans
to ratepayers, they could have doubled the nation’s solar capacity.

The utilities’ wasteful defence of a failing status quo is as
nothing compared to that of the oil and gas industry’s. But the oil
and gas giants are coming under increasing pressure, and nowhere
more so than on the risk that they are heading for stranded assets.
The latest report from Carbon Tracker calculated that the oil majors
would be worth more if they adapted their business models to reflect
a world in which governments actually succeed in their treaty
commitments to keep global warming below 2°C.

ExxonMobil and Chevron faced torrid times at their AGMs in May
staving off shareholder resolutions around stranded-asset risk. They
won majorities, but for how much longer can they? A BBC headline
suggested Exxon Mobil faces a “change or die” moment on climate. The
Royal Institution for International Affairs published an analysis
suggesting that the oil companies have ten years in which to change
strategy, or face a “short, brutish end”. “Not-so-Big Oil”, read the
headline of an Economist article focussing on the evaporation of
profits. The problems are not just around climate and the debt
mountain they are building. Oil discoveries slumped to a 60-year low
in 2015. The Financial Times summed up in an editorial at the end of
May under the headline: “The long twilight of the big oil
companies.” “Fossil fuel producers face a future of slow and steady
decline”, the leader writer argued.

Investors are reacting, albeit slowly. A report by the Asset Owners
Disclosure Project showed that 246 of the world’s 500 biggest
investors, worth $14 trillion, are still ignoring climate risk
completely. The AODP rates investor behaviour in the manner of
ratings agencies, in this case assessing engagement on climate risk,
risk management, and low-carbon investment. They distinguish classes
from Leaders (A to AAA grade) through to Bystanders (D grade) and
Laggards (ungradeable). The percentage of Leaders is growing slowly,
but does not come close to matching the urgency implicit in the work
of regulators concerned about stranded assets. That said, the very
fact that ratings are now being applied should help unlock the
floodgates. So should the work of the G20’s Taskforce on Climate-
related Financial Disclosure when it reports later this year. My
prediction: expect a stampede at some point soon. The capital
markets are well known for herd behaviour.

Total is one oil and gas company that is making an effort, at least
to hedge bets. Total aims to have a fifth of its assets in low-
carbon by 2036. Its latest move is a billion euro acquisition of a
battery company, Saft Group. During May, Total and the solar company
it majority owns, SunPower, announced a project to power Santiago’s
metro with a 100 megawatt solar plant. Serving 2.2 million
passengers every day, this would be the first public transportation
system in the world to run mostly on solar energy. On a personal
note, I have often been assured by defenders of the energy
incumbency in London that “renewables can never run the tube
(metro).”

ExxonMobil, meanwhile, dug further into their defence of the status
quo. Their CEO told his AGM that ending oil production was “not
acceptable for humanity”. Calpers, holding $1bn of ExxonMobil
shares, was among the many who took a different view: “This is their
Kodak moment”, said Anne Simpson, representing the giant Californian
pension fund. “If they want to still be in business in 30 years,
they have to understand the changes that are taking place.”

In the UK, fracking of shale for gas won a council go-ahead for
first time since 2011. Here too scorn descended on the industry, not
least because – unmentioned by many UK press reports – bankruptcies
among US shale frackers have now rising to more than 70 in the face
of a debt mountain that is raising fears in some quarters of a new
sub-prime crisis. The FT’s Lex Column won first prize for imagery:
“The idea of the undead fascinates people”, Lex’s analyst wrote.
“The cult following still believes that fracking in the UK could be
profitable. Investors should allow market forces to finally kill it
off.”

A session of climate talks in Bonn was covered by less than 100
journalists, compared to the 3,500 who attended the Paris Climate
Summit. Almost unnoticed, governments kept their climate show on the
road, teeing up processes for implementing the Paris Agreement that
make success at this year’s climate summit, in Marrakesh in
December, more likely.  At this point it looks possible that the
treaty will actually come into force earlier than negotiators agreed
in Paris.

There can be little doubt that all players, governmental and non-
governmental, will have to move faster than they expected in Paris.
The global average temperature for April broke yet another world
record. Terrifyingly, twelve months in a row have now done so.
Unprecedented impacts accompanied the unprecedented heat, most
notably a uniquely ferocious wildfire in Canada that required the
evacuation of Fort MacMurray, a city that owes its existence to the
tar sands. More than half the coral on the northern Great Barrier
Reef appears to have been killed by bleaching in unsurvivably hot
water.

For those still resistant to the idea that the world is warming
dangerously because of greenhouse gas emissions, despite such
evidence, there should be another reason to worry now. The largest
coral reef in the continental US, off Florida, is dissolving into
the ocean in some areas. The acid doing the damage comes from carbon
dioxide from fossil fuel burning. Then there should be worries about
air pollution, from the same source. The World Health Organisation
announced it is up 8% in last 5 years, and is now the single biggest
killer in world.

*****************************************************

AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with a
particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.

AfricaFocus Bulletin can be reached at africafocus@igc.org. Please
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http://www.africafocus.org

AfricaFocus Bulletin
Jun 2, 2016 (160602)
(Reposted from sources cited below)

Editor’s Note

“Finance Uncovered, working with an anonymous Liberian journalist,
has exposed a little-known offshore business registry that has
created tens of thousands of anonymous companies and registered them
to a non-existent address in Monrovia, Liberia’s capital city.
Although these companies are technically a creation of Liberian law,
management of the registry is based in the United States and appears
to have the support of the US government. … Our investigation has
discovered over half a billion pounds of high-value London property
registered to Liberian offshore companies.”

For a version of this Bulletin in html format, more suitable for
printing, go to http://www.africafocus.org/docs16/iff1606.php, and
click on “format for print or mobile.”

To share this on Facebook, click on
https://www.facebook.com/sharer/sharer.php?u=
http://www.africafocus.org/docs16/iff1606.php

In the wake of the Panama Papers leak of an extraordinary array of
data from one prominent law firm, the revelations continue of the
tangled web formed by international networks involved in concealing
their assets through financial secrecy. This AfricaFocus Bulletin
contains a report on one such case, by investigative journalists
working as part of the Finance Uncovered network, including the
AmaBhungane Centre for Investigative Journalism in South Africa.

This revelation came in the wake of an evolving scandal based on a
report from Global Witness, revealing how two British businessmen
used scams and bribery to deceive investors, used a London-based
registry (the Alternative Investment Market),  along with bribery of
Liberian government officials, to pitch fake investments. Earlier
this week, Liberian judicial authorities indicted Sable Mining
Company and Sable’s Liberian lawyer Varney Sherman, Speaker of
Liberia’s House of Representatives. See Global Witness press
releases at https://www.globalwitness.org/en/campaigns/liberia/

Sorting out the details in cases such as these is complex, while
some press reports cite an wider set of claims of corruption
involving Liberian officials and large multinational corporations
involved in the country. The move by the Liberian government to
indict the alleged culprits in the Sable mining case is positive.
But there can be more doubt that there is much more to uncover, both
in Liberia and in the international networks of those outside the
country who are using the country for their own illicit enrichment.

For additional recent news on these development from the Liberian
and international press, visit http://allafrica.com

For previous AfricaFocus Bulletins on illicit financial flows and
related issues, visit http://www.africafocus.org/intro-iff.php

For previous AfricaFocus Bulletins on Liberia, visit
http://www.africafocus.org/country/liberia.php

++++++++++++++++++++++end editor’s note+++++++++++++++++

Liberia: America’s outpost of financial secrecy

Finance Uncovered, 26 May 2016

By George Turner and a Liberian journalist

http://www.financeuncovered.org, http://amabhungane.co.za/ – direct
URL: http://tinyurl.com/hbw7vq7

[This investigation was supported by the Thomson Reuters Foundation,
who funded a trip by Finance Uncovered’s Investigations Director to
Liberia. It forms part of their Wealth of Nations Programme. In
Liberia our director worked with a local journalist to try to
understand the workings of Liberia’s little spoken about corporate
registry, a factory for anonymous companies. The name of the
Liberian journalist has been withheld to prevent reprisals against
his publication.]

