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SOUTH Africa should consider itself lucky to be home to a plethora of civil society and social justice movements, including religious organisations, that are increasingly vigilant and active in ensuring that the hard-won freedoms for which many gave up their lives are not stolen away by bad, unethical leaders in government.
These groups are also driven by the need to see less public funds being diverted into bank accounts of criminals with public sector links and into development programmes that should improve the lives of many South Africans, especially the poor.
The country’s economy, many of them point out with reason, cannot be competitive when the funds that should stimulate it are not invested in the right areas.
Following earlier court victories by Earthlife Africa and the Southern African Faith Communities’ Environment Institute, and more recently by the Organisation Undoing Tax Abuse, all challenging government’s alleged lack of transparency in its drive to invest in an additional nuclear new build programme, other organisations have seen fit to enter the fray on other matters they too deem unjust.
More recently, the Justice and Peace Commission for Southern African Catholic Bishops Conference (SACBC) wrote a letter to 21 mining companies operating in South Africa, asking each one of them to explain why it uses tax havens, also known as secrecy jurisdictions, to house the bulk of its finances.
This follows a huge outcry spanning the entire African continent and other parts of the world on allegations that massive cash outflows by big business end up robbing poor African countries of the means to develop themselves, and reduce poverty and unemployment.
In many countries, moribund local economies are blamed for the massive exodus of struggling citizens who end up joining hundreds of thousands of economic refugees leaving the lands of their birth to seek better lives elsewhere, often embarking on dangerous voyages managed by criminal networks of human traffickers who do not care about the well-being of their fragile human cargo.
Many women and children have perished in such undertakings, whose tragic ends are also well recorded.
While the SACBC has been careful not to accuse the mining companies of engaging in tax avoidance, it fears there is a heightened risk of this when companies use tax havens to house their finances, as such practices render it hard for tax authorities to scrutinise corporate tax affairs.
In a released statement, the SACBC provided two examples of the kind of practices it is not happy with. The first concerns Anglo American, whose group structure is said to include 43 subsidiaries in tax havens such as Bermuda, the British Virgin Islands, the Cayman Islands, the Isle of Man, Luxembourg, Mauritius and the Netherlands.
The second is Bermuda-incorporated Petra Diamonds, which has subsidiaries in the British Virgin Islands, Bermuda, Jersey and the Netherlands.
Some of the key questions asked require each of the implicated companies to provide numbers of people employed in each of their subsidiaries, as some seem to be mere shell/mailbox companies, outline the tax advantages received by using tax havens, and say whether or not the companies are prepared to report their key financial figures on a country by country basis, covering all jurisdictions in which they operate.
Globally, tax avoidance by multinational companies is said to amount to hundreds of billions of dollars per annum. A recent estimate quoted by the SACBC placed the figure at $500bn.
On the other hand, a recent Skynews report looking at this phenomenon seemed to caution the growing antipathy against the use of tax havens, as they’re also used for legitimate reasons by many retirement funds who see tax havens as easy springboards into global markets around the world, enabling them to contain management costs while maximising returns for their investors.
The other question that comes up, especially in countries like South Africa where corruption by people in power is increasingly endemic, is whether the funds taken out of the country into tax havens would really be used to improve the lives of the poor or whether they would end up in the bank accounts of corrupt government officials and their political masters, if they were kept in the country.
- Solly Moeng is brand reputation management adviser and CEO of strategic corporate communications consultancy DonValley Reputation Managers. Views expressed are his own.
