Liberia ranks 1, Ghana in 3rd position as most ‘secret’country in Africa
By Shout-Africa Reporter – Liberia ranks number 1 in the newly released Financial Secrecy Index (FSI) 2011, whilst Ghana has been ranked the third most ‘secret’ country in Africa where illegal financial transactions thrive and the 44th out of 74 countries researched, according to the 2011 FSI.
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The research was conducted by a Kenyan-based international non-aligned coalition of researchers and activists called The Tax Justice Network Africa. The FSI 2011 shows that most secrecy jurisdictions are not in “sunny small palm-fringed islands for shady people”, but rather wealthier countries, such as the United States of America, United Kingdom, Germany, and Japan. Switzerland provides the most financial secrecy in the world. In other words, security jurisdictions provides facilities that enable people or entities escape or undermine the laws, rules and regulations of other jurisdictions elsewhere, using secrecy as a prime tool.
Members of the Organisation for Economic Cooperation and Development (OECD), and their various dependencies account for 84 per cent of the world market in offshore financial services. The FSI 2011 identified 5 African countries as secret jurisdictions, with Liberia offering the most secrecy, followed by Mauritius, Ghana, Botswana, and the Seychelles.
According to the research group, it is concerned about the harmful impacts of tax avoidance, tax competition and tax havens. Per its conclusions, Ghana is third in Africa in this year’s FSI. The FSI 2011 identified five African countries as secrecy jurisdictions, with Liberia being first, followed by Mauritius, Ghana, Botswana, and the Seychelles.
According to the research group, the criteria used for their research into illicit financial flows stem from three major sources, bribery (corruption in its narrow sense), criminal activity and cross-border tax evasion.
In doing so, secrecy jurisdictions and the secrecy providers operating through them play not only a major role in preventing the poorest countries from developing out of a state of dependency and poverty, but they help creating an environment where crime thrives.
Although the research fell short of giving exact figures that are lost through the secrecy, it estimated that about $11 trillion was held in secrecy jurisdictions in private wealth in 2005, resulting in an annual tax loss of US$255 billion.
Additionally, between 1970 and 2008, illicit financial flows from Africa amounted to about US$854 billion, which could have satisfied the continent’s external debt obligations and left a surplus of US$600 billion to reduce poverty and stimulate economic growth.
Whilst the challenges of a large informal sector, low tax morale, and poor service-delivery are often cited as the major barriers to effective taxation, what is often overlooked is that African countries have lost substantially more tax revenue as a result of the difficulties in detecting the illicit flows of money out of the continent.
If African governments are serious about improving the livelihoods of the majority of their citizens, then they can no longer afford to continue to lose tax revenue in this manner, the network warned.
It is highly unlikely that African countries will meet all the Millennium Development Goals (MDG) by 2015 and the lives of impoverished communities will only get worse.
African governments have however been urged to support the demands for increased transparency of financial transactions to enable tax administrators to better detect tax dodging.