After the Panama Papers, attention focused on the UK’s role at the
heart of a tax haven empire. But the UK isn’t the only country which
has created a web of offshore secrecy. In our latest investigation
published today in South Africa’s Daily Maverick in cooperation with
AmaBhungane, we probe Liberia – America’s offshore outpost in
Africa.

Finance Uncovered, working with an anonymous Liberian journalist,
has exposed a little-known offshore business registry that has
created tens of thousands of anonymous companies and registered them
to a non-existent address in Monrovia, Liberia’s capital city.

Although these companies are technically a creation of Liberian law,
management of the registry is based in the United States and appears
to have the support of the US government.

The companies, which can be purchased online, offer near-total
anonymity to their clients, allowing them to hide assets without
fear of being caught by law enforcement or revenue authorities.

Our investigation has discovered over half a billion pounds of high-
value London property registered to Liberian offshore companies. And
there have been allegations that revenues from the registry were
used to fund arms purchases during Liberia’s violent civil war.

Liberia’s secret companies

Non-resident corporations are a particular form of corporate entity
offered by the Liberian government to foreigners. They cannot do
business in Liberia, and anyone in the world can set up such a
corporation online within 24 hours through a corporate service
provider.

Registered with the ministry of foreign affairs, they have no
liability to pay taxes in Liberia, and no obligation to declare who
owns them or file annual accounts.

They can also issue “bearer shares”, a legal instrument banned in
most countries because of the ease with which they can be used for
tax evasion and money laundering.

Bearer shares are unregistered certificates of ownership which can
be physically transferred, changing ownership of a company without
any record being kept. They are companies in cash form.

This means that no one, including tax and law enforcement
authorities and the directors of the company itself, can find out
who the owners are.

It is unclear exactly how many offshore companies Liberia has
established. The Liberian government does not publish official
figures, and Liberian officials repeatedly stonewalled requests for
information, citing “commercial confidentiality”.

The registry is apparently a sensitive issue for the foreign
ministry. The ministry’s then-deputy minister for legal affairs,
Boakai Kanneh, became visibly enraged when we raised the issue
during a brief meeting and ordered us out of his office.

Binyah Kesselly, former commissioner of the Liberia Maritime
Authority (LMA), which has oversight of the corporate registry, said
in answer to e-mailed questions that the number of companies
registered is kept confidential because of competition in the
maritime industry.

The Liberian International Shipping and Corporate Registry (LISCR),
a private company that manages the registry on the government’s
behalf, also cited commercial confidentiality in response to
questions.

Outside LISCR, the LMA, the ministry of foreign a airs and the
president’s office, few Liberians seem aware that the offshore
companies registry exists.

The minister in charge of the Liberian domestic business registry
until his death earlier this year, deputy minister of commerce and
trade services Cyril Allen, told us in December 2015 he was unaware
that Liberia had any other system of registering companies.

Some of the tax advisers who use the registry also seemed strangely
unwilling to discuss it. Price Waterhouse Coopers is the only member
of the “big four” accountancy rms with an office in Liberia, and is
listed as a “certified service provider” on the LISCR’s website.

To qualify for this programme PwC must actively promote the use of
Liberian companies. When we contacted them, the company said it
would only respond to a letter delivered to its Monrovia office.

A letter was delivered, but no reply was forthcoming.

Liberia’s former auditor-general, John Morlu, slammed what he called
secrecy surrounding the registry and the Maritime Programme of which
it forms part.

He told us in an email: “The Presidency has managed to conceal the
corporate registry in the infamous maritime registry with 99% of the
Cabinet, 99% of the legislature, and 99% of the Liberian people
having no clue what a corporate registry is.

“Many Liberians know that the Maritime Programme is lucrative, and
since it has always been the prerogative of the presidency no one
dares bother to poke into it.” However, Finance Uncovered located an
OECD report from 2013 on Liberia’s tax and transparency laws which
states that 55 000 companies are registered in that country. Most
are understood to be non-resident corporations.

In 2009 the trial of former Liberian president and convicted war
criminal Charles Taylor heard that the offshore corporate registry
had registered 40 000 companies.

Asked for comment, the Liberian government claimed that the maritime
programme and the registry are not secret and that President Ellen
Johnson Sirleaf usually reports on the activities of the registry in
her annual State of the Union address.

No mention of the registry could be found in the previous twoffstate
of the Union addresses. We asked when Sirleaf last updated the
Liberian legislature on the programme, her spokesperson, Jerolinmek
Matthew Piah did not respond.

In search of 80 Broad Street

To receive mail, all Liberian non-resident corporations must have an
address in Liberia and a registered agent.

Under Liberian law the LISCR Trust Company, a private entity with
the address of 80 Broad Street, is the exclusive agent for all
Liberian non-resident corporations. This means that all such
corporations have the same mailing address – 80 Broad Street,
Monrovia.

Broad Street is the commercial heart of downtown Monrovia. But 80
Broad Street does not exist, and when we visited the area none of
the businesses in the street had heard of it.

At the ministry of post and telecommunications, no one would say who
was assigned to that address.

Finally, a DHL agent we interviewed found that mail for 80 Broad
Street is diverted to LISCR, on 5th Street in Sinkor, a few
kilometres away.

At the LISCR offices, we-were told that the managing director,
Joseph Keller, was on long-term sick leave in the US and no one had
replaced him.

Asked whether anyone at LISCR’s Monrovia office could explain what
happened there, we were told “no”.

LISCR’s Monrovia office appears to be little more than a mail room,
receiving correspondence for the thousands of companies registered
there, which is scanned into computers and e-mailed to LISCR’s US
headquarters.

The US connection

Liberia’s offshore registry would not have been possible without US
patronage . A LISCR spokesperson said the foundation of the registry
“resulted from an initiative of the United States government at the
end of World War 2 to set up, in effect, an offshore ship register
for the United States.”

Liberia was chosen because of the “strong historical connections
between the US and Liberia”.

The Liberian shipping registry was founded in 1948 by former US
secretary of state Edward Stettinius, who persuaded the Liberian
government to contract out its shipping register to a private US
company.

Today LISCR, the register’s current manager, is based in Vienna,
Virginia, at the heart of the US military-industrial complex close
to Washington DC. It has offices across the world.

The fees collected by LISCR are transferred to the Liberian
government through a special account at the US Federal Reserve.

Liberian law continues to require that LISCR is owned and managed by
US nationals. Its owner is Yoram Cohen, whose investment rm YCF
Group owns agriculture, shipping and telecommunication companies
operating in 18 countries, according to its website.

Cohen was also the president of Cellcom, a Liberian cell phone
company, before it was sold to Orange earlier this year.

LISCR itself is registered in the tax haven and secrecy jurisdiction
of Delaware in the US -prompting criticism in 2003 from the United
Nations, which said it would have preferred the company to publicly
declare its shareholders.

LISCR said the UN has never accused it of wrongdoing and that it has
always co-operated with Security Council investigations into
Liberia.

Throughout the history of the registry, LISCR and its predecessor
have been staffed by retired US generals and former employees of the
US coast guard.

In return for hosting this outpost of financial secrecy, the
Liberian government gets to keep 67% of the net revenues collected
by LISCR on its behalf. Funds raised by the company accounted for
75% of the government’s annual revenues during Charles Taylor’s
rule, according to Taylor’s head of maritime a airs, Benoni Urey.
During the first Liberian Civil War, revenues from the registry
accounted for 90% of government revenue.

