By Abdul Tejan-Cole
First, it was the Paradise Papers. Then in 2020, the FinCen Files were released. Last week, the Pandora Papers was published. According to their website, the documents, about 2.94 terabyte in size, expose the offshore secrets of wealthy elites from more than 200 countries and territories. The elites included 130 Forbes billionaires, 330 politicians, celebrities, royals, religious leaders, ambassadors, drug lords and fraudsters – all people who use tax and secrecy havens to buy properties and hide assets and avoid paying taxes.
It is unclear how the International Consortium of Investigative Journalists, which published the papers, got the extensive records of 14 offshore service providers that give professional services to wealthy individuals and corporations seeking to incorporate shell companies, trusts, foundations and other entities in low- or no-tax jurisdictions. The Consortium includes credible African media like amaBhungane Centre for Investigative Journalism in South Africa, Daily Monitor in Uganda, OuestAf in Senegal and Premium Times in Nigeria.
Africa and Africans featured prominently in the leaks. Perhaps the most prominent is the family of Kenya’s President Uhuru Kenyatta. The papers revealed that his family has for decades been hiding monies in offshore accounts. The papers provided evidence of at least $30 million in hidden assets in 13 offshore companies. This represents a small portion of the estimated $500 million dollars believed to be owned by the family in many parts of the world, including Panama and the British Virgin Islands.
President Kenyatta welcomed the release of the Pandora Papers, saying that it was important to shine a light on secrecy that is often used to shield illicit financial flows. “The Pandora Papers and subsequent follow up audits will lift that veil of secrecy and darkness for those who cannot explain their assets or wealth,” his statement said.
Unlike President Kenyatta, Denis Sassou-Nguesso, Congo’s President since 1979, denied revelations that he is the owner of Inter African Investment Ltd, which controls lucrative diamond mines in his country. Incorporated in the British Virgin Islands in 1998, the company was struck off the register in 2015. Gabon’s President, Ali Bongo Ondimba is said to have controlled two SHELL companies, Cresthill Worldwide Limited and Gazeebo Investment Limited, in the British Virgin Isles, both are now defunct. Côte d’Ivoire’s Prime Minister, Patrick Achi, denies owning a company in the Bahamas obscured through a complex trust scheme.
According to the Monitor, Uganda’s Security Minister Jim Muhwezi had shares in a SHELL company in the British Virgin Islands, Audley Holdings Ltd, which is the holding company of Audley Ltd. in Uganda. Muhwezi denies owning this company and Sukari Loma Investment Holdings Ltd registered in Cyprus in 2013. Botswana’s retail mogul, Ram Ottapathu, denies registering a Shell company, Covering Concepts Global Limited, in the British Virgin Islands in 2016. Peter Obi, former Governor of Anambra State, who made his name as a beacon of transparency and won the Champion Newspaper’s Nigeria’s Most Trustworthy Governor in 2009, set up a complex business structure, Gabriella Investments Limited, in the British Virgin Islands and failed to declare it. Nigeria’s Constitution and the Code of Conduct Bureau and Tribunal Act prevent a public officer from holding a bank account outside of Nigeria.
Many have stressed that there is nothing illegal with setting up secret accounts in tax havens, but these revelations are significant. Like WikiLeaks and the Panama Papers before it, it proves once more that nothing is secret. Published in 2016, the Panama Papers led to the fall of governments in at least two countries – Pakistan and Iceland – and many corruption investigations. Unlike the latter, the impact of the Pandora Papers will not be immediate. The papers do not answer several critical questions, including what is the source of the funds held in these companies? Why do our leaders choose to set up these offshore entities in the highly secretive jurisdictions? Also, it is not in all cases that the papers provide the precise details about the identity and value of assets held in these tax havens.
Even when the facts and data are produced, leaders deny the obvious. These papers have provided citizens with robust evidence to challenge the powerful in society. Tax Justice Network noted that “the world loses $427 billion in tax-to-tax havens – that’s a nurse’s yearly salary lost every second to the world’s wealthiest multinational corporations and individuals. We know how much we’re losing because the Panama Papers forced governments to adopt tax transparency, but we don’t know who’s doing the tax abusing because our governments stopped short of full transparency.”
There are many reasons why the rich and powerful expend so much time, energy and money to conceal their accounts. A key reason is to avoid paying high taxes in many jurisdictions. These offshore havens are used to hide money from national revenue authorities who are improving and intensifying their tax collection drives. Many multinational companies in the world do the same and pay little tax as a result. Facebook, Amazon and Google are glaring examples.
The problem is particularly acute in Africa. In 2015, the former South African President Thabo Mbeki led a High-Level Panel that produced a report on Illicit Financial Flows from Africa. They argued that Africa should retain the capital generated on the continent, and this must be an important part of the resources to finance the Post-2015 Development Agenda. The panel found that a “major enabler or pull factor for IFFs [Illicit Financial Flows] from Africa” is the existence of tax havens, which mainly aim to exploit differences in tax rates across different jurisdictions.
The panel strongly believed that it remained vital to ensure that there was nowhere to send or hide illicit financial outflows. They found that several African countries desired to become financial services centres, and, though they understood the reasoning, they felt strongly that African countries should not in the process become financial secrecy jurisdictions sucking resources from the rest of the continent. They concluded that a “situation in which global businesses pay lower taxes than domestic companies, in countries where they have substantial operations, does not inspire confidence in the intentions and outcomes of the financial arrangements put in place to achieve this result.”
The Pandora Papers represents just a tiny fraction of the wealth that is hidden offshore. The documents highlight the vital need to implement some of the recommendations of the Mbeki Panel. These include the recommendation that the Bank for International Settlements publish the data it holds on international banking assets by country of origin and destination; for the global community to take all necessary steps to eliminate secrecy jurisdictions, introduce transparency in financial transfers and crack down on money laundering; for stronger collaboration and consistent engagement between Africa and global players such as the US, EU, G8 and G20 to help ensure greater transparency in the international banking system, with banks being required to ascertain the identity, source of wealth and country of origin of their depositors and their deposits and for partner countries to require publicly available disaggregated, country-by-country reporting of financial information for multinational companies incorporated, organized or regulated in their jurisdictions.
Greater transparency and a fairer and just global tax regime are urgently needed to tackle poverty and inequality. The effort by the Consortium that released the Pandora Papers to unite media organisations and investigative journalists to expose tax havens is an invaluable step in this process. It is journalism at its finest and should wholeheartedly be welcomed.
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Copyright © 2021 Politico Online (20/10/21)
