Tax Avoidance

Over the past few decades, we have seen an emerging form of neoliberal discourses on Africa that focus on emergence, as the continent has moved from being framed as the world’s “problem case” to the exciting new frontier of “Africa Rising". This has pushed neoliberal capitalists to see Africa as a continent of the future that is about to achieve transformations and socio-economic progress if it follows the orthodox advice of opening its market and accepting negative integration into the world economy. However, fuelled heavily by GDP growth rates, the “rising” narrative has been adept at obscuring a reality of widening wealth inequality and persistent poverty among the majority sections of the continent’s population even while witnessing the emergence of mega shopping malls and cell phones in almost every hand. Additionally, the myth of an Africa that achieves growth has overshadowed the quality of this growth as it does not lead to an improvement in the living conditions of Africans but instead breeds illicit financial flows (IFFs).

This blog provides an alternative approach, described as a potential abusive tax avoidance (PATA), to evaluate incidences of illicit financial flows (IFFs) in Africa. By way of a working definition, PATA arises when there is a greater probability that a proposed tax legislation is susceptible to abusive tax avoidance. The abuse contemplated under the PATA is similar to Steve Dean’s argument of how considerable degree of taxpayer autonomy– under the guise of tax deregulation - can negatively impact a nation’s tax system. PATA provides a complimentary mechanism to examine how a proposed international tax framework can result into IFFs. The author undertakes this analysis using the global minimum tax proposed by the OECD to address the tax consequences of the digitalized economy.

There is no gainsaying the fact that Illicit Financial Flows (IFFs) constitute a major impediment to Africa’s sustainable development. In fact, IFFs have a direct impact on a country’s ability to raise, retain and mobilise its own resources to finance sustainable development. Its negative impact further includes draining a country’s foreign exchange reserves, reducing domestic resource mobilization, preventing the flow of benefits of foreign direct investment, and worsening insecurity, poverty and economic inequality.

This commentary responds to Fernando C. Saldivar's article 'Africa in the Economy of Francesco'. This commentary focuses on the author's main argument, which grows from the view that the tax justice movement needs to involve Catholic Social Teaching as an intellectual and moral ally in the fight for systemic reform in the global financial order. The article's main claim is critiqued on two fronts. Firstly, this commentary questions whether a moral backbone, particularly the Catholic moral niche, is sufficient to prevent tax evasion and tax avoidance by MNCs. And secondly, it is argued that the article could have advanced a deeper analysis if it had explored the nature of tax law from both the perspective of its 'spirit' aspect and its more technical aspects.

Most of DSTs significant propositions are based on several grounds, including the goal of having businesses and corporations, especially multinational corporations (MNCs) pay their due share on taxes, taxing profits derived from consumers activities in their territory, or adapting traditional regulations and systems of international taxation to guide and inform new forms of unsettling business models that can be conducted virtually. This is following the debate that digital firms are undertaxed.

The primary objective of this post is to highlight the importance and gravity of the existing tax evasion in Latin America and the Caribbean today. A study conducted by Santiago Diaz de Sarralde Miguez reports that Latin America and the Caribbean are characterized by a relatively low tax burden, which averages 22.8% of GDP. That is 11.5% less than the OECD (2015). While it is true that there are large differences between countries, as the tax burden varies from 12.4% in Guatemala to 38.6% in Cuba.

Our ethical conundrum as we think about issues of global distributive justice in the post-pandemic era is that social contract theory fails to provide an adequate framework for conceptualizing duties and obligations of international organizations to individuals, as opposed simply to their member states. The tension comes from the fact that people intuitively have a sense of justice which is offended by the manner in which power is wielded by those at the helm of the global financial order to place the interests of international organizations, banks, and multinational corporations over and above those of individual human beings, particularly those at the margins of the world economy.

What do we owe our States, and what do our states owe us? This is a difficult question, sometimes answered by invoking a social contract between the rulers and the ruled which implicitly sets out the rights and responsibilities of each. Matters get even more complicated where international citizens and multinational corporations are concerned. Are they party to multiple social contracts? Or none? I will argue that if there is a social contract, then those involved in the international tax system—including tax evasion and facilitating novel forms of tax avoidance—are party to it.

This symposium addresses issues such as the low tax to GDP ratio in developing states, the broken social contract in these countries and the reforms needed to repair the social contract. The convener, in accepting the invitation of Afronomicslaw to host the tax symposium, called upon tax practitioners, academics, policy experts, philosophers, administrators, to offer insights on the relationship between taxation and the social contract

Illicit Financial Flows (IFFs) are one of several impediments to achieving sustainable development in developing countries across the world. While there is no globally accepted definition of IFFs, there is global acceptance that IFFs undermine the efforts of developing countries to generate domestic revenues to finance their national development agendas. According to the United Nations (UN), developing countries face an estimated annual funding gap of $2.5 trillion to deliver on Agenda 2030. In Africa, the continent loses approximately $100 billion annually through IFFs that are generated in and moved from the continent to tax havens.