Multinationals pay little tax in Africa, forum told

Developing countries trying to play by tax rules drawn up in 1950s, says Nigerian finance minister

Nigeria’s finance minister Ngozi Okonjo-Iweala. “Could do more,” she told the Shell who had proudly declared that that the exploration company had paid $12 billion in taxes last year to African countries “including $4.5 billion into your treasury, Ngozi”. Photograph: Reuters

Nigeria's minister for finance Ngozi Okonjo-Iweala had listened to the man from Shell proudly declare the exploration company had paid $12 billion in taxes last year to African countries "including $4.5 billion into your treasury, Ngozi".

Witheringly, the former World Bank executive replied: “Could do more.”

Like others attending the Lancaster House conference on Saturday, Ms Okonjo-Iweala is less than impressed by the declarations of business.

Dubbed Tax, Transparency and Trade, the conference increased pressure on G8 leaders meeting in Fermanagh to curb tax evasion at home and in overseas territories.


Transparency rules
Earlier, the UK's overseas territories, such as the British Virgin Islands and the crown dependencies, such as the Isle of Man, signed up to new transparency rules, though many of them argued they already operated by standards laid down.

Each will sign the Multilateral Convention on Mutual Assistance in Tax Matters – which already has 50 signatories, committing themselves to co-operate with tax authorities in other countries trying to track down illegally transferred money.

Developing countries, said Ms Okonjo-Iweala, were trying to play by tax rules drawn up in the 1950s: “When we start talking about the amount of taxes to be paid, we have already lost: tax avoidance and evasion starts long before tax is paid.”

African enterprises
In some cases, multinationals pay tax only after costs have been covered, but those costs never seem to be met, no matter how long their African enterprises have been operating or how many resources have been taken from the ground, she complained.

In the end, it came down to having properly trained tax officials: “Building capacity is unglamorous, but it is what works in the end. ”

David Cameron said the true ownership of businesses – often hidden behind a maze of shell firms – would be made known in a central registry, available to police and revenue agencies. "These commitments demonstrate the concrete action we are taking ourselves but it is vital that we take collective international action through the G8 to tackle the international challenges of tax evasion, money laundering and illicit finance," said Chancellor George Osborne.

Not everyone is impressed. Richard Murphy of Tax Research UK, who argues that Mr Cameron's G8 "rhetoric is beginning to fall apart", said: "It is a bit like asking criminals to leave their calling cards on a voluntary basis."

If the registers become commonplace it will be of more use to rich countries that have the resources to chase after evaded tax, rather than the developing countries who are most likely to be the biggest victims, he said.

Meanwhile, mining companies and developing countries often rich in minerals will be pressed to sign up to new transparency rules where the companies will say what they pay governments, while the latter will say what they receive. "If people can see how much their government receives from selling the country's extractive wealth they can question how that money is being spent," said British international development secretary, Justine Greening. Too often, transparency is absent, said Mr Cameron.

In Equatorial Guinea, oil revenues are a state secret while the president's son owns "a Gulfstream jet, eight Ferraris, seven Rolls-Royce, a $38 million estate in Malibu, and white gloves previously owned by Michael Jackson".

Mark Hennessy

Mark Hennessy

Mark Hennessy is Ireland and Britain Editor with The Irish Times