TaxJusticeAfrica: South Africa: Manuel Calls Bluff of Tax-Avoidance Schemes

Thursday, March 20, 2008

South Africa: Manuel Calls Bluff of Tax-Avoidance Schemes

20 March 2008 - (Allafrica.com
Finance Minister Trevor Manuel yesterday announced that tough measures were in the pipeline to crack down on tax avoidance schemes that used legitimate transactions to generate artificial deductions through excessive financing

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Increasing foreign aid to Africa is often viewed as the panacea to address the poverty facing the continent. While the role played by international aid can not ignored there is an important element which is often ignored in this debate: the issue of the massive resource outflow from the continent.

The African Union estimates that up to US$ 148 billion is taken out of the continent annually because of corruption. These amounts exceed the current aid flow by a significant margin. It is indeed estimated that for every dollar that flows into the continent in terms of foreign aid and loans, there are 8 dollars flowing out through corrupt practices.

Issues around the massive resource outflow and its effects on the fledging economies of Africa have not been accorded due attention. The illicit capital flight and associated tax evasion , tax competition, transfer mis-pricing, revenue losses due to import tariff reduction brought by market liberalization, and other related aggressive tax avoidance malpractices by both MNCs and other rich elites in Africa have all significantly led to accelerated capital flows out of Africa.

The debate on economic development of the continent and the reduction of poverty would be missing a very important component if factors that encourage resource outflow, hamper domestic resource mobilization and encourage reliance on external financing for development are not addressed. There is need to raise the awareness among different actors of the impact these outflows have in hampering economic growth in Africa.

TaxJusticeAfrica

Thursday, March 20, 2008

South Africa: Manuel Calls Bluff of Tax-Avoidance Schemes

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