Every year Africa loses billions and billions of dollars to offshore banking in tax havens, an almost eternal reality. Governments, whose politicians are mostly complicit in such illegal transactions, lose billions in tax revenues, which among other things have to flow into the provision of basic social services such as schools, hospitals, public transport, water, housing, roads. All of this is done through the lens of the “offshore”, as money from Africa (and other parts of the world) is received from wealthy individuals and companies via offshore accounts in tax havens such as Mauritius, Panama, Cayman Islands, British Virgin Islands, Switzerland, the Netherlands, under other.
Offshore banking, which is largely responsible for the artificial poverty in Africa, is a phenomenon in which lawyers, accountants, businessmen and politicians conspire to steal money through legal and financial veils – the desired "banking secrecy". The secret nature of illicit financial flows makes it difficult for authorities to track the flow of money – global private capital – and because of this, many of these illicit flows take place right in front of the authorities. This is of course made worse by the endemic corruption rates that are rampant around the world.
The reason these wealthy people take advantage of tax havens with offshore accounts is because they cannot conduct such financial transactions in their countries (“onshore”) due to strict banking / financial regulations. Tax havens or offshore financial centers are commonly referred to as "secrets". It is safe to highlight a tax haven as a territory with “low or no corporate taxes”, which makes it easier for outsiders to locate their businesses. The payment of taxes on personal income is also low / non-existent in some tax havens. Tax havens are noticeably characterized by a high level of financial / banking secrecy.
Most tax havens typically offer low tax rates for foreign investors as well as a high level of secrecy, although not all tax havens do. One particular tax haven may offer low taxes but no secrecy, while another offers both low taxes and high secrecy. Some of the most notable tax havens in the world include Panama, Seychelles, Mauritius, Cayman Islands, British Virgin Islands, Bermuda, Vanuatu, Dubai, Switzerland, the Netherlands, Luxembourg and the US state of Delaware. These territories are places where illegal wealth circulates ad infimum, setting the wheels of global neoliberal capitalism in motion.
Offshore banking and its associated offshore accounts – the mechanisms by which ill-gotten assets are hidden – are used by "letterbox companies" or "letterbox companies" to hide undeclared income. The banks in these offshore financial centers for such activities are called offshore banks, and the accounts are called offshore accounts. Opening an account with these banks is as easy as inhaling and exhaling – one phone call can open an account in a tax haven, at affordable prices between $ 350 and $ 3,000. Account holders include debtors who include corporations, trusts and foundations or agents.
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A letterbox company (a front company that only exists on paper) is a legal entity born in a tax haven – it has the status of a corporation that gives it a legal personality that separates it from shareholders / investors (which is known is in law as a corporate veil). A mailbox company has no employees or an office (a single office building in a tax haven can house thousands of mailbox companies because they are only written on paper). The temptation with letterbox companies is that the actual owners of the letterbox companies – the people behind the company veil – are not mentioned in the founding documents, as they usually use the terms "shell company" and "offshore company" synonymously. Identities are obfuscated so that it is easy to move money and other assets through such letterbox companies.
Shell companies are the lifeblood of illicit capital flows around the world – their legal personality means they can own "money, luxury real estate, intellectual property, businesses and other assets." They are legal on paper, but can be both legal and illegal in existence and operation. Wealthy people – business people, celebrities, drug lords, bank robbers, mafia kingpins, arms dealers, and politicians – use mailbox companies to hide money and other assets, as mailbox companies don't reveal the real owners behind the company. Coupled with the low to nonexistent taxation as well as the high level of banking secrecy that these banks are prohibited from disclosing anything, it is tempting for the mega-rich of this planet to use mailbox companies to hide ill-gotten wealth and to facilitate the global illegal money transactions. All of this creates more and more poverty.
Investing in tax havens through mailbox companies is incredibly lucrative because practically no taxes are paid. Such companies enjoy tax savings that are out of this world. Essentially, the public assets are sold in private bank accounts. Shell companies have no economic activity and are used to benefiting from tax savings that they would not enjoy in their “real home country”. Large global trading giants can also set up mailbox companies to protect their obscene profits from high taxes in their home countries. These capitalist giants can set up subsidiaries (letterbox companies) in tax havens to avoid taxes on their investments and profits. Companies like Apple, Johnson and Johnson, as well as Skype, are notorious for avoiding taxes through offshore financial centers.
Despite numerous attempts from the global north to contain the threat posed by offshore banking, such a phenomenon will continue to thrive, as most tax havens are countries without great industrialization and therefore do not require “enforcement of a large tax base”. ”They rely on“ minimal formalities to attract foreign investment ”but this has been cited as a pretext and myth (FDI in tax haven areas). This, of course, goes hand in hand with the false neoliberal mantra that such investments automatically create a “trickle-down effect” on the masses in terms of employment and real income. The era of globalization, which required the unbridled flow of private capital around the world to maximize profits, has perpetuated income inequalities as the rich steal money from the public and hide it in offshore accounts. And for the most part, they can get away with it. There is little accountability for this.
When groundbreaking research is carried out by journalists to uncover such illegal flows through offshore accounts (investigations like Panama Papers, Mauritius Leaks, Paradise Papers, etc.), Africans need to think carefully about the importance of offshore banking. There should be many public awareness campaigns in African countries educating people about what offshore accounts are and how they are used to siphon money from the continent through illegal financial flows, which harms most of the poor. Offshore accounts were central to many African countries during the liberation struggle, but contexts have now changed. Where solidarity played a role in offshore banking, it has been replaced by greed, individualism, materialism and narcissism of this neoliberal era.
In Africa, leaders have close ties to global capital (as they are linked to the rich and powerful of the world) and as such we should review their responsibilities to ensure that Africa is not "bleeding" in money. Many African elites avoid paying taxes as they transfer money to private offshore accounts through mailbox firms of law / accounting firms in the countries of the Global North. The global financial system continues to work against Africa, and people need to be aware of this fact in order to create counter-hegemony in dealing with this vice.