The receipts are far less significant now, but there are still
concerns about where they end up. Under the Taylor administration
the Bureau of Maritime Affairs (BMA), a Liberian government agency
that oversees the work of LISCR, took 10% of the revenue from the
maritime programme for its running costs. This was off the
government’s balance sheet, and the UN alleged that Urey used the
agency to make off-budget arms purchases during the civil war in
violation of UN sanctions.

In a recent interview, Urey claimed that the money granted to the
BMA was used for legitimate running costs. He said his agency was
audited four times and on each occasion he was cleared of
wrongdoing.

According to news reports, an agreement signed earlier this year
between LISCR and the Liberian government grants the Liberian
Maritime Authority, which has taken over from the BMA, 25% of
revenues to meet its running costs. There appears to be little
scrutiny of where the money goes, although there is no evidence that
it is used for inappropriate expenditure.

In 2009, LISCR’s contract with the government came up for renewal,
and the negotiations led to a political storm known as “Knuckles-
gate”.

Willis Knuckles was President Sirleaf’s former chief of staff. In
2009, he was chairperson of Cellcom, LISCR’s sister company, when
emails emerged purporting to show that Knuckles tried to bribe
members of the government, including Sirleaf herself, during the
negotiations to extend LISCR’s contract.

An independent commission was set up to investigate the allegations
led by Dr Elwood Dunn, a respected academic. The Dunn Commission,
whose report can still be found on the Liberian president’s website,
states that their findings were in part based on interviews with
Yoram Cohen and other sta ff at LISCR and Cellcom. The commission’s
report cleared Sirleaf of corruption but criticised Knuckles for
offering a $200 top-up card to the president’s brother-in-Law.

The commission found evidence of some “unclear payments” by LISCR
that should be probed further, including a $600 000 “pre-payment”
referred to in an email on a hard drive in Sirleaf’s mansion.

In its response to Finance Uncovered, LISCR issued a stinging attack
on the Dunn Commission, claiming that the commission never contacted
the company in the course of its inquiries. LISCR added that the
alleged payments from it referenced on the hard drive in the
president’s mansion never took place and that the company was
subsequently cleared of any wrongdoing in a letter from the Liberian
justice ministry.

Liberia blacklisted

The offshore registry has prompted a growing number of countries to
place Liberia on tax haven blacklists, with potentially far-
reaching consequences.

In June 2015 the European Union released a consolidated list of tax
havens drawn from its member states – and Liberia was included by
Bulgaria, Greece, Croatia, Latvia, Lithuania, Poland, Portugal,
Slovenia and Spain.

Now, the EU is threatening to create a new list compiled by the
European Commission, and may impose sanctions on states that do not
meet international tax and transparency

Brazil lists Liberia as a “privileged tax regime”. Argentina has
produced a white list of countries that are not tax havens, and
Liberia is one of the few that is not included.

Several US states, including Montana and Oregon, have drawn up tax
haven lists, and companies in these states doing business in listed
countries have greater tax obligations. Again, Liberia features.

Asked to comment, Sirleaf’s office and LISCR emphasised that the
registry complies with international norms and standards on tax and
transparency.

Said the president’s office: “Liberia does not conform to the
definition of tax haven and in fact is not considered such by
leading OECD countries such as France and the USA.” It added, “Over
the past years, the government of Liberia has … taken measures to
improve upon the transparency and management of the programme to
meet all of the OECD requirements. Liberia is in fact an OECD
‘white-listed’ jurisdiction.”

On its website and in its statement to Finance Uncovered, LISCR
echoed the claim that Liberia is an OECD “white-listed
jurisdiction”.

However, the OECD ceased to publish a white list in 2009.
Responsibility for international coordination of policy in this area
has passed to the OECD Global Forum on Transparency and Exchange of
Information for Tax Purposes. A spokesperson confirmed that the
forum does not publish white lists.

The forum, which has 131 members, including Liberia, conducts phased
reviews of whether governments meet agreed standards on tax and
transparency.

Last reviewed in 2012, Liberia has yet to pass phase one. And this
is because of lack of access to ownership and accounting information
from Liberian non-resident corporations.

In response, the government said: “There is no bad stigma attached
to this designation, as many other countries have been in the same
position. The reason for this is very simple. Liberia has not been
able to compete with the larger countries, such as in Europe, as it
does not have the infrastructure and manpower in place to assist
with the implementation of the rigorous standards required by the
OECD.”

Only eight states – Liberia, Vanuatu, Trinidad and Tobago, Nauru,
Lebanon, Micronesia, Guatemala and Kazakhstan – have failed to make
it past phase one of the OECD Global Forum. Even tiny well-known tax
havens such as the British Virgin Islands, the Cayman Islands,
Mauritius and Panama have moved to phase two.

This month Liberia passed new legislation on corporations, after the
country was given a deadline by the OECD, which is conducting its
latest review.

This reiterates companies’ obligation to keep internal accounting
and ownership records but does not oblige them to file those records
with the corporate registry.

LISCR emphasised that the provisions are similar to those of many
other countries.

For the first time the law gives the Liberian authorities power to
request documents from the companies themselves.

A failure to comply results in a minimum fine of $1 000, while the
ne for not keeping records is capped at $5 000. Liberian companies
also continue to be allowed to issue bearer shares, which can make
attempts to discover the ownership of companies extremely difficult.

‘Unimaginable damage’

After the European Union published its tax haven blacklist,
officials at LISCR’s US headquarters started to email campaign
groups in Europe to ask for help in lobbying to get Liberia removed
from the list.

In one e-mail seen by Finance Uncovered, a senior LISCR official
writes: “The harm this blacklisting will do to reputation and
commercial enterprise is unimaginable.”

It is a fear echoed by banking representatives in Liberia. In the
Liberian Observer, local banks said it was difficult for them to
establish correspondent banking relations because of Liberia’s
reputation as a money-laundering centre.

Asked about the effect on a country such as Liberia of being added
to a blacklist, Melissa Dejong, a tax policy analyst for the OECD,
said they are aware of financial institutions moving out of
countries that do not comply with the Global Forum recommendations,
and that blacklisting deters investment.

“In some cases, jurisdictions may impose rules with respect to
jurisdictions that do not meet the Global Forum standards,” Dejong
said.

“For example, a jurisdiction may impose tax consequences on their
own taxpayers who engage in transactions with a person in a
jurisdiction that does not meet the Global Forum standards, such as
higher withholding taxes, increased likelihood of audit, denial of
tax benefits, increased information reporting requirements. These
create a disincentive to investment.”

A national resource

Kesselly, the former chief executive of the Liberian Maritime
Authority, said the characterisation of Liberia as a tax haven is a
“misconception”. Kesselly said Liberia is not listed as a “high-
risk” jurisdiction by the Financial Action Task Force, and that
diplomatic correspondence with the EU suggests the country will be
taken off the European list of tax havens later this year.

Calling the registry “a national resource”, he said that every non
resident Liberian corporation must have an agent and an address in
Liberia where official documents and mail can be served, regardless
of whether anything else happens there.

In addition, non-resident corporations pay fees to the Liberian
government on incorporation and every year thereafter, as well as
when they file documents.

“The government views these programmes as national resources and is
committed to protecting these resources by modernising them to both
meet the needs of clients, and maintain compliant ratings from our
international peers,” Kesselly said. “This synergy ultimately
benefits the people of Liberia.”

However, Morlu, Liberia’s former auditor-general, said the small
income the registry generates for the government – between $9-
million and $15-million in most years – does not justify the
tremendous risk.

“There are better ways to make money and since Liberia does not have
the means, the desire and the political will to create a stronger
regulatory and enforcement regime, we are better off not adding to
the world’s problem of terrorist financing, drug financing and
illicit fkow of funds from other poor countries,” Morlu said in an
email.

