Activist: Panama Papers style tax-dodging costs lives in Africa

Tax evasion by multinational companies, such as that exposed by the Panama Papers, costs African countries up to 60% of the revenue they lose, which has massive implications for development aid, government budgets, and ultimately costs lives, says activist Stella Agara.

“You’ve got some people buying yachts, while others can’t even afford a meal,” the tax justice campaigner said, before criticising EU moves to increase tax transparency as too weak to bring real change.

Stella Agara is from Kenya, but she works in Malawi. She started her tax justice work as a young person in Kenya when she volunteered for the Cancel Debts for Children campaign. Agara is now an influential leader at the African Youth Trust. She has worked for the past two years putting youth at the centre of Action Aid Malawi’s tax justice program. 

Agara spoke to euractiv.com News Editor James Crisp. You can listen to an excerpt on SoundCloud below, or read the transcript that follows. 

Why have you come to Europe?

I’m here in Belgium as part of the tax tour. I’ve been travelling through Denmark, the UK and Ireland. The proposal is basically to mobilise people to support the agenda of tax justice.

I come from a very humble background and I realised somewhere along the way that I had been affected by a number of injustices that I didn’t even know about. I realised that there were many people enjoying more privileges than my family; my mother was a teacher and my father was an accountant, and they both paid their taxes.

I realised that this was a problem in my country, Kenya,  when I couldn’t access education, health or even decent housing. I started asking questions and I realised that our government didn’t have enough money to invest in these services or the social welfare systems that you have in Europe.

Every time I would challenge the government, through public forums, on why they were not investing in these services, I was given the same response: “We don’t have enough money”.

Then it became clear that large multinational corporations in the country were not paying their taxes correctly and were getting away with a large amount of money that could be used for investment.

That is why I dedicated myself to tax justice, and that’s why I am here to promote this campaign.

Where are the multinationals paying their taxes then?

Most of these companies are using tax havens where they either stash or divert their money, so that they don’t pay taxes where they should. There are many examples throughout the entire continent, where huge sums of money have been sent overseas.

Many of the multinationals are keeping their money in a wide range of tax havens like the Netherlands or in Mauritius. In Kenya particularly, Switzerland is a popular choice, for individual politicians as well, because they know Swiss law will allow them to keep their money there.

Panama Papers scandal puts pressure on EU to toughen tax laws

The Panama Papers scandal has put political pressure on the European Commission to toughen its tax laws, and in particular for multinational companies, EU Economic and Financial Affairs Commissioner Pierre Moscovici has said.

The EU’s new plans for country by country reporting aim to show where multinationals pay their taxes and make their profits.

Well, the European Commission did declare that there is going to be this country-by-country reporting, and I’m calling it that rather than public country by country reporting, because they’ve limited it just to the EU member states.

So what happens to non-EU countries? If this information is going to be useful to tackle tax breaches, then it will be invaluable for countries that are the most exploited. I would call it public country-by-country reporting if it covered every country and everyone had access to it.  As it is, they’re doing something, but I think there needs to be more.

What do you think about the tax haven blacklist the Commission has suggested? If a country is on the list, companies must publish information about their activities there.

We are unlikely to see Switzerland, or even the Netherlands, on that list. We’ve found out that a lot of people in Europe don’t even consider the Netherlands a tax haven. I foresee a situation where non-EU countries populate the list, and the member states are handled with kid gloves.

Assuming that all the havens would be listed, I believe there are certain parties that would prevent that from happening. It’s not about tax havens at the end of the day, it’s about making useful information available to everyone. That’s why I support a public country-by-country reporting, not this exclusive club that is going to be used to maintain the situation as it is and leave millions of people disadvantaged.

EU's new tax haven blacklist doomed to failure, warn campaigners

New European Union rules to force multinational companies to publish their tax bills were criticised on Tuesday (12 April) by campaigners for being too weak to stop tax-dodging corporations hiding their profits.

+Development aid+

The EU gives development money to countries like Kenya…

That is true, there’s a lot of development money coming into countries like Kenya. But I would cite a number of facts that were established by an African Union report under the Mbeki Commission.

It looked at illicit financial flows from Africa and it established that Africa loses three times the money it makes in development aid. For example, for every €1 we get from Belgium, we lose €3.

The main problem is that 60% of the money we lose is down to tax evasion, mostly by multinational corporations. Corruption accounts for between 12% and 15%. Business malpractice makes up the large majority of what else is lost.

