Africa has lost out on more than 1 trillion dollars, European leaders should take action

September 23rd, 2010

EU Commission headquarters in Brussels | Photo: TPCOM, Flickr

BRUSSELS—A debate was held on transparency and extractive industries in Africa at the European Parliament on 15 September 2010, organised by CIDSE, an international alliance of Catholic development agencies and its partner organisation SECAM, the pan-African bishops’ conference.

The debate highlighted how “the lack of transparency is killing the African people,” as stated by Bishop Louis Portella-Mbuyu of Congo-Brazzaville, who for years has fearlessly challenged his government and transnational extractive companies.

EU legislation could contribute to recuperating the huge amount of uncollected tax revenue, far surpassing development aid. The European Commission recently reviewed its EU transparency regulation setting up transparency requirements for European Multinational companies (the TOD Directive) however; country by country reporting has not yet been included.  It is critical that information be reported and measures implemented that enable countries’ tax authorities and citizens to hold companies and governments accountable for the money earned on their natural resources. As expressed by Bernard Pinaud, Director of CCFD-Terre Solidaire, “the US has recently set the right example by passing such legislation, the EU should follow suit.”

Constraints and challenges to the momentum of political will for reform, as expressed at the event, include:

  • The double discourse of politicians in developed countries that publicly are against tax havens, but they don’t approve any concrete measure in that regard.
  • Claims that the “tax havens” of Luxembourg, Belgium and Austria are responsible global citizens regarding alleviating poverty in developing nations through boasting of the percentage of national income they give in Official Development Assistance.
  • Members of African nations pointing out that many in their governments hold active business interests in the extractive and other industries.
  • A member of an organization in Zimbabwe pointing out that while Northern governments state opposition to grand scale corruption by African government officials, they nonetheless permit accounts to be opened for these officials by banks within their jurisdictions.

It remains clear that the relevant issues of political will are globally intertwined, and they need to be addressed globally. It is also worth noticing the important role that civil society organizations play at national and global level. As one of the panelists emphasized, “we need to act as watchdogs of governments and multinational companies in developed and developing countries”. Transparency is an emergency in the fight against tax havens and capital flight and should be demanded at all levels.

The European Commission has estimated that its member states still needed to find 12 billion euro to reach their target of spending 0.56% GNI on development assistance in 2010. However, according to some of the panelists, up to now EU aid is not efficiently and not transparently enough.

European Heads of State need to realise that as long as the leakages are not plugged Africa will continue to lose more than it receives in terms of ODA. Africa lost around 1 trillion dollars in illicit financial outflows between 1970 and 2008, according to recent Global Financial Integrity (GFI) report. EU legislation could contribute to recuperating these illicit outflows, and the uncollected tax revenue associated with them, far surpassing development aid.

Correction: An earlier version of this article incorrectly stated a recent report found that African countries lose more than €1 trillion each year in tax revenue. The report actually found African countries lost over $1 trillion dollars total in illicit financial outflows between 1970-2008. The article has been updated to reflect this correction.

Written by María José Romero

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