He would like to see the registry reserved only for legitimate
shipping companies. With the OECD report due on its progress in
meeting transparency standards, and the EU threatening sanctions
against countries on its blacklist, this summer will be a key moment
for Liberia.

Scrutiny by international institutions is bound to grow in the wake
of the Panama Papers. If Liberia is once again found to be lacking,
the consequences for this fragile economy, still recovering from
Ebola, could be devastating.

*****************************************************

AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with a
particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.

AfricaFocus Bulletin can be reached at africafocus@igc.org. Please
write to this address to subscribe or unsubscribe to the bulletin,
or to suggest material for inclusion. For more information about
reposted material, please contact directly the original source
mentioned. For a full archive and other resources, see
http://www.africafocus.org

AfricaFocus Bulletin
November 11, 2015 (151111)
(Reposted from sources cited below)

Editor’s Note

“New research from the Tax Justice Network shows that the gap
between where companies pay tax and where they really do their
business is huge … even developed countries with state-of-the-art
tax legislation and well-equipped tax authorities cannot stop
multinationals dodging their tax without a thorough reform of the
global tax system. … [these practices have] a relatively greater
impact on developing countries, whose public revenues are more
dependent on the taxation of large businesses.”

For a version of this Bulletin in html format, more suitable for
printing, go to http://www.africafocus.org/docs15/iff1511.php, and
click on “format for print or mobile.”

To share this on Facebook, click on
https://www.facebook.com/sharer/sharer.php?u=
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Two new reports, briefly excerpted in this AfricaFocus Bulletin,
shed light on the complex global systems of tax evasion and tax
avoidance which are draining resources from public needs in both
rich and poor countries. While giant companies and the super-rich
move their money around the world in secrecy, the system is obscured
both by secrecy and by deceptive language.

Thus, according to the highly regarded and well-publicized
Corruption Perception Index from Transparency International,
Switzerland, Hong Kong, the United States, Singapore, Luxembourg,
Germany, and the United Kingdom are all among the 20 “least corrupt
countries” in the world. Yet the less-well-known Financial Secrecy
Index, from Tax Justice Network, also places them among the top 15
“secrecy jurisdictions” (also known as “tax havens”) which serve as
the essential “enablers” of corruption and of illicit financial
flows by multinational corporations.

Similarly, there is no doubt that Africa and other developing
regions are hardest hit by this global tax abuse, while they have
the most urgent needs for investment in public goods. But a new
report by the Global Tax Justice Network and other civil society
groups shows that rich countries themselves are also major losers,
as corporations shift profits from one rich country to another (as
well as to smaller smaller jurisdictions fitting the stereotype of
“tax havens”). In 2012 U.S. multinationals alone shifted between
$500-$700 billion dollars out of the country, or roughly 25 percent
of their annual profits.

For previous AfricaFocus Bulletins on tax justice and related
issues, visit http://www.africafocus.org/intro-iff.php

++++++++++++++++++++++end editor’s note+++++++++++++++++

Financial Secrecy Index 2015 reveals improving global financial
transparency, but USA threatens progress

Tax Justice Network

Press Release

http://www.taxjustice.net/

Nov 2, 2015

European Union moves furthest with reforms; USA causes great
concern; and developing countries are (as usual) reaping few
benefits.

Today the Tax Justice Network launches the 2015 Financial Secrecy
Index, the biggest ever survey of global financial secrecy. This
unique index combines a secrecy score with a weighting to create a
ranking of the secrecy jurisdictions and countries that most
actively promote secrecy in global finance.

Most countries’ secrecy scores have improved. Real action is being
taken to curb financial secrecy, as the OECD rolls out a system of
automatic information exchange (AIE) where countries share relevant
information to tackle tax evasion. The EU is starting to crack open
shell companies by creating central registers of beneficial owners
and making that information available to anyone with a legitimate
interest. The EU is also requiring multinationals to provide
country-by-country financial data.

But these global and regional initiatives are flawed and face
sabotage by lobbies that have already weakened them. Secrecy-related
financial activity risks being shifted to other areas such as the
all-important trusts sector, where no serious action is being taken
despite promises made by the G8 in 2013, and shell companies, where
many secrecy jurisdictions such as Dubai, the British Virgin Islands
or Nevada in the U.S. are refusing to open up.

The FSI Top 10

1. Switzerland
2. Hong Kong
3. USA
4. Singapore
5. Cayman
6. Luxembourg
7. Lebanon
8. Germany
9. Bahrain
10. Dubai / UAE

[Note from AfricaFocus Editor: African countries on the list rank as
follows: Mauritius 23; Liberia 33; Ghana 48; South Africa 61;
Botswana 62; Seychelles 72]

Crucially, even in those areas where there has been progress,
developing countries are largely being sidelined: OECD countries are
the main beneficiaries.

Our analysis also reveals that the United States is the jurisdiction
of greatest concern, having made few concessions and posing serious
threats to emerging transparency initiatives. Rising from sixth to
third place in our index, the US is one of the few whose secrecy
score worsened after 2013. Switzerland stays at the top of the index
and for good reason: despite what you may have heard, Swiss banking
secrecy is far from dead, though it has curbed its secrecy somewhat.
The United Kingdom also remains a huge concern. While its own
secrecy is moderate, its global network of secrecy jurisdictions –
the Crown Dependencies and Overseas Territories – still operate in
deep secrecy and have, for instance, not co-operated in creating
public registers of beneficial ownership. The UK has failed to
address this effectively, though it has the power to do so.

The progress: a scorecard

Since the global financial crisis emerged in 2008, governments have
sought to curb budget deficits by cracking down on offshore
corporate and individual tax cheating and financial crimes by the
world’s wealthiest citizens. Campaigners have shown them the way and
the sea change in the political climate has been remarkable.
Progress has come in three main areas.

* Twelve years ago the tax justice movement created country-by-
country reporting (CbCR), a measure that can shine a light  country
where they operate, including tax havens. They told us CbCR would
never happen: it is now endorsed at G20 level and the first schemes
to implement it are in place. However, we are concerned that CbCR
cannot work unless the information is made publicly available.

* Just four years ago they laughed at us for pushing the concept of
automatic information exchange (AIE), where countries routinely
share information about each others’ taxpayers so they can be taxed
appropriately. AIE is now being rolled out worldwide.

* They said we at TJN were crazy to contemplate public registries of
beneficial ownership (BO), to crack open shell companies and ensure
that businesses, governments and the public know who they are
dealing with, and to provide the basis for effective AIE. Beneficial
ownership registries are now endorsed at G20 level: we now need a
big political push to make them a reality and bring this information
into the public domain.

Of these areas most progress has been made on AIE, with several
schemes emerging. Though the G20 had mandated the OECD to create a
country-by-country reporting standard, what it came up with has
fallen well short, victim of heavy lobbying behind the scenes by
U.S. multinationals in particular. Finally, the UK has passed
legislation to create a public register of company beneficial
ownership information, and the EU has required all member states to
make beneficial ownership information available to anyone with a
legitimate interest. However, little progress has been made towards
creating an effective form of public registry for offshore trusts.

These broad changes are welcome, and we are pleased to see the EU
leading the way: even some of Europe’s historically worst secrecy
jurisdictions, such as Luxembourg and Austria, are engaging.

The EU’s leadership role, however, is called into question by recent
resistance, spearheaded by Germany, to block public access to CbCR
data and prevent expansion of CbC reporting beyond the banking and
extractives sectors. (Read more about the current EU-level
negotiations here.)

Almost all of the progress to date has arisen from public pressure.
To counter the lobbies that constantly seek to undermine progress,
sustained political grass roots pressure is indispensable.

The backsliding

Yet huge problems remain.

