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Increased financial transparency is critical to stem the illicit capital outflows that are crippling Africa. The past month, the spotlight has been on James Ibori, the governor of Nigeria's Delta state from 1999 to 2007, who pleaded guilty in a London court to 10 counts relating to conspiracy to launder funds from the state he governed.

Ibori was accused of siphoning off an estimated $250m and laundering it in London through a number of offshore companies and financial intermediaries to fund his extravagant lifestyle of lavish mansions, expensive cars and private jets. This mode of illicit capital flight is by no means restricted to one rogue Nigerian governor or even African leaders at large, nor is it the most important means by which capital leaves the continent (and developing countries generally) illicitly.

True, $250m from one source is substantial. But this pales into insignificance compared with the estimated $100bn that left Nigeria illicitly between 1970 and 2008, according to Global Financial Integrity (GFI). The bulk of this haemorrhage, contrary to popular belief, is not through the laundering of corrupt money but through commercial activities, and particularly through multinational corporations.

According to GFI's conservative estimates, more than $1.8 trillion left African shores illicitly between 1970 and 2008. Of this, only 3 percent is attributable to bribery and theft by government officials, 30-35 percent results from the laundering of criminally acquired wealth (drugs, illegal arms sales, human trafficking, etc), and the bulk - 65-70 percent - is from commercial activities, especially through trade mis-pricing of goods.

Over the last 10 years, the average annual outflows of this sort exceeded $50bn. This compares with annual aid inflows of less than $30bn. The outflows are largely to avoid or evade tax and to conceal wealth.

This week's proposed change by the chancellor, George Osborne, on how foreign subsidiaries of multinationals based in the UK are taxed, will give even less incentive to keep money in poorer countries. Reform of these controlled foreign company rules in the upcoming budget would strengthen the financial case for shifting money to tax havens by making profits made by multinationals abroad and retained in offshore jurisdictions free from UK tax. This could cost developing countries 4bn a year in lost tax revenue, according to ActionAid estimates.

These outflows undermine the rule of law, stifle trade and worsen macroeconomic conditions. They are facilitated by around 60 tax havens and secrecy jurisdictions that enable the creating and operating of millions of disguised corporations, shell companies, anonymous trust accounts and fake charitable foundations. They allow the likes of Ibori and many multinational corporations to cripple Africa financially and politically.

Given that about 50 percent of global trade passes through tax havens, these jurisdictions facilitate trade mis-pricing by making it difficult for documentation to be traced. Transnational companies have the ability to set up multiple trusts and shell companies in these jurisdictions. This is significant because about 60 percent of global trade takes place between and within multinational companies. Secrecy also attracts criminal activity, and the laundering of corrupt money through concealment of the natural beneficiaries behind shell companies and trusts.

Africa is experiencing economic growth, and for the increasing wealth to be channelled to public services, development and the achievement of the millennium development goals by 2015, it is urgent the problem of tax havens as a conduit for illicit outflows is addressed. The high-level panel set up by the African Union, the African Development Bank and the UN Economic Commission for Africa, and chaired by former South African president Thabo Mbeki, is a significant step forward - and testifies to the importance of this issue for Africa's development. The ball is now in the court of the rich countries.

Charles Abugre is the Africa Regional Director of the United Nations Millennium Campaign (for the MDGs). These views should not be attributed to the United Nations.

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Africa: Could Abolishing Tax Havens Solve Africa's Financing Needs?

Japan's cut in corporate tax rate, set to take effect April 1, will leave the U.S. corporate tax rate the highest in the world.

NEW YORK (CNNMoney) -- On Sunday, the United States gets a distinction no nation wants -- the world's highest corporate tax rate.

Japan, which currently has the highest rate in the world -- a 39.8% rate on business income between national and local taxes -- cuts its rate to 36.8% as of April 1. The U.S. rate stands at 39.2% when both federal and state rates are included.

"The change in and of itself is not that important, but there's some symbolism involved in being the highest in the world," said Eric Toder, co-director of the Tax Policy Center, a non-partisan think tank. "There's certainly been a long-term trend of our rate getting higher relative to everyone else."

But despite the headline number, the statutory rate only tells part of the story.

Loopholes and other special treatment for different kinds of businesses mean that businesses pay an effective rate of only 29.2% of their income, which puts the United States below the average of 31.9% among other major economies, according to analysis by the Treasury Department.

And the Organization for Economic Cooperation and Development, the multinational group that tracks global economic growth, estimates the United States collects less corporate tax relative to the overall economy than almost any other country in the world.

Some economists argue that tax collection relative to gross domestic product is the more relevant measure. That's because different accounting rules around the world mean what's counted as income in one country isn't counted in another, making comparisons of tax rates misleading.

Still, both Democrats and Republicans argue that the corporate tax rate should be lowered as a way of promoting greater economic growth, so that multinational companies have incentive to invest more in their U.S. operations than overseas. President Obama has proposed cutting the corporate rate to 28%, Republican challenger Mitt Romney proposes a 25% rate.

Both sides are in agreement for the need to reduce the loopholes and other exemptions that shield companies from paying taxes on all their income. That kind of reform could increase corporate tax collections, or at least leave them unchanged, even with a lower rate.

See original here:
U.S. corporate tax rate: No. 1 in the world

On Sunday, the United States gets a distinction no nation wants -- the world's highest corporate tax rate.

Japan, which currently has the highest rate in the world -- a 39.8% rate on business income between national and local taxes -- cuts its rate to 36.8% as of April 1. The U.S. rate stands at 39.2% when both federal and state rates are included.

