Delegates to the Sixth International Tax Justice Academy in Dakar, Senegal have highlighted that African countries that are opening themselves to tax havens’ exploitation are milking their continental counterparts through double taxation avoidance agreements (DTAAs).
Speakers at the meeting noted that tax treaties signed by African countries involving tax havens result in significant revenue loss instead of the expected additional investment due to illicit finance channelling gaps.
They cited a country such as Mauritius which is rated among the continent’s nine most corrosive corporate tax havens boasting of the lowest available corporate income tax of zero percent. Ironically, the speakers observed, Mauritius has secured several DTAAs with other African countries applying a corporate tax rate of at least 20 percent.
Birahime Seck, coordinator of Forum Civil and co-organiser of the academy, observed that the learning session will serve as a good basis for the actors to invest more in the fight against illicit financial flows (IFFS) and also to participate in the promotion of tax justice at national and international level.
During the opening session, speakers from different countries took turns in highlighting the tax injustice that was taking place in Africa which they noted was undermining African countries’ ability to tax wealthy and multinational corporations.
Action Aid Malawi acting head of policy Chisomo Manthalu, who is attending the workshop, said if Malawi signs and ratifies the tax treaty with Mauritius, it will likely impact the efforts to increase domestic tax revenue.
“Mauritius is an investment hub that is being used by most multinational companies to avoid paying tax in the countries they are operating. Most companies are moving money untaxed to Mauritius from countries they are doing business.
“There is a belief that signing a tax treaty with Mauritius would spur investments in Malawi, however studies show that the results are contrary,” he said.
Manthalu said countries that have signed the treaty with Mauritius, such as Uganda, saw an increase in businesses relocating their headquarters to Mauritius with a sole purpose to use the agreement to avoid paying tax.
Malawi and other countries such as Cote d’Ivoire and The Gambia have DTAAs with Mauritius awaiting a signature, according to the Mauritius Tax Authority website. In Malawi, publicly listed companies such as First Capital Bank have headquarters in Mauritius.