Economy
Africa Needs Stronger Tax, Trade Laws—Experts
By Modupe Gbadeyanka
Experts have advised African leaders to come up with stronger tax laws and trade treaties in order to block huge amount of money lost to weak tax laws and unfair trade treaties.
At the Pan-African Conference on Illicit Financial Flows (IFFs) from Africa organised by Tax Justice Network Africa (TJNA) in Nairobi, Kenya, speakers agreed that a lot of funds have been lost to weak tax laws and trade treaties and that African countries must begin a holistic review of all trade and tax laws to address this.
According to the News Agency of Nigeria (NAN), over $50 billion has been lost to multinationals who take advantage of weak tax laws and unfair trade treaties.
In an interview with NAN on the sidelines of the conference, Mr Jason Braganza, Deputy Executive Director, TJNA said Africa was yet to ascertain the real amount being lost to IFFs as the quoted $50 billion was just a fraction of the entire sum.
He said that the conference was part of efforts to broaden Africa’s approach at defining and calculating illicit financial flows with a view to stopping them.
Mr Braganza said that there were a number of ways through which multinational companies cheated African countries, taking advantage of weak laws and policies without breaking them.
“When we talk about broadening the definition, what we mean is the need to come up with an approach that includes aggressive tax planning by high net worth individuals as well as big multinational corporations who engage in harmful tax practices in order to maximise their profits.
“They take advantage of weak tax policies and tax laws in many African countries, which make the countries vulnerable to these multinationals who are able to manipulate the laws without breaking them.
“Therefore taking away the profits from where they are generated and moved to other tax jurisdictions like offshore tax havens where there is high level of secrecy and tax laws are in favour of multinationals.
“The way businesses conduct their activities, the international financial architecture is very fractured, fractured in the sense that the complexity of operating tools and models for business transactions means that one single business can have over 100 subsidiaries or special purpose vehicles.
“This sort of arrangement provides them with the platform to hide or not fully reveal the kind of activities they have been undertaking, the kind of incomes they are making.
“They are able to hide what they are supposed to be paying to government, this is a big problem,” he said.
Mr Braganza said the illicit ways high net worth individuals and corporations were exploiting weak existing laws, policies and legislation was having a detrimental impact on government ability to collect revenue.
He said also that it significantly impacted on government’s ability to implement development projects.
He therefore advised African countries to review their laws to check such excesses by multinationals.
Mr Braganza said also that there were weak laws that allowed multinationals to trade within themselves and either charge lower or higher rates to evade tax liability.
He said that the law review should also include transparency in transactions and audit reports adding that African countries must collaborate to check the activities of these companies.
He also called for review of all trade treaties especially those entered into for decades and were not beneficial to Africa but to the western nations.
“There are a number of laws, policies and strategies that need to be strengthened in order to avoid and close these loops.
“In Uganda for instance, the government has taken the decision to suspend the negotiation of new treaties pending a review of all existing treaties to understand what exactly is contained in these treaties.
“You can go even in the case of Kenya, there are treaties that dates back to the 70s that have never been analysed for people to understand what the country has signed itself up for.
“The first step is to really appreciate that some of the treaties that were signed several decades ago are harmful and detrimental to the economies.
“The second point is for members of parliament to get involved in this conversation and be part of the negotiation process that governments enter into and not leave it only to technocrats or bureaucrats.
“This is because the lawmakers are the ones who pass laws that have significant impact on how a government or an economy can run,” he said.
Mr Braganza also called on African government to show more political commitments to implement recommendations that had already been made on these issues.
“The high level panel is a good example, they have made very good set of recommendations that can actually help African governments to try and stop IFFs, to better improve the way they negotiate treaties.
“The African Tax Administrative Forum (ATAF) is another platform where governments should sign on, because ATAF is responsible and involved in developing legislation and policy guidelines for Africa perspective.
“So we advise that African countries review all trade treaties but most importantly, implement the recommendations that they have signed up to.
“There is a charter that all heads of state of AU have signed up to, committing themselves to working with their members of parliament to try and curb IFFs,” he said.
Mr Braganza said that TJNA had also been engaging parliaments from different African countries to build their skills to understand the technicality of some of these issues so as to inform their law making process.
He added that TJNA had a specific programme, African Parliamentary Network on Illicit Financial Flows and Tax which was dedicated to working with lawmakers across the continent.
By Adedapo Adesanya
The Naira opened the new trading week on a negative note on Monday at the Nigerian Autonomous Foreign Exchange Market (NAFEX) and the black market.
At the parallel market, the Nigerian currency weakened against the US Dollar by N5 to sell for N1,380/$1 compared with the preceding session’s rate of N1,375/$1, and at the GTBank FX desk, it shed N1 to trade at N1,373/$1 versus N1,372/$1.
At the official market, it lost 63 Kobo or 0.05 per cent against the Dollar during the session to close at N1,362.84/$1, in contrast to last Friday’s value of N1,362.21/$1.
