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One Year after the Paradise papers: Should We Keep the Hope Alive?



On November 5th 2017, a set of 13.4 million confidential electronic files relating to offshore investments went public in what was known as the paradise papers (link). The files exposed over 120,000 people and multinational companies engaged in Illicit Financial Flows[i] (IFFs) practices including tax evasion, corruption and aggressive tax planning strategies. To-date, the following critical questions remain. What has changed? What is at Stake? How do we move forward?  This policy brief seeks to deepen and keep alive the discourse about the paradise papers along the foregoing questions.

What has changed?

The Paradise Papers and Panama Papers (link) significantly contributed in increasing public awareness and shedding light on the IFF phenomenon. They received both global and national coverage, elicited public policy debate on the impact of IFF on development and exposed the role played by low tax jurisdictions often referred to as Tax Havens in facilitating IFFs and corruption (link). Whereas there has been increased level of sensitisation, little has been done at the international  and continent levels to change the status quo in the international tax architecture to curb IFFs. For instance, the 2017 reforms in USA’s tax policy [ii], The UK reducing her corporation tax rate by 2%[iii], the proposal for the re-establishment Accra International Financial Centre (link) and Kenya’s proposal for the establishment of the Nairobi International Financial Centre (link) among others, provide a breeding ground for tax competition and soft landing for Multi-National Corporations (MNCs) to perpetuate tax avoidance,

From the African perspective, during the 24th African Union Summit held on February 15, 2015, the Heads of African Governments committed to implement the recommendations of the High-Level Panel (HLP) report on IFFs from Africa.  However, there has been slow progress on implementation of these recommendation in most the countries.

On the positive note, we have seen a few ‘baby steps’ by some Governments such as Tanzania where the Government banned exports of gold by Acacia for alleged $190 billion in unpaid taxes[iv], Uganda recovered $ 434million worth taxes from the case against Heritage Oil[v], Kenya signed memorandum of understanding with the Government to return assets owned by Kenyan nationals in swiss banks[vi], Rwanda revised her income tax act to cap the amount of fees subsdiaries can pay to their mother companies to 2percent[vii] and Nigeria recovering $322 million public money held in Swiss Banks [viii] among others.

However, recent revelations by International Consortium of Investigative Journalists (ICIJ) and the Business and Human Rights Resource Centre UK indicate aggressive tax avoidance in Madagascar (link)and Zambia (link) respectively.

The foregoing cases resonate with comments of Professor Sylvain Boko -Principal Advisor, Head of Development Planning and Statistics at the United Nations Economic Commission for Africa who accentuated that $100 billion a year, about four percent of Africa’s GDP, have been illegally earned, transferred, or used, much of it due to mis-invoicing. This retards Africa’s growth; weakens public institutions and rule of law; discourages the culture of paying taxes and value-addition to natural resources; and results in countries over relying on official development assistance[ix].

What is at Stake? 

The Post 2015 Development Agenda reflects the magnitude of threat of IFFs to the global sustainable development and confirms that corruption, bribery, theft and tax evasion cost developing countries US$ 1.26 trillion per year. The Sustainable Development Goal (SDG) Indicator  16.4, 16.5 and 16.6 (link) reiterated the global commitment to reduce IFFs, reduce corruption and promote transparent institutions respectively. In the same vein, the Addis Ababa Action Agenda (link) provides a strong framework to support implementation of SDGs by aligning all financial flows and policies with economic, social and environmental priorities.

In the world where only 8.6 percent of the global population owns 85.6 percent of global wealth [x]  and in the wake of raising the momentum for increased Domestic Resource Mobilisation (DRM) to finance the global sustainable development agenda, the threat of IFFs is more palpable   than was one year ago especially for developing countries.

The current rules and norms setting in the international financial architecture has not done developing countries any good(link). The decision making remains largely disproportionate with   developing countries embracing implementation as developed countries set the agenda.

