Sir Bob Geldof is keen for Western governments to give aid to Africa. The world discovered this week, however, that heâÂÂs less keen on paying taxes to those African governments himself.
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Sir Bob Geldof is keen for Western governments to give aid to Africa. The world discovered this week, however, that[heâs less keen]( on paying taxes to those African governments himself.
The musician and anti-poverty activistâs African investment fund was among hundreds of companies named in the[Mauritius Leaks]( a trove of 200,000 files leaked from a law firm in the Indian Ocean tax haven to the [International Consortium of Investigative Journalists]( and shared with Quartz and others.
The documents have one overarching theme: Big Western multinationals reaping as much profit as possible from India and Africa, then depriving their governments of tax revenue through extraordinary accounting contortions.
The sums involved are colossal. In 2013, Americaâs biggest venture capital firm, Sequoia Capital, [boasted]( it had routed $1.2 billion into Indian startups via the island, which offers an effective 3% tax rate for foreign multinationals. Itâs unclear how much tax Sequoia avoided, but the files show it taking â[pretty aggressive]( head-spinningly complexâmeasures stretching all the way to Singapore.
Such machinations deprive poorer countries of [up to $100 billion]( per yearâor around 6% of[sub-Saharan Africaâs GDP](. In Uganda, where the average person lives on $2 per day and fragile tax systems rely heavily on corporate tax, losing that revenue can be crippling. âOne little wad of cash can be the difference between a poor country building big infrastructure or not,â a Ugandan tax official told ICIJ. For many, this equates to Mauritius [selling out]( the rest of Africa, with other African[governments]( and [businesspeople]( often complicit.
The scandal highlights efforts led by India to change global tax rules and [force multinationals]( to pay tax where economic activity is actually happening. The problem has long seemed intractable, as the US nixed any attempts at substantive change. But with New Delhi and others threatening to cause headaches for giant companies by passing their own unilateral tax laws, the powers that be are genuinely considering systems that would dent the profit-shifting status quo. Whether they can find a deal that 100-plus countries can agree on, however, is no sure thing. âMax de Haldevang
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