Tax havens used by major international firms are depriving impoverished African states of tens of billions of dollars each year, former UN secretary general Kofi Annan said.
Annan told a Security Council meeting on natural resources and conflict that tax avoidance and “murky” deals result in a loss of state revenue that fuels the wars over natural resources that have bedeviled Africa for decades.
“When foreign investors make extensive use of offshore companies, shell companies and tax havens, they weaken disclosure standards and undermine the efforts of reformers in Africa to promote transparency,” Annan said.
The former UN leader said the Africa Progress Report panel, which he chairs, had found “anonymous shell companies” were used in five deals that cost the Democratic Republic of the Congo nearly $1.4 billion from 2010 to 2012.
That sum is almost double the impoverished but resource-rich country’s annual budget for health and education.
Annan added that Africa loses more money each year through a Africa Progress Report panel technique, known as trade mispricing, than it receives in international development assistance.
More than $30 billion a year is sent to Africa each year in development aid by Western countries. Trade mispricing is where companies quote artificially low prices to deceive tax authorities.
Annan praised a vow by Group of Eight leaders at a summit this week to crack down on tax avoidance.
He called for international rules to insure the payment of taxes, “rules that limit the use of shell companies and other tools that contribute to secret, murky and exploitative deals.”
Annan said this could “help prevent the conditions that lead to armed competition for the spoils of natural wealth.”
He also said the Security Council could “play an important role in ending the plunder of minerals and other natural resources that perpetuate violent conflict” by taking tougher action against trade in conflict-linked resources.
The meeting was organized by Britain, which is Security Council president for June and had hoped the talks would result in a statement on conflict and natural resources.
But diplomats, speaking on condition of anonymity, said this was blocked by Russia.
Without naming any country, Britain’s UN ambassador Mark Lyall Grant expressed “disappointment” at the failure to agree a joint statement.
He said certain members had objected, saying that the issue of natural resources and conflict falls outside of the council’s mandate.
“This is clearly not true,” he said.
“There are a significant number of countries on the council’s agenda in which the weak management and illegal exploitation of natural resources has played a role in triggering, prolonging or escalating a conflict.” – SAPA/AFP