For instance, in 2015, the OECD and G20 agreed Action Plans to combat corporate tax avoidance (Base Erosion and Profit Shifting (BEPS) Action Plans). The success of these Action Plans remains notional due to its vivid weaknesses which among others include:

  • Non-adaptability with tax jurisdictions in developing and some other non-OECD countries where technical and infrastructural capacity challenges regarding exchange of information; weak legal frameworks for deterrence, detection and punishment for tax avoidance and evasion exist;
  • The threshold for EURO 750millions of annual turnover for Country by Country Reporting is high especially for MNCs operating in developing countries providing opportunity for abuse
  • The requirement that information exchanged between jurisdictions must be used only for tax purposes
  • Lack of agreement on whether exchange for information should be automatic or should be on request
  • Limited capacity to utilise Beneficial Ownership data for investigation of tax crimes

From the foregoing, the BEPs project cannot provide an ultimate solution to the problem exposed by the paradise papers. Therefore, one year down the road, we do not have the necessary international standards to solve the problem of corporate tax avoidance. The risk of this trend is that even amidst increasing global awareness of the IFFs and tax avoidance schemes after the paradise papers, revenue losses and the growth in the number of wealth individuals is equally on the rise and will remain un-checked for the foreseeable future.

This coupled with increasing digitalisation of the global economy has opened more avenues for multinational companies and individuals to avoid tax thereby increasing the complexity of the international tax architecture. Therefore, by and large, the international system for taxing multinational corporations and curtailing tax abuses remains slow since the 2017 paradise papers. Worthy to note is that the impact of revenue losses from corporate tax avoidance is heavier on and of greater significance to developing countries than developed countries (Crivelli et al 2015) [xi]. The existing inclination therefore imposes a great burden on developing countries including but not limited to, increased indebtedness and use of regressive tax policies to realise the required resources to finance their development programs.

How do we Move Forward? 

The need for the balance between increased domestic revenue mobilisation amidst calls for fairness and equity of the tax system is a call for urgent action against corporate tax avoidance.  Tax Justice Network Africa’s four-point agenda to stop global taxation scandals is summarised in 4Cs.

Change: The call for Governments to continue pursuing reforms in their tax laws to close loopholes facilitating aggressive tax avoidance. These include but are not limited to re-negotiation of tax and investment treaties to ensure that they are mutually beneficial for all contracting parties and limit the inclusion of harmful tax incentives.

Clarity: One step to transparency is creating public beneficial ownership registries, Government procurement data public and increasing public access to tax information for multinationals. The more available and clear such information is for public scrutiny, the greater their ability to demand for accountability from their Governments.

 Collaboration: TJNA supports the establishment of an inclusive Intergovernmental Tax Commission under the auspices of the United Nations, where all countries have an equal say in setting international tax standards and the works of the Global Tax Justice movements are a right direction towards promoting tax justice which is TJNAs core mandate.

 Conformity: TJNA calls on Multilateral Institutions and frameworks such as the Platform for Collaboration on Tax (PCT) to deepen their commitments towards reforms in the international tax architecture at the political and technical levels. At continental level, the African Union leaders must embrace and support fast tracking of implementation of the recommendations from the HLP report on IFFs.

By: Robert Ssuuna-Policy Lead Tax and International Financial Architecture

Tax Justice Network Africa –Policy Brief Series, December 2018


[ii] Some of the reforms in USA tax policy include, cutting the federal statutory corporate tax rate from 35% to 21%; 10.5% minimum tax on income earned abroad that exceeds an overall 10% return on tangible assets abroad; and a tax rate of 13.125 as opposed to 21% on earnings from foreign sales by U.S corporations that exceed a 10% return on company’s tangible assets i.e. producing in the US for export.

[iii] Theresa May promises corporation tax cut to the lowest rate in the G20 amidst Brexit uncertainty. [iv] Acacia owns three goldmines in Tanzania, where the government is trying to increase its share. It has imposed an export ban on gold and copper concentrate and has demanded $190 billion in alleged unpaid taxes from Acacia and an increased stake in its mines.

[v] : Uganda has won a landmark $434m (over sh1.1 trillion) oil tax case in London against Heritage Oil and Gas Ltd.

[vi]–Swiss-ink-deal-to-recover-corruption-loot/1056-4654486-ucbojn/index.html : Kenya Swiss sign deal to recover corruption root.

[vii] Rwanda caps income tax outflows to 2pc.

[viii] : Returning Nigeria’s Stolen Billions.

[ix] See Illicit financial flows continue to impede Africa’s development, says ECA’s Boko at HLPD 2018.

[x] . Global inequality

[xi] See:




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About TJNA

The Tax Justice Network-Africa (TJN-A) is a Pan-African initiative and a member of the Global Alliance for Tax Justice. Launched in January 2007 during the World Social Forum (WSF) held in Nairobi, TJN-A promotes socially- just, accountable and progressive taxation systems in Africa. It advocates for tax policies with pro-poor outcomes and tax systems that curb public resource leakages and enhance domestic resource mobilisation.

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