Private companies getting away with tax evasion – Thabo Mbeki

Private companies often get away with tax evasion because they can afford better lawyers than government, former president Thabo Mbeki has said.

“The problem is that private companies or large companies are able to mobilise much better skills with regards to lawyers, accountants, banking people and all that, so they could bring all that expertise to bear in the court cases, Mbeki told City Press in an interview in Addis Ababa yesterday, following the public release of the High Level Panel on Illicit Flows from Africa, which he chaired.

“They have much better capacity to access those experts than even governments have.”

Mbeki said money and people with skills were needed in Africa to combat this problem.

More than $50 billion (R582 billion) left the continent annually, according to the International Monetary Fund – money that could be used for development.

Mbeki said the problem with skills for court cases was raised by the IMF, the World Bank and the Organisation for Economic Cooperation and Development in the course of the panel’s work.

“Naturally it will be a matter of what resources are there, whether intellectual or financial or whatever to enable these African countries to be able to build up the capacity to deal with this.

“We have to go back to these development partners of ours if we can’t generate money ourselves on this continent, to really build up this capacity because we need it. If you don’t have it on the continent you won’t be able to deal with this problem.”

Mbeki said African countries should also have laws to deal with the problem of money leaving the countries, and there should be proper institutions like anti-corruption agencies.

He said sometimes the money leaving the country was more than the money that remained, and it was wrong because African countries needed the money to fund development goals, clinics and schools.

Mbeki said the figure of money leaving the country was much more than $50 billion, because the figure did not take into account transfer pricing.

But he said even in developed countries multinational companies sometimes evaded tax by taking their money to tax havens.

“There is at least a global consensus that we have act against these things,” he said.

The report, which was commissioned by the UN Economic Commission on Africa and the African Union, was tabled at the AU assembly on Saturday.

Countries will have to report back to the AU on what they have done to improve the situation.