"The change in and of itself is not that important, but there's some symbolism involved in being the highest in the world," said Eric Toder, co-director of the Tax Policy Center, a non-partisan think tank. "There's certainly been a long-term trend of our rate getting higher relative to everyone else."

But despite the headline number, the statutory rate only tells part of the story.

Loopholes and other special treatment for different kinds of businesses mean that businesses pay an effective rate of only 29.2% of their income, which puts the United States below the average of 31.9% among other major economies, according to analysis by the Treasury Department.

And the Organization for Economic Cooperation and Development, the multinational group that tracks global economic growth, estimates the United States collects less corporate tax relative to the overall economy than almost any other country in the world.

Tax reform: Why it's so hard

Some economists argue that tax collection relative to gross domestic product is the more relevant measure. That's because different accounting rules around the world mean what's counted as income in one country isn't counted in another, making comparisons of tax rates misleading.

Still, both Democrats and Republicans argue that the corporate tax rate should be lowered as a way of promoting greater economic growth, so that multinational companies have incentive to invest more in their U.S. operations than overseas. President Obama has proposed cutting the corporate rate to 28%, Republican challenger Mitt Romney proposes a 25% rate.

Both sides are in agreement for the need to reduce the loopholes and other exemptions that shield companies from paying taxes on all their income. That kind of reform could increase corporate tax collections, or at least leave them unchanged, even with a lower rate.

Original post:
U.S. corporate tax rate poised to become highest

On 18 February 2012, the United Nations Economic Commission for Africa (UNECA) established a High Level Panel to examine what it referred to as 'the debilitating problem of illicit financial outflows from Africa'.

In a statement issued a day ahead of the launch of the panel, UNECA asserted that:

Former South African President Thabo Mbeki chairs the panel. The concern with a net leakage of resources from Africa is as old as the anti-colonial politics of liberation. It has, however been given new impetus, generally as part of anti-corruption initiatives but specifically in the wake of declining levels of aid from developed countries.

There is a growing perception that the gap between the available finance and what is required can perhaps be filled by the closure of the most significant avenues of resources drainage. The extent of such drainage remains a matter of speculation, with the figures pertinent to Africa ranging between $50 billion and $80 billion per year. Various sources have attempted to quantify the scale of the problem, including Transparency International (2004), financial research group Global Financial Integrity (2005), Christian Aid (2007) and the Tax Justice Network (2007).

The absence of unanimity on this score is probably attributable to the fact that the terrain concerned is quite broad, and each organisation can only be exposed to part of it at any given point in time. It is less important to achieve consensus on scale than it is to achieve it on the measures to be taken to stem illicit financial outflows from Africa.

Several months ago, I lamented the absence of concerted efforts by the relevant authorities against abusive transfer pricing transactions, despite their suspected prevalence in African countries. The UNECA initiative offers some hope of a consensual and systematic approach to such transactions.

The UNECA Panel has undertaken to study the nature, pattern, scope and channels of illicit financial outflows from Africa. It will use the data gathered to sensitize governments, citizens, policy makers, and political leaders in Africa. It pledged to mobilise the support of development partners for effective measures to curb such outflows to be adopted. It is ultimately its goal to influence policies at national, regional and international levels to 'neutralize' illicit financial outflows from Africa.

It goes without saying that tackling this age-old problem will not be a walk in the park. The Panel will probably be aware of some of the thorniest challenges that have impeded previous initiatives. It is somewhat odd that the unavailability of good quality, comprehensive and up to date information is among the most critical. Researchers who have done substantial work in this area, such as Raymond Baker, have found this an insurmountable challenge.

Part of the blame for this may be laid on the absence of consensus among countries that are linked together through trade of what information is tax-relevant to them. An agreement on this should be followed by the extraction, from the sectors concerned, of as much of that information as is available, so that it can be shared.

As Mr Mbeki observed, sometimes there are glaring disparities between exporting and importing countries on the quantity or quality of commodities exchanged between them. Since intra-African trade is relatively low compared to that between African and non-African countries, much of the tax-relevant information will be located beyond the continent. How much of it is accessible to African countries?

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Africa: Illicit Outflows From Africa Exceed 'Normal' Corruption

Dublin - Research and Markets (http://www.researchandmarkets.com/research/430f5edc/brazil_tax_law_an) has announced the addition of the "Brazil Tax, Law and Business Briefing - Newly Revised Sixth Edition" book to their offering.

Thomson Reuters, the world's leading source of intelligent information for businesses and professionals, has published a Sixth Edition of its special corporate report, Brazil Tax, Law and Business Briefing through its WorldTrade Executive (WTE) brand, a Tax and Accounting Business.

The Report provides key legal and tax considerations for investors as they evaluate possible transactions in Brazil, such as acquiring or launching a business or entering into a joint venture or strategic alliance. Contributors to the Report include senior experts at major accounting and law firms in the region.

Brazil's regulations on worldwide income taxation, transfer pricing and, more recently, thin capitalization rules provide challenges for businesses operating in the region, according to the Report, said Gary Brown, Senior Director at WTE/Thomson Reuters. The Report illuminates the nuances of Brazil's tax code based on the insights of advisors who understand them.

Coverage Includes:

- Summary of Brazil's thin capitalization rules

- How to deal with tax audits and tax litigation

- Brazil's anti-avoidance rules

- A new list of tax havens issued by the Brazilian Tax Authorities

- Planning opportunities using treaties.

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Research and Markets: Brazil Tax, Law and Business Briefing - Newly Revised Sixth 2012 Edition