None of these initiatives take the interests of developing countries
sufficiently into account. They haven’t been centrally involved in
setting the rules, and most will see little if any benefit. (Note,
too, that secrecy is just part of a wider charge sheet against tax
havens, as the box above explains.)

Meanwhile, even progress to date is under threat:

* Private sector ‘enablers’ and recalcitrant jurisdictions like
Dubai and the Bahamas are beavering away finding exclusions and
loopholes, being picky about which countries they’ll exchange
information with, and simply disregarding the rules.

* The United States’ hypocritical stance of seeking to protect
itself against foreign tax havens while preserving itself as a tax
haven for residents of other countries needs to be countered. The
European Union must take the lead here by imposing a 35 percent
withholding tax on EU-sourced payments to U.S. and other non-
compliant financial institutions, in the same way as the U.S. FATCA
scheme does; and this should become global standard practice.

* The UK has been playing a powerful blocking role to protect its
huge, slippery and dangerous trusts sector, probably the biggest
hole in the entire global transparency agenda. See below for more
details.

The next section gives a brief description of the biggest players in
the secrecy world today.

FSI 2015: the big players

[See full press release for more details on each country

* Switzerland (first place)

* United States (3rd place)

* United Kingdom [not in top ten, but “supports a network of secrecy
jurisdictions around the world.” If counted together, would be first
place]

* Hong Kong [2nd place]

* Singapore [4th place]

* Cayman Islands [5th place]

* Luxembourg [6th place]

* Lebanon [7th place]

* Germany [8th place]

* Bahrain [9th place]

* Dubai [10th place]

******************************************************

About the Financial Secrecy Index

http://www.financialsecrecyindex.com/

The Financial Secrecy Index ranks jurisdictions according to their
secrecy and the scale of their offshore financial activities. A
politically neutral ranking, it is a tool for understanding global
financial secrecy, tax havens or secrecy jurisdictions, and illicit
financial flows or capital flight. The index was launched on
November 2, 2015.

Shining light into dark places

An estimated $21 to $32 trillion of private financial wealth is
located, untaxed or lightly taxed, in secrecy jurisdictions around
the world. Secrecy jurisdictions – a term we often use as an
alternative to the more widely used term tax havens – use secrecy to
attract illicit and illegitimate or abusive financial flows.

Illicit cross-border financial flows have been estimated at $1-1.6
trillion per year: dwarfing the US$135 billion or so in global
foreign aid. Since the 1970s African countries alone have lost over
$1 trillion in capital flight, while combined external debts are
less than $200 billion. So Africa is a major net creditor to the
world Рbut its assets are in the hands of a wealthy ̩lites,
protected by offshore secrecy; while the debts are shouldered by
broad African populations.

Yet all rich countries suffer too. For example, European countries
like Greece, Italy and Portugal have been brought to their partly
knees by decades of tax evasion and state looting via offshore
secrecy.

A global industry has developed involving the world’s biggest banks,
law practices, accounting firms and specialist providers who design
and market secretive offshore structures for their tax- and law-
dodging clients. ‘Competition’ between jurisdictions to provide
secrecy facilities has, particularly since the era of financial
globalisation really took off in the 1980s, become a central feature
of global financial markets.

The problems go far beyond tax. In providing secrecy, the offshore
world corrupts and distorts markets and investments, shaping them in
ways that have nothing to do with efficiency. The secrecy world
creates a criminogenic hothouse for multiple evils including fraud,
tax cheating, escape from financial regulations, embezzlement,
insider dealing, bribery, money laundering, and plenty more. It
provides multiple ways for insiders to extract wealth at the expense
of societies, creating political impunity and undermining the
healthy ‘no taxation without representation’ bargain that has
underpinned the growth of accountable modern nation states. Many
poorer countries, deprived of tax and haemorrhaging capital into
secrecy jurisdictions, rely on foreign aid handouts.

This hurts citizens of rich and poor countries alike.

What is the significance of this index?

In identifying the most important providers of international
financial secrecy, the Financial Secrecy Index reveals that
traditional stereotypes of tax havens are misconceived. The world’s
most important providers of financial secrecy harbouring looted
assets are mostly not small, palm-fringed islands as many suppose,
but some of the world’s biggest and wealthiest countries Rich OECD
member countries and their satellites are the main recipients of or
conduits for these illicit flows.

The implications for global power politics are clearly enormous, and
help explain why for so many years international efforts to crack
down on tax havens and financial secrecy were so ineffective, it is
the recipients of these gigantic inflows that set the rules of the
game.

Yet our analysis also reveals that recently things have genuinely
started to improve. The global financial crisis and ensuing economic
crisis, combined with recent activism and exposure of these problems
by civil society actors and the media, and rising concerns about
inequality in many countries, have created a set of political
conditions unparalleled in history. The world’s politicians have
been forced to take notice of tax havens. For the first time since
we first created our index in 2009, we can say that something of a
sea change is underway.

World leaders are now routinely talking about the scourges of
financial secrecy and tax havens, and putting into place new
mechanisms to tackle the problem. For the first time the G20
countries have mandated the OECD to put together a new global system
of automatic information exchange to help countries find out about
the cross-border holdings of their taxpayers and criminals. This
scheme is now being rolled out, with first information due to be
exchanged in 2017.

Yet of course these schemes are full of loopholes and shortcomings:
many countries are planning to pay only lip service to them, if that
— and many are actively seeking ways to undermine progress, with
the help of a professional infrastructure of secrecy enablers. The
edifice of global financial secrecy has been weakened – but it
remains fully alive and hugely destructive. Despite what you may
have read in the media, Swiss banking secrecy is far from dead.
Without sustained political pressure from millions of people, the
momentum could be lost.

The only realistic way to address these problems comprehensively is
to tackle them at root: by directly confronting offshore secrecy and
the global infrastructure that creates it. A first step towards this
goal is to identify as accurately as possible the jurisdictions that
make it their business to provide offshore secrecy.

This is what the FSI does. It is the product of years of detailed
research by a dedicated team, and there is nothing else like it out
there. We also have a set of unique reports outlining detailed
offshore histories of the biggest players in the game.

************************************************

Global Alliance for Tax Justice

G20 among biggest losers in large-scale tax abuse – but poor
countries relatively hardest hit

Press Release

[Excerpt. Full press release & related reports available at
http://www.globaltaxjustice.org | direct URL:
http://tinyurl.com/pcbgoyw]

November 10, 2015

G20 countries are among the biggest losers when US multinationals
avoid paying taxes where they do business. This is the main finding
of ‘Still Broken’ a new report on the global tax system released by
the Tax Justice Network, Oxfam, Global Alliance for Tax Justice and
Public Services International in advance of the G20 leaders’ meeting
in Turkey.

Overall it is estimated that, in order to reduce their tax bills, US
multinationals shifted between $500 and 700 billion—a quarter of
their annual profits—out of the United States, Germany, the United
Kingdom and elsewhere to a handful of countries including the
Netherlands, Luxembourg, Ireland, Switzerland and Bermuda in 2012.
In the same year, US multinational companies reported US$ 80 billion
of profits in Bermuda – more than their profits reported in Japan,
China, Germany and France combined.

Claire Godfrey, head of policy for Oxfam’s Even it Up Campaign said:
“Rich and poor countries alike are haemorrhaging money because
multinational companies are not required to pay their fair share of
taxes where they make their money. Ultimately the cost is being
borne by ordinary people – particularly the poorest who rely on
public services and who are suffering because of budget cuts.”

Rosa Pavanelli, general secretary of Public Services International
said: “Public anger will grow if the G20 leaders allow the world’s
largest corporations to continue dodging billions in tax while
inequality rises, austerity bites and public services are cut.”

The G20 Heads of State are expected to consider a package of
measures they claim will address corporate tax avoidance at their
annual meeting in Turkey on 15 and 16 November.