However, the Nigerian Naira gained N2.30 against the Pound Sterling at the spot market yesterday, quoting at N1,821.29/£1 compared with the previous rate of N1,823.59/£1, and improved against the Euro by 23 Kobo to settle at N1,574.35/€1 versus N1,574.58/€1.
Data from the Central Bank of Nigeria (CBN) showed that interbank forex turnover increased to $92.248 million across 90 deals, from $73.565 million last Friday.
On the policy front, participants believed that the application of the fourth edition of the Foreign Exchange Manual of the central bank, which introduces updated guidelines for foreign exchange transactions and tightening compliance requirements for authorised dealers and market participants, will enhance market flexibility and ease previous restrictions.
Meanwhile, the cryptocurrency market snapped from recent declines, jolted by Strategy’s purchase of 1,550 Bitcoin for approximately $101 million, increasing its total holdings to 845,256 BTC. The company raised $181 million through common stock sales, using the proceeds to fund the bitcoin purchase and increase its cash reserves to $1 billion, pushing the price of the coin higher by 3.2 per cent to $63,731.69.
Cardano (ADA) appreciated by 8.4 per cent to $0.1738, Ethereum (ETH) rose by 5.2 per cent to $1,711.54, Solana (SOL) expanded by 5.1 per cent to $67.82, and Ripple (XRP) improved by 4.9 per cent to $1.18.
Further, Dogecoin (DOGE) jumped by 4.3 per cent to $0.0873, Binance Coin (BNB) soared by 2.7 per cent to $609.50, and TRON (TRX) increased by 0.7 per cent to $0.3274, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $0.9997 and $0.9998, respectively.
By Aduragbemi Omiyale
The federal government has been advised to consider exploring other funding sources to finance its budget deficits.
Speaking with Punch recently, the chief executive of CSA Advisory, Mr Aliyu Ilias, said the current appetite for borrowing by the government cannot be sustained because it elevates debt-servicing costs.
The economist suggested the sale of some public assets and the involvement of the private sector in infrastructure financing for economic growth.
According to him, running to the debt markets to raise funds for the government is not the best route to take, as the reliance on borrowing always leads to higher debt-servicing obligations.
“The more you borrow, the more you are also incurring more debt services,” he said, tasking the government to also capitalise on increased oil revenues stemming from ongoing geopolitical tensions in the Middle East.
“The government can actually sell off some of their assets to raise more money. The government can also, if you look at the revenue we are getting from oil, it’s getting more, especially with this war. It’s another opportunity for us to actually not borrow again,” Mr Ilias submitted.
He also pointed to ongoing tax reforms as another avenue to improve government finances and narrow the fiscal gap.
“The government can also look at tax reform. The fact is that the government does not have money. The only chance for getting more money is to address the financial deficit,” he added.
By Adedapo Adesanya
Crude oil was up by $1 on Monday as Iran and Israel said they had halted attacks on each other following an appeal from US President Donald Trump.
Brent crude futures gained $1.16 or 1.3 per cent to trade at $94.25 a barrel, while the US West Texas Intermediate (WTI) crude futures were up 76 cents or 0.8 per cent to $91.30 per barrel.
Iran’s military said Monday it halted attacks on Israel after the two countries exchanged their most intense strikes in months, further straining an already shaky ceasefire as well as the US-Israeli relationship. Iran, however, said it would resume strikes if Israel continued to hit Hezbollah in Lebanon.
Israel also halted attacks on Iran, Israeli Prime Minister Benjamin Netanyahu said, stopping short of acknowledging a ceasefire that US President Donald Trump said the countries were aiming for.
President Trump said earlier that the US blockade, which was introduced in April, would remain in place “in full force” until a final peace agreement between the two warring nations is reached.
Prices gained more than 5 per cent earlier on Monday after renewed Israeli strikes on Iran and attacks on Lebanon had reduced hopes of an imminent end to the wider war.
Market analysts noted that because of the strikes, investors were concerned that flows through the Strait of Hormuz might remain restricted for longer. Roughly a fifth of the world’s daily supply of oil and liquefied natural gas passed through the waterway before US-Israeli airstrikes at the end of February unleashed the latest escalation of the Middle Eastern conflict.
Yemen’s Iran-aligned Houthis said on Monday they would ban ships linked to Israel from the Red Sea after Israel renewed its military attacks on Iran, adding to concerns about global shipping and energy flows.
In the face of the supply crisis, a sub-group under the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) on Sunday agreed on its fourth oil output target increase in four months. The seven members decided to increase targets by 188,000 barrels per day from July, the same as the June hike, which was adjusted down from monthly increases of 206,000 barrels per day in May and April to take into account the exit of the United Arab Emirates (UAE).
On paper, the sub-group has increased its output quotas from April to June by almost 600,000 barrels per day, but in reality, the group’s production has collapsed due to export cuts by Gulf members, averaging 33.19 million barrels per day in April compared with 42.77 million barrels per day in February.
Saudi Arabia has cut its official selling prices for crude oil to Asia in July for a second month.
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