Multinational Evade $11 Billion in Africa

June 3, 2015 Taxation In Africa

CAPE TOWN – If large multinational companies stopped actively evading taxes in Africa, enough money could be raised to more than cover the healthcare costs of three countries in Africa.

On June 2nd the international non-government organization Oxfam issued a statement claiming that multinational companies are taking active measures to minimize their tax obligations around the world, and, in 2010 alone deprived African nations of at least USD 11 billion in taxes through such actions.

According to Oxfam, in 2010 large reduced their taxable profits by approximately USD 40 billion, equating to a reduction in tax obligations of USD 11 billion, as the average corporate tax rate in the area is 28 percent.

The corporate profits were artificially reduced through the practice of trade mispricing, whereby companies set disproportionate prices for their goods when conducting trades with their subsidiaries.

It was noted that trade mispricing is not the only method used by large multinational companies to evade taxes in Africa, noting that recent research has shown that at least a further USD 100 billion is lost each year to tax avoidance schemes involving the use of entities register in tax havens.

The amount of tax lost to trade mispricing alone is believed to be six times more than the amount needed to cover the total healthcare bills in Sierra Leone Liberia, and Guinea Bissau.

Photo By: T U R K A I R O