Alex Cobham, director of research at Tax Justice Network, said: “The
corporate tax measures being adopted by the G20 this week are not
enough. They will not stop the race to the bottom in corporate
taxation, and they will not provide the transparency that’s needed
to hold companies and tax authorities accountable. It’s in the G20’s
own interest to support deeper reforms to the global tax system.”

Twelve countries – the United States, Germany, Canada, China,
Brazil, France, Mexico, India, UK, Italy, Spain and Australia –
account for roughly 90 percent of all missing profits from US
multinationals. For example, US multinationals make 65 percent of
their sales, employ 66 percent of their staff and hold 71 percent of
their assets in America but declare only 50 percent of their profits
in the country.

While G20 countries lose the largest amount of money, low income
developing countries such as Honduras, the Philippines and Ecuador
are hardest hit because corporate tax revenues comprise a higher
proportion of their national income. It is estimated, for example,
that Honduras could increase healthcare or education spending by
10-15 percent if the practice of profit shifting by US
multinationals was stopped.

Dereje Alemayehu, chair of the Global Alliance for Tax Justice said:
“If big G20 economies with well-developed tax legislation and well-
supported tax authorities cannot put a stop to corporate tax abuse,
what hope have poor countries with less well-resourced tax
administrations? Poor countries need a seat at the table in
negotiations on future tax reforms to ensure that they can claim tax
revenues which are desperately needed to tackle poverty and
inequality.”

The Tax Justice Network, Oxfam, Global Alliance for Tax Justice and
Public Services International are calling on the G20 to support
further reforms to the global tax system that involve all countries
on an equal footing. These reforms should effectively tackle harmful
tax practices such as profit shifting and the use of corporate tax
havens and should halt the race to the bottom in general corporate
tax rates.

Summary of report

In 2013 the OECD, supported by the G20, promised to bring an end to
international corporate tax avoidance which costs countries around
the world billions in tax revenues each year. However, with the
recently announced actions against corporate tax dodging, G20 and
OECD countries have failed to live up to their promise. Despite some
meaningful actions, they have left the fundamentals of a broken tax
system intact and failed to curb tax competition and harmful tax
practices.

It is often assumed that the richest and largest economies, home to
most of the world’s multinationals, defend the current system
because it is in their interests.

However, new research from the Tax Justice Network1 shows that the
gap between where companies pay tax and where they really do their
business is huge and that among the biggest losers are G20 countries
themselves, including the US, UK, Germany, Japan, France, Mexico,
India, and Spain. This shows that even developed countries with
state-of-the-art tax legislation and well-equipped tax authorities
cannot stop multinationals dodging their tax without a thorough
reform of the global tax system.

Profit shifting to reduce taxes is happening on a massive scale. In
2012, US multinationals alone shifted $500–700bn, or roughly 25
percent of their annual profits, mostly to countries where these
profits are not taxed, or taxed at very low rates. In other words,
$1 out of every $4 of profits generated by these multinationals is
not aligned with real economic activity.

Large corporations and wealthy elites exploit the rigged
international tax system to avoid paying their fair share of taxes.
This practice has a relatively greater impact on developing
countries, whose public revenues are more dependent on the taxation
of large businesses. Recent IMF research indicates that revenue loss
to developing countries is 30 percent higher than for OECD countries
as a result of the base erosion and profit shifting activities of
multinational companies.

Tax avoidance is a key factor in the rapid rise in extreme
inequality seen in recent years. As governments are losing tax
revenues, ordinary people end up paying the price: schools and
hospitals lose funding and vital public services are cut. Fair
taxation of profitable businesses and rich people is central to
addressing poverty and inequality through the redistribution of
income. Instead, the current global system of tax avoidance
redistributes wealth upwards to the richest in society.

That is why civil society organizations, united in the C20 group,
together with trade unions, are calling for the actions announced by
the OECD to be regarded only as the beginning of a longer and more
inclusive process to re-write global tax rules and to ensure that
multinationals pay their fair share, in the interest of developed
and developing countries around the world.

Considering the enormous losses that countries around the world
incur, it is alarming that the G20 seems fairly satisfied with the
current agenda. Governments and citizens of G20 countries should
wake up, face the facts and take additional action immediately.

*****************************************************

AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with a
particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.

AfricaFocus Bulletin can be reached at africafocus@igc.org. Please
write to this address to subscribe or unsubscribe to the bulletin,
or to suggest material for inclusion. For more information about
reposted material, please contact directly the original source
mentioned. For a full archive and other resources, see
http://www.africafocus.org

******************************************************

AfricaFocus Bulletin
October 20, 2015 (151020)
(Reposted from sources cited below)

Editor’s Note

“Despite MTN having its headquarters located in South Africa, 55% of
the “management and technical fee payments” flow to “MTN
International” (MTNI)–a company which has no staff and is located
in Mauritius. The remaining 45% was paid to MTN Dubai–a subsidiary
which the company says it renders international financial services
and shared services to MTN Group.” – Quartz Africa, on new report by
amaBhungane and Finance Uncovered

For a version of this Bulletin in html format, more suitable for
printing, go to http://www.africafocus.org/docs15/td1510.php, and
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The “Africa Rising” narrative is dubious as a gross
oversimplification of African reality. But it does point to at least
one important reality: the growth of consumer markets that are
attracting much international attention. Particularly notable are
two ubiquitous consumer goods, one old (beer), one new (mobile
phones), which are producing enormous profits. The question is where
do those profits go?

This AfricaFocus Bulletin contains several background documents
related to (1) the South African mobile company MTN and exposure of
its profit-shifting strategies in a new report, and (2) the giant
formerly South African beer company SABMiller (just being
purchased by a rival global giant Anheueser-Busch InBev). SABMiller
was featured in an ActionAid report in 2010, which is summarized
below. So, to understand the complexity of “Africa Rising,” consider
these tax tricks the next time you are drinking beer and browsing on
your mobile phone.

For previous AfricaFocus Bulletins on tax evasion, illicit financial
flows, and related issues, visit
http://www.africafocus.org/intro-iff.php

For previous AfricaFocus Bulletins on information and communication
technologies, visit http://www.africafocus.org/ictexp.php

++++++++++++++++++++++end editor’s note+++++++++++++++++

Tax Tricks

South Africa’s ‘next president’ is entangled in another corporate
tax dodging allegation–this time it’s with MTN

Sibusiso Tshabalala

October 13, 2015 Quartz Africa

http://qz.com/522656/

For more detailed report, see http://amabhungane.co.za / direct URL:
http://tinyurl.com/od3s9fd

South Africa’s deputy president Cyril Ramaphosa–long seen as the
most likely next successor to president Jacob Zuma–has seen his
name caught up in another corporate tax dodging allegation, this
time with Africa’s largest mobile phone company MTN.

Last week Friday, amaBhungane, an investigative journalism
organization, and Finance Uncovered, a global network of
journalists, published a story alleging that Africa’s largest mobile
network, MTN, was involved in shifting millions of dollars from its
subsidiary companies in Nigeria, Uganda, Côte d’Ivoire and Ghana to
companies in Dubai and Mauritius in order to avoid its tax
obligations. This all happened under Ramaphosa’s watch, as he was
chairman of MTN’s board of directors, between 2001 and 2013.

In September last year, South Africa’s Mail and Guardian reported
that Lonmin–a mining company which Ramaphosa was a board member of
between 2010 and 2013–was involved in a scheme to move profits
generated from its platinum mining activities in South Africa to
Bermuda.

While Ramaphosa, one of South Africa’s richest men, has taken a
strong public stance against tax avoidance as deputy president it
doesn’t seem to be in tune with his former life as a captain of
industry. It is also causing a revision to the expectation that he
is next in line when Zuma’s term ends in 2019.