That is why I believe we have to draw the globe’s attention to the practice of tax evasion. It may not always be illegal, but it is extremely immoral. Especially when economies that badly need these resources are the one who end up deprived.

We are talking basic needs, not luxuries. You’ve got some people buying yachts, while others can’t even afford a meal. It’s a level of inequality that is not acceptable anywhere in this day and age. It is also a question of dignity.

So if multinational tax evasion was tackled properly, there would be less need for development aid?

The truth is, Africa would not need aid from anyone, if our tax systems worked correctly. We can hold our own governments accountable for the corruption, that’s something that’s already happening. Corruption exists everywhere after all. If we had the resources we wouldn’t have to depend on anyone.

At the end of the day, aid is often conditional. We are often expected to spend it in a certain way, based on the donor’s agenda. Tax is the most reliable income any country has, and it’s the only income with which citizens can hold their governments accountable.

Developing countries lose $2 for every $1 they earn

For every dollar that developing countries have earned since 2008, they have lost $2, which proves that the global financial system is failing poorer nations, writes Jesse Griffiths.

There has to be a global response if we are talking  about multinationals. Is there a pan-African consensus on this?

There isn’t, but there is an ongoing conversation, especially after the AU report I mentioned before. There is a need to address the continent’s many loopholes.

+Lives being lost+

What are your thoughts on the Panama Papers and LuxLeaks scandals?

The Panama Papers are just another description of the problem I have been talking about. It’s a demonstration of what selfish people can do when they get an opportunity. It’s an extremely annoying issue, especially when you hear that a group of lawyers advised a company to move to another country.

Uganda, for example, lost $400 million to Heritage Oil, because they were advised by Mossack Fonseca to move their registration to Mauritius. That’s a figure that is higher than Uganda’s health budget. People are dying in Uganda because there are not enough resources. I refuse to believe that people are that bad that they would want to keep all these resources to themselves and leave other people suffering.

The papers exposed a sickness that we have to deal with right now. More importantly, it isn’t everyone that is benefiting from the tax system, it’s the extremely wealthy.

These are not small amounts of money that we are talking about. It’s money that would have a colossal impact on, for example, the Kenyan economy, through lending and development. The way things currently stand, money stashed in the Cayman islands only benefits the account holder.

Both the Panama Papers and LuxLeaks illustrated that this is not just an African problem. After all, the Icelandic Prime Minister and President of the European Commission were implicated.

That’s very true. The fact that the Prime Minister of the United Kingdom benefited from a tax haven shows that our problems are not systemic just to Africa. Looking at it critically, more money is lost to corruption in this part of the world than in Africa. It’s convenient to point at us and say we are corrupt and losing development money, despite tax evasion being the real problem.

What do you think about Juncker, who basically ran a tax haven in Luxembourg for a number of years,  and is now president of the Commission?

I think that they are part of the structural and fundamental problems of the world. We have the wrong people running business. Not everyone is happy with kind of leadership we have. The world needs to take a critical view of this matter and take decisions that will benefit the majority of the world’s population.

Does Juncker own this world? It’s the only one we have. We’d move if it wasn’t. We have to learn to share it.

Juncker emerges stronger from Luxleaks censure motion

The European Parliament rejected a motion of censure against Commission President Jean-Claude Juncker’s team today (27 November), the result being better than the one he obtained when the Commission was initially voted on, two weeks before the Luxleaks scandal erupted.

What is your take on the whistleblower trial due to start today? Is it on people’s radar in Africa?

I support a system that protects whistleblowers, because a lot of the evil that is done in our society is done in secret. If we don’t provide a system of protection for people to expose these evils, then they will continue to exist and grow. These kinds of levels of corruption have to be exposed.

LuxLeaks whistleblowers go on trial

Three people go on trial in Luxembourg today (26 April) over the so-called LuxLeaks scandal that exposed the country’s huge tax breaks for major international companies, with the issue riding high after the recent Panama Papers revelations.

If you could give one message to the EU on this issue, what would it be?

Tax injustice never benefits tax havens or the country from which those resources have been stolen.

I would also add that they have to sit down and seriously reflect on the kind of suffering that is maintained because of tax evasion in developing and low-income countries.

I would like them to think about what it would be like if the situation were to be reversed. Would they be pleased to see someone enjoying a life of luxury, while they suffer? I’m talking about the kind of abject poverty and suffering seen in countries like Malawi. I would implore the EU, including the Council of Ministers, to put themselves in that position and ask themselves whether they want to continue with the way things are.