/ 24 February 2014

Poor still losing out in African boom

Despite a decade of high growth across the continent
Despite a decade of high growth across the continent

Soaring economic growth in many African countries is coming at the expense of the poor, according to a new report that urges governments to overhaul their tax systems to halt rising inequality.

Despite a decade of high growth across the continent, the wealth created is not being equally shared and so progress in human development in Africa has been disappointingly limited, according to the report by Christian Aid and Tax Justice Network-Africa.

But the growing gap between rich and poor is not simply the result of the rich getting richer, the authors say.

They also point to money escaping offshore in illicit flows as well as tax systems that are failing to redistribute wealth and in some cases even disadvantaging the poor.

"Inequality has been exacerbated by the growth model in many countries which has seen a concentration of income," said Alvin Mosioma at Tax Justice Network-Africa.

"It also reflects the inability of governments to tax the proceeds of growth, either because so much is given away in corporate tax breaks, or has escaped offshore into tax havens.

Until tax dodging is tackled effectively, nationally and internationally, and illicit finance flows from the continent halted, economic inequality will continue to rise."

The report, "Africa Rising? Inequalities and the essential role of fair taxation", investigates income inequality in eight sub-Saharan countries: Ghana, Kenya, Malawi, Nigeria, Sierra Leone, South Africa, Zambia and Zimbabwe.

Among the key problems it highlights is a reliance in many parts of Africa on mining natural resources, a sector "known to be rife with tax-dodging techniques".

The report also says tax authorities with limited expertise and resources are ill-equipped to tackle tax abuse and that Africa's high net worth individuals often evade tax.

It argues that income tax thresholds are too low and do not protect the poor.

Tax Justice Network-Africa is calling on an African high level panel on illicit financial flows from Africa, chaired by former South African president Thabo Mbeki, to use its upcoming report to recommend practical solutions.

Christian Aid called for more focus on fair taxation systems in Africa.

Sophie Powell, the charity's Africa policy and advocacy manager, said: "African governments at present are finalising their position on the framework that should succeed the Millennium Development Goals at the end of 2015. 

"They and other governments globally must prioritise the building of fair taxation systems to address inequality at its core." –  guardian.co.uk © Guardian News and Media 2014