‘Close all tax havens’

A bundle of $100 notes. Most wealthy people are hiding their wealth outside the country in tax havens. PHOTO BY RACHEL MABALA

What you need to know:

According to the report of the high level panel on Illicit Financial Flows from Africa, the continent is losing more than $50 billion (about Shs182 trillion) annually in Illicit Financial Flows. Mr Alvin Mosioma, the founding executive director of Tax Justice Network- Africa in an interview with Daily Monitor’s Ismail Musa Ladu talks about how the fight to track the outflows, stop it and get it is fairing.

What is tax justice?
One wise man once said: “Tax is the price we pay to live in a civilised society.” People care about services such as health care, education and good infrastructure among other things. They expect their government to fulfil those expectations.
With an equitable taxation regime where everyone, including companies and individuals pay according to their ability and not their capacity to avoid or evade tax, then everybody will contribute towards the society we all want to live in.
So, tax justice is linking the collection of tax revenue to the provision of basic services and ensuring that this is done fairly.

Are you happy with the way tax is being collected and used by regional governments?
No. There are many loopholes in the system. We see a shift to heavy reliance on consumption taxes. In some way, this shifts the tax burden to the shoulders of the poor.
Some governments are in competition with each other to attract investments. They provide tax holidays to companies which in turn enjoy a wide range of tax incentives, limiting the State to collect taxes – revenue.
Regressive tax policies are also taking shape. But due to the global financial system; companies are finding ways of shifting their profits from countries where the economic activity is taking place to offshore tax havens through different mechanisms of tax evasion.
That presents one of the biggest challenges we are trying to tackle by mobilising citizens to push their government to seal loopholes that facilitate the leakage, allowing significant resources to bypass state coffers.

How fair should tax regime be and is that feasible?
East Africa, just like other regions on the continent, has the fastest growing high net worth individuals. Studies carried out about this category of people in Uganda, Kenya, Tanzania, indicates so.
So you have some of these wealthy people hiding their wealth outside the country—in tax havens, yet they enjoy all the benefits that the State provides without contributing to the national revenue collection kitty.
That is one group I think must be within the tax collectors radar.
Then, there are the multinational companies which enjoy a wide range of tax incentives in addition to paying little or no taxes after taking advantage of tax law loopholes.

Should sectors like agriculture, health, education take priority in budget allocation?
You need to focus on sectors where majority of the citizens draw their livelihoods from. In Uganda, agriculture plays a central role. Education and health are the other important sectors that deserve attention.
I think building human resource is crucial. Sectors like energy, transport are all priorities that our governments should be considering.

What explains the low interest of the regional population on issues of taxation?
One of the most important components of taxation is a social contract - a contract between a tax payer and the government. A huge part of the social contract is that I give you my money and in return, you (the government) spend it in an accountable and transparent way.
This social contract in many African countries is lacking. Our organisation gives citizens support that will allow them hold their government accountable on matters taxation.

How is the “Stop the Bleeding campaign” launched a couple of years ago fairing in dealing with IFFs?
Illicit financial flows have been identified as one of the biggest challenges hindering Africa’s growth and economic development.
The high level panel on illicit financial flows that was chaired by Thabo Mbeki came up with recommendations which many of our governments, including Uganda accepted to implement.
But there is the lack of seriousness to implement these recommendations.
Some countries are revisiting the double taxation agreement and signing it into force with some tax haven jurisdictions.
There have been some baby steps towards tackling the phenomenal of IFFs in the continent. However, much more still needs to be done.
The purpose of the “Stop the Bleeding Campaign” is to raise awareness among common citizens about the impact of illicit financial flows on Africa’s economic development.
We have put this conversation on the table and people are beginning to talk about it. There is increasing interest from young people, especially students. Journalists are writing about it. Members of Parliament are also raising issues about this. Civil Society is marching on the streets of Nairobi and Accra about this matter.

On a scale of one to 10, where would you rate your efforts to end IFFs?
I think we are at six out of 10.

What is it you are looking to achieve with the just concluded tax justice academy held in Entebbe, Uganda recently?
The main objective is to build the next generation of tax justice champions. We are out here to give knowledge to young people, give information and equip people with facts on the issues about tax and related matters, including IFFs.
Building champions requires patience. It requires a long-term strategy and that is what we are trying to do.

What does the Paradise Paper (leaks shedding light on who is investing huge amounts of money in offshore tax havens) and Panama Papers (leaked documents that detail financial and attorney–client information for offshore entities) tell about African leaders?
Someone once said the difference between tax avoidance and tax evasion is the thickness of the prison wall. With one, you land in prison, while with the other, you get away. But in essence, they are both the same.
If it is wrong, it is wrong. Slavery was legal at one time but it did not make it right. So was Apartheid in South Africa.
In the long-term, building an equitable society is the only way we can all live next to each other in harmony.
The growing gap between the rich and the poor should be addressed. The Panama Papers confirm that the rich are becoming richer and hiding that wealth in different offshore tax havens.
We need to plug structures that will not allow that kind of evasion to happen. The structures that allow people to loot their countries and hide their wealth offshore is what we need to revisit by tightening legislations at national level but also by addressing loopholes in the international financial system.
Tax havens should be closed. As long as they exist, we shall be having these leaks.