Like Multinational Companies, Africa's Richest Are Hiding Wealth And Avoiding Taxes

The Tax Justice Network-Africa makes a damning observation: "...economic inequality is perpetuated by among other things, non-inclusive, inequitable and unaccountable tax systems characteristic of most countries in Africa." TJN-A's argument is that governments are increasingly employing consumption taxes like VAT (regressive taxes) so as to take advantage of the growing informal sector. However, these regressive taxes burden the poor rather than the rich. It would seem that the rich in Africa have it easy yet they are still not willing to contribute to the fiscus. Sub Saharan Africa continues to struggle with tax revenue mobilization and this has led to stunted government spending which results in low economic growth if any. It is time for the rich to pay their fair share.

The September 2018 AfrAsia Bank Africa Wealth Report says the total individual wealth held in Africa amounts to US$2.3 trillion. The continent has more than 148,000 millionaires, 7,100 multi-millionaires, 320 centi-millionaires and 24 billionaires. These figures are potentially an understatement as some notable markets were excluded for lack of reliable data. However, with the available data, the report still managed to establish that total wealth held in Africa has risen by 13% from 2007 to 2017 and by a further 3% from 2017 to 2018. In the next 10 years, total private wealth is expected to rise by 34% to breach the US$3 trillion mark. 

The continent has a growing number of very wealthy individuals and unfortunately, with this growth, offshore account balances are also growing. In 2014, Gabriel Zucman published a paper which stated that US$500 billion of African wealth is held in offshore accounts and US$15 billion of tax revenue is lost as a result. Lost is a euphemism for stolen from the continent by its wealthiest individuals. 

Rhiannon McCluskey in a brilliant 2016 article for The Conversation said while personal income taxes make up about 25% of all revenue collected in the OECD countries, "In Africa, they only make up about a tenth on average and as little as 4% in countries like Uganda and Rwanda." Christian Aid pegs the average personal income taxes collected at a marginally higher 13.6% but the difference does not change the unavoidable conclusion: Africa's richest are not giving to Caesar. Even the low personal income taxes collected in African countries are predominantly from formal employees through the pay-as-you-earn system. The system is clearly rigged against the low-income earning working class and the poor. 

The rich are sitting pretty, siphoning their wealth to havens for posterity. The Panama Papers and more recently, the Paradise Papers, have exposed the rich and mighty in all their not-so-glorious greed. Wealthy politicians seem to be leading from the front in this unAfrican movement to impoverish the continent. With leaders who hate their own countries and devise plan after plan to strip it of its wealth, it is not surprising that the rest of the upper-class has no motivation to be honest.

Christian Aid's appraisal of the Kenyan system is quite telling as the top 1,000 individual taxpayers in the country have an entry point annual income of US$168,000 yet around 40,000 people live in the affluent suburbs of Nairobi where no house can be bought for less than US$420,000. Any attempt to explain away this ridiculous divide between the consumptive habits of the Kenyan upper-class and the taxes they pay should not be taken seriously. South Africa is also being prejudiced of taxes from more than 100,000 high net-worth individuals. If other countries open up to scrutiny, the Kenyan and South African situation will prove to be the norm rather than the exception. 

The wealthy (including the politicians) are understating their riches, siphoning wealth to offshore tax havens and prejudicing countries of needed revenue just like the infamous Multinational corporations. As George Orwell would have it, "The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.” 

Africa's poor simply have no friends.

Image Credit: ActionAid