Forget 'old-timers' Mauritius and Seychelles – the other African tax havens you didn’t know existed

This list does have the usual suspects—but also others you wouldn’t think of immediately. More than 30% of Africa’s wealth could be held offshore

IN 1996, two years after he seized power, Gambia president Yahya Jammeh rolled out his growth blueprint for the nation’s march to a dynamic, middle-income country.

Vision 2020, still largely intact 20 years later, aims to “transform The Gambia  into a financial centre…thriving on free market policies and a vibrant private sector” among other goals.

In 2013, the west African country announced the going live of its company registry, touting it as the “most revolutionary” yet, and which would help it compete with established registries in the US, Singapore and Hong Kong.

Its list of services is extensive and impressive, offering to set up anything from trusts and foundations to “ready made” companies all in the space of a minute, the resulting offshore (the use of the term is contested) structures identifiable only by a number or by special characters. No audits are required, it adds, noting that The Gambia is a white-listed jurisdiction

A Mail & Guardian Africa inquiry as to how many companies it has so far attracted was not immediately answered by the registry’s UK-based managers, but in its launch year, a count of “hundreds” was offered.

However, even an increase of this to the lower thousands would not be enough to register The Gambia anywhere on the world’s offshore entities scale, as the leak of 11.5 million documents belonging to Panama-based law firm Mossack Fonseca—its entire global database—published last week showed.

The firm, the world’s fourth biggest in its line of work, acts for nearly 300,000 companies, well in the league of other heavy-hitters such as Hong Kong-headquartered OIL and Isle of Man-based OCRA Worldwide.

The Gambia’s ambition is perhaps one borne of necessity—its economy is dependent on tourism and agriculture, both fickle economic activities, but retains a favourable location, despite nearly being engulfed by Senegal.

Africa’s offshore leaders

Panama, home to just four million people, has also played to its geographic strength (it oversees the valuable Panama Canal), in addition to a similar “see-little” history that until the fall of dictator Manuel Noriega in 1989 had allowed offshore money to flourish.

But other African countries have also been eyeing the establishment of offshore structures, as they seek to diversify into what is one of the most lucrative lines of business globally.

The Indian Ocean islands of Seychelles and Mauritius are already established names, one half of only four jurisdictions that have in the last three decades broken into the cutthroat business, the other being Samoa and Belize. The two islands are home to many big global firms that provide quick few-questions-asked incorporation services, including Mossack Fonseca.

In its latest Financial Secrecy Index campaign group Tax Justice Network names six other African countries as jurisdictions that allow the secrecy and relaxed legal conditions that allow mainly rich persons seeking to minimise their tax bill, both legally or not, to thrive.

We looked at why they feature on the list:

Liberia

Panama’s growth into a tax haven came by starting to register foreign ships to help US oil giant Standard Oil beat its home taxes. Liberia, which has a long history with the US, has since 1940 served as a “flag state”, providing “corporate and maritime ‘tax haven’ services to vessel owners and operators”, often referred to as “flags of convenience” and which bring it at least $20 million annually.

The Liberian registry is administered out of the US state of Virginia. In 2008 the Liberia-flagged fleet consisted of more than 2,600 ships, and the country also offers “shelf corporations”.

Ghana

The West African country begun flirting with the idea of an International Financial Services Centre (IFSC), as most offshore structures are called, in the early noughties.

In 2005 president John Kufuor signed a deal with Barclays Bank of Ghana to hammer out the details, with the supporting laws drafted two years later.

But threatened with being blacklisted by powerful western nations under the Organisation for Economic Development (OECD) grouping, the bank’s licence was pulled, but the legal architecture remains in place, meaning it can be reactivated anytime, Tax Justice says.

South Africa

With Africa’s most sophisticated financial industry the country however fails on a number of indicators used to construct the index. It for example does not maintain details of firm ownership or accounts in official records or make them publicly available, while it partly allows harmful legal vehicles, TJN says. The country has said that any of its citizens mentioned in the Panama papers will be investigated for compliance.

Botswana

Seeking to move away from dependence on exports of diamonds, the country has since 2003 operated an IFSC, which exempts firms from paying capital gains on exit, among other levies, and also offers a low corporate income tax rate.

It also has several agreements that prevent the paying of taxes in two countries with other nations including in Africa, many of them secrecy jurisdictions, making it attractive to those with higher rates.

France also lists it as a nation of concern following a much-debated “blacklist” published last year.*

Gambia, Tanzania

The Gambia is part of two countries on a “watchlist” in addition to Tanzania—unranked as their treaties have not been reviewed by the OECD-backed Global Forum. Both either do not have data on key indicators, or throw up red flags on as many as eight of 15 featured categories. The latter for example does not maintain ownership details in official records or make them publicly available, in addition to struggling to efficiently analyse tax-related information. The two countries were not its 2013 list.

 Kenya

The EU countries of Latvia and Lithuania have also listed east Africa’s largest economy as of concern related to its tax governance, according to the list of 30 “non-cooperative tax jurisdictions” released by the bloc, but lets on few other details.

Benin, Rwanda, Senegal

The Web Foundation will on April 21 fully publish its Open Data Barometer which shows several other African countries as having created the conditions for entities looking to reduce their tax bill and stay under the radar, but for most of these it appears more a case of a lack of capacity rather than deliberate steps.

“Governments fail to make company data open for a number of reasons - from reluctance to lose the revenue from user fees to lack of understanding of how to share the data in truly reusable formats,” it said Monday.

Read: Rwanda says company named in ‘Panama Papers’ was used legally to secure ‘strategic services’

But with economists estimating trillions in untaxed entities the reason might be moot when it is compared to just how much hundreds of millions need everyone to pay their fair share of taxes, in addition to widening the existing inequality gap.

US economist Gabriel Zucman in his book The Hidden Wealth of Nations estimates that globally, more than $7.6 trillion is held in offshore tax havens—or 8% of the world’s wealth. About 80% is untaxed, leading to tax losses of about $200 billion annually—and that is only for the “really illegal” money.

Zucman estimates that more than 30% of Africa’s wealth is held offshore.  African leaders are taking note. Last year, the High Level Panel on Illicit Financial Flows (IFF) found that Africa loses more than $50 billion annually through such flows, or a fifth of the money the continent requires to simultaneously halve poverty and inequality.

The Panama leaks have further stoked the global debate, adding a tailwind to demands for publicly available ownership registers. African Union executive head Nkosazana Dlamini-Zuma last week called for repatriation of illicit funds, as the intricacy of the web woven by offshore entities was revealed to have roped in the presidencies of many nations, even as the continent struggles to fund its growth ambitions.

Read: Who is who on the list? Notable Africans in the leaked ‘Panama Papers’

“In a time such as this when the issue of curbing Illicit Financial Flows, brought on by practices such as tax evasion and the use of Tax Havens, is one of Africa’s priorities, the release of these Panama Papers is most welcome,” former South African president Thabo Mbeki, who led the ECA-AU-backed Panel, said in reaction.

With data showing that the South American country does not even make the top 10 list of global havens—a list headed by the UK, US, Hong Kong and Seychelles, it was left to the Executive Secretary of the UN’s Economic Commission for Africa to sum much of the feelings up.

“Until now, the ones from afar passing judgment [and] singling out Africa could get away with it. No more.”


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