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Monday, 6 April 2009

Africa loses US$90 Billion in tax evasions

Written by CEDRIC LUMITI    

NAIROBI - KENYA, African countries are losing US$90 billion of revenue through tax evasion by international mining companies.

A new report by ActionAid titled "Breaking the Curse" observes that African countries rely heavily on aid from foreign donors despite being rich in minerals and other natural resources.

"It is surprising how potentially wealthy nations depend, almost at alcoholic proportions, on aid from countries in the West and most recently Asia," Brian Kagaro, ActionAid Pan African Policy Manager said.

Kagaro pointed out that Africa's challenge was lack of technical capacity to extract minerals, opening the door for international organisations.

He alleged the international mining companies employ underhand tactics to pay as little tax as possible.

"Forcing governments to grant concessions by threatening to go elsewhere and falsifying accounts and depressing profit margins to evade tax are some of the measures employed by unscrupulous organisations to defraud governments," Kagaro alleged.

Another method, according to the report, is using secrecy when signing contracts to pursue aggressive tax avoidance strategies.

The report puts blame on governments in some few cases. In the case of the Democratic Republic of Congo, corrupt politicians award illegal tax exemptions to mining companies in return for private gain.

Allowing ministers to negotiate tax deals with individual mining companies has often led to lower royalties, taxes and levies than those stipulated by law, according to the study.

The report also highlights that mineral exploitation often leads to environmental degradation and in most cases to evolution of social crisis.

The Democratic Republic of Congo accounts for a third of the world's total natural resource deposits but has been plagued by civil war for many years.

Sierra Leone is another example where diamond exploitation has seen the emergence of warlords plundering the resources.

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