According to the report, MTN subsidiary companies in Nigeria,
Uganda, Cote d’Ivoire and Ghana paid “management fees”–which
according to MTN cover for elements like back office support,
technology transfer (to subsidiary companies) and use of the MTN
brand.

While it is common for telecom companies to charge their
subsidiaries management fees–as MTN itself argues in a response to
a set of questions asked by the investigative team–the bone of
contention is whether the large sums of money flowed to “real
offices staffed with people doing actual work to earn the money” as
the investigative report states.

MTN’s ‘management fees’

The investigative team reports that despite MTN having its
headquarters located in South Africa, 55% of the “management and
technical fee payments” flow to “MTN International” (MTNI)–a
company which has no staff and is located in Mauritius. The
remaining 45% was paid to MTN Dubai–a subsidiary which the company
says it renders international financial services and shared services
to MTN Group.

Territories like Dubai and Mauritius are better known as “tax
havens”–many multinational companies stash their profits here using
complicated payment systems to subsidiaries. The lure of a low tax
rate, or a sometimes a zero-rate tax regime, is hard to resist: it
means multinationals can cut the cost of doing business without
paying tax in the country they’re required to do so.

Chris Maroleng, MTN spokesman said the company has not been involved
in any tax avoidance scheme and that it had responded fully to the
investigative team’s claims.

“We have been able to prove that we’re tax compliant in all our
operational jurisdictions. We have not infringed any laws and we
have nothing to hide,” said Maroleng. He added that MTN had been in
contact with the amaBhungane and Finance Uncovered team for a
“protracted period” and that the company had satisfied itself with
all of its responses.

The deputy president’s office said it is referring all queries on
the matter to MTN.

Meanwhile, the Right 2 Know campaign, a South African organization
that advocates for freedom of expression and anti-corruption, has
played on a MTN ad-slogan from 2009 to signal their discontent. MTN
frequently used the South African slang word “ayoba” (loosely
translated as “cool”) in their ads. Now R2K–is calling for the
investigations against–has spun the slogan back to the company and
Ramaphosa. Their version: “Tax dodging is not ayoba.” (
http://www.r2k.org.za/2015/10/12/investigate-mtn-ramaphosa/)

*************************************************************

Finance Uncovered Investigation: MTN’s Mauritian Billions

Finance Uncovered, 09 Oct, 2015

http://www.financeuncovered.org/ – Direct URL:
http://tinyurl.com/qhklzpa

The Finance Uncovered global network of investigative reporters have
today published a cross-border investigation into South African
telecoms giant MTN exposing how billions of rand from its
subsidiaries in Ghana, Nigeria and Uganda have been shifted to a
shell company in the small island tax haven of Mauritius.

The two year investigation spanning five countries was published
today in South Africa’s Mail and Guardian, the Ugandan Observer and
Ghana Business News.

The reporting team

Finance Uncovered is a global network of journalists from over 55
countries across the globe. This investigation was undertaken by
Craig Mckune of amaBhungane in South Africa, George Turner and Nick
Mathiason from Finance Uncovered in London, Francis Koktuse in
Ghana, Emmanuel Mayah in Nigeria and Jeff Mbanga in Uganda.

A report in Nigeria will follow shortly.

MTN’s Offshore Payments

The reporting team discovered MTN revenue producing companies
operating in Ghana, Nigeria, Uganda and Cote d’Ivoire made
substantial payments to offshore companies in Dubai and Mauritius.
These payments were counted as a cost of business for the operating
companies, lowering their profits and potential tax bill.

The enormous sums were purportedly for management and technical
services performed on behalf of these companies, as well as royalty
payments for the use of the MTN brand. In Ghana, these payments
accounted for more than 9% of the turnover of the company.

African journalists in Ghana, Nigeria and Uganda working with
Finance Uncovered discovered that 55% of management and technical
fee payments are directed towards MTN International, a company based
in Mauritius. The Mauritius company has no staff and is little more
than a post box. The remaining 45% was routed to MTN Dubai, where
the company employs 115 staff who provide shared services to the
group.

MTN told reporters that MTN International remunerates companies in
South Africa for management services performed on behalf of the
company. They were unable to answer why the payments were made to
Mauritius first.

Company documents published by MTN said that money in MTN Mauritius
was used to repay external debts of the MTN group and dividends,
rather than pay for management services.

But after further questions were put to MTN, the company was forced
to admit that not all of the revenue was passed onto South Africa.
The company refused to disclose how much it kept in Mauritius.

The company said that MTNI is resident in South Africa for tax
purposes and the Mauritian entity gives no tax benefit to the
company.

MTN in Africa

Our revelations are particularly sensitive given the sheer size of
MTN. The South African listed firm is the largest cell phone company
in Africa with 227,503,000 subscribers worldwide. Almost one in four
mobile phones in Africa are part of the MTN network a total of 161m.

This means MTN is the largest company in many of the countries in
which it operates. It is also frequently one of the largest
taxpayers in African countries so they are particularly vulnerable
to profit shifting by the company.

Game over?

Our investigation has established that a number of African countries
have now challenged the offshore payments made by MTN. Authorities
in Nigeria and Ghana have frozen payments and the Ugandan
Authorities has placed a large tax bill on the company for
management fees paid over a 6 year period.

Ghana

Scancom, MTN’s subsidiary in Ghana, paid 758m Cedi (Rand 3.7bn,
$401m) in management and technical fees to MTN Dubai between 2008
and 2013 equivalent to 9.64% of the company’s revenue.

An agreement between the Ghanaian Investment Promotion Centre and
the company that allowed the management fees to be paid expired in
2013 and payments have been frozen. MTN is currently negotiating a
new agreement with GIPC.

Uganda

MTN Uganda paid 3% of turnover in management fees between 2003 and
2009 to MTNI in Mauritius. The Uganda Revenue Authority issued MTN
with a “notice of assessment” in 2011. This was for a number of tax
issues between 2003 and 2009, but a large portion was to do with a
dispute over management fees. The total tax bill from the URA was
R467m ($69m).

Nigeria

In 2013 the company disclosed that it had paid R2.5bn ($562m) in
fees to MTN Dubai between 2010 and 2013. The company made this
disclosure because the fee payments had been reversed following a
failure to come to a new agreement on management fees with Nigerian
regulators.

Despite these fees being paid to MTN Dubai, MTN confirmed to us that
these fees are then ‘on-paid’ to MTNI in Mauritius and that MTNI
Mauritius is the ‘ultimate beneficiary’ of the fees.

Cote d’Ivoire

MTN has confirmed to us that the company paid 12bn West African
Francs in 2012 and 14bn West African Francs (Rand 512.9m, $55.53m)
in 2013 in management fees to MTNI. The figure for 2013 is
equivalent to 5% of the revenue made by MTN in Cote d’Ivoire.

*****************************************************

Finance Uncovered, “Can We Beat Tax Avoiding Multinationals?,”
Finance Uncovered, Oct. 18, 2015
[Brief excerpt. For full article visit
https://www.byline.com/column/39/article/499]

How the MTN case shows that OECD “solutions” for such tax evasion
will not work.

“Unfortunately the OECD proposals are unlikely to bring these
practices to an end, and could even make the whole process even less
transparent.

The OECD has embraced the arm’s-length concept and many of the
solutions it proposes are simply aimed at giving tax authorities
more and better tools to use in their transfer pricing
investigations. There will be better access to comparable data to
determine prices, bigger books of guidance for tax authorities, but
in the end tax authorities will continue to need to rely on complex
investigations and highly subjective analysis of the complicated
internal structures of multi-national companies.”

******************************************************

“Calling Time: Why SABMiller should stop dodging taxes in Africa”

by ActionAid, November 2010, Updated 2012

Summary by Malik Stan Reaves written for AfricaFocus Bulletin and
US-Africa Network, Oct. 20, 2015

Full report available at
http://www.actionaid.org.uk/tax-justice/calling-time-the-research

London-based SABMiller plc is the world’s second largest beer
company making more than $3 billion a year in profits. The origins
of the company date back to the founding of South African Breweries
in 1895 and it owns several African breweries. Its many brands
include Coors Light, Miller Light, Keystone Light (#2, #4, and #12
in sales in the USA), Castle, Kilimanjaro, and Lion (in Africa), and
Grolsch (in Europe and global).

The company has some 65 tax havens, and this ActionAid report
estimated it has used them to reduce their tax bills by as much as
1/5 in Africa. For example, its Ghana operations generate about $45
million a year, yet SABMiller paid no taxes for the two years before
the report and only for one year in the prior four years.

ActionAid estimated loses to governments in Africa of as much as $30
million a year, “enough to put a quarter of a million children in
school.”

To avoid paying taxes, SABMiller uses transfer pricing payments made
by its subsidiaries to sister companies in the corporation. “These
payments can reduce or even eliminate profits in one place at
a stroke of an accountant’s pen; a kind of financial alchemy that
also shrinks the company’s tax bill.”

ActionAid examined the accounts of eight SABMiller subsidiary
companies in Ghana, Mozambique, Tanzania, South Africa, Zambia and
India, along with researching the tax systems in these countries.
ActionAid identified four “tax-dodging” techniques used in Africa.
Tax dodging or tax avoidance is seen by ActionAid as designed to
comply with the letter of the law though the practice is
irresponsible and unethical (whereas tax evasion breaks tax laws).
The report notes that there is no mention of tax in SABMiller’s code
of business conduct and ethics.

The first is a loophole in Dutch tax law which allows SABMiller’s
Dutch holding company for its African operations, Rotterdam-based
SABMiller International BV, to pay next to no tax on the royalties
they earn. “Six SABMiller companies in Africa paid this Dutch
company $37.5 million in royalties last year, according to their
most recent accounts. If the company’s African operations that do
not publish accounts also make payments at the same rate, the total
can be expected to be $65 million. This corresponds to an estimated
tax loss to African countries of $15 million.”

The second dodge involves millions in management fees paid yearly by
African subsidiaries to SABMiller companies in European tax havens,
mostly in Switzerland. Some fees are high enough to wipe out all
taxable profits.

In the third dodge, SABMiller subsidiary Mubex in Mauritius is used
by SABMiller breweries in other African countries as a purchasing
agent, even though the goods may not be produced in or even transit
through Mauritius. Mubex makes a profit, the amount of which is
unknown due to tax haven secrecy, and is taxed at 3% as against what
would be much higher rates in the countries where the beer is
actually produced.

In the fourth tax dodge, African breweries are able to borrow money
from Mubex, in Ghana’s case seven times what’s allowed in that
country, leading to interest costs that erase sizable amounts of tax
liability.

ActionAid calls on SABMiller to do three things:

1. Take a responsible approach to tax. Stop using tax havens to
siphon profits out of Africa, for example by ending the huge
payments for lucrative brand rights and management services to
Switzerland and the Netherlands.

2. Understand and disclose the impact of its tax planning. SABMiller
needs a tax code of conduct to explain how it applies its
sustainable development principles to its tax affairs. It should be
open and transparent about its use of tax havens and tax avoidance
techniques.

3. Be more transparent about financial information. Make public the
accounts of each of its subsidiaries – especially for companies in
countries where accounts are kept secret – and provide a country-by-
country snapshot of tax payments and other financial information.

It further lays out several recommendations for governments to shore
up their tax operations and policies.

Outcomes:

In June 2011, a meeting of tax authorities from several African
countries, supported by the African Tax Administration Forum (ATAF),
considered the findings of the report. A multilateral tax treaty was
presented to ATAF’s council meeting the following year which would
“allow African countries to work together to investigate the tax
affairs of multinational companies operating across the continent”
(page 3, para 3).

Other Actions:

“Over 10,000 people across the world have taken action, asking
SABMiller to adopt a more responsible approach to its tax affairs in
the developing world. The company has been questioned in media
interviews, by ActionAid at its Annual General Meeting, and by
students at Edinburgh University, who voted to ban the company’s
beers from their student union.”

“Schtop tax dodging” beer mats found their way to Australia, Sweden,
the Netherlands, Ghana, South
Africa, Senegal and the United States.”

ActionAid charcterized SABMiller’s response to the outcry over its
practices as “a combination of denial and obfuscation,” including
ownership moves resulting in reduced transparency and shifting
exposure in Mauritius, but “increased royalty payments and
management service fees paid into tax havens across the continent.”

Given the “protests and occupations” in the 18 months since the
original publication of Calling Time, they noted that “corporate
attitudes towards tax have changed…increasingly aware of the
reputational issues… involved in governance around tax.”

Note:  The corporate malfeasance in this ActionAid report is
identified as tax avoidance rather than tax evasion. ActionAid is
thus not accusing SABMiller of breaking any laws but of being
unethical and irresponsible “in failing to acknowledge the impact of
its tax dodging on public revenues.” The term “illicit financial
flows,” not yet in wide use at the time of the ActionAid report, is
not a concept used in this report. To what extent some forms of
abusive transfer pricing may be illegal as well as illegitimate is a
still unresolved issue in the literature on the subject.

*****************************************************

Beer & Mobile as Rising Retail Markets

“Anheuser-Busch InBev and SABMiller to Join,” New York Times, Oct.
13, 2015 http://tinyurl.com/otmzfxt

“The research firm Euromonitor International estimated on Tuesday
that the combined Anheuser-Busch InBev-SABMiller would account for
29 percent of global beer sales, after selling assets to win
regulatory approval. It also would be more than three times as large
in terms of sales as its next closest competitor, the Dutch brewer
Heineken, according to Euromonitor.”

“Bud-SAB tie-up hinges on a scramble for Africa,” Reuters, Sept. 24,
2015
http://tinyurl.com/ngsavbz

“Africa is Budweiser’s lost continent. For SABMiller, it is the
jewel in the crown. Where Anheuser-Busch InBev is basically absent,
Africa generated 28 percent of SAB’s revenue and 30 percent of its
EBITDA [Earnings Before Interest, Taxes, Depreciation and
Amortization]
last year. That’s the key to a potential offer by the Budweiser
brewer for its $89 billion rival.”

“SAB and Castel, one of its partners, share around 55 percent of
Africa’s ‘formal’ beer market.”

“The Beerhemoth,” The Economist, Oct. 17, 2015
http://tinyurl.com/pwwjula

“The battle lasted one tumultuous month. In September SABMiller, the
world’s second-largest brewer, said it was the target of a takeover
by its bigger rival, AB InBev. There followed a volley of bids,
skirmishes in the press and tense private talks: between them, the
firms’ main shareholders include a big tobacco company, the dashing
scion of Colombia’s richest family and three Brazilian billionaires,
not to mention South Africa’s public-investment fund. On October
13th, one day before a deadline mandated by British takeover rules
(SABMiller is listed in London), the companies announced a tentative
deal.”

“The Mobile Economy: Sub-Saharan Africa 2015”
http://gsmamobileeconomy.com/ssafrica/

“The mobile industry in Sub-Saharan Africa continues to scale
rapidly, reaching 367 million subscribers in mid-2015. Migration to
higher speed networks and smartphones continues apace, with
mobile broadband connections set to increase from just over
20% of the connection base today to almost 60% by the end
of the decade. Falling device prices are encouraging the rapid
adoption of smartphones, with the region set to add more than
400 million new smartphone connections by 2020, by which
time the smartphone installed base will total over half a billion.”

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AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with a
particular focus on U.S. and international policies. AfricaFocus
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