Pandora Papers Reporting From The Middle East And North Africa

Editor's Note

2021 was a banner year for attention to national and international tax reforms to reduce tax evasion and avoidance, with legislation in the United States spearheaded by the FACT Coalition and a global reform deal proposed by the Organization of Economic Cooperation and Development (OECD). But the Pandora Papers also demonstrated the pervasive scale of illicit financial flows that siphon off wealth into an "offshore' world of secrecy.

Despite the advances, it was also clear that the measures taken were at best a first step towards addressing the accumulation of untaxed private wealth at the expense of public resources to meet unprecedented global crises. In the case of the OECD-led deal, leading experts warned that it would increase rather than decrease global inequality. The "two pillar' solution overwhelmingly favors rich countries over poor countries. And according to the Independent Commission for the Reform of International Corporate Taxation (ICRICT), the OECD "minimum global corporate tax' of 15% is so low that "a reform that was intended to make sure multinationals pay their fair share will end up doing just the opposite.

The scope of the Pandora Papers is worldwide, but is still only the tip of a larger iceberg of hidden wealth. But they clearly show a pattern of a leading role for the United States as a home for hidden wealth and of the vulnerability of developing countries, including those in Africa.

Among the revelations:

"An oligarch, a dictator's aide and a beverage tycoon turned to America's least populated state to shelter assets, the Pandora Papers show.' https://www.icij.org/investigations/pandora-papers/the-cowboy-cocktail-how-wyoming-became-one-of-the-worlds-top-tax-havens/ December 20, 2021

"Pandora Papers show a Wall Street plan to cash in on the foreclosure crisis by pouring money into rental homes, part of an unprecedented flow of global finance into US suburbs that has left stressed tenants in its wake.' https://www.icij.org/investigations/pandora-papers/how-a-billion-dollar-housing-bet-upended-a-tennessee-neighborhood/ December 15, 2021

"Pandora Papers: The Kenyatta files' https://www.financeuncovered.org/investigations/pandora-papers-kenyatta-files-source-documents/ October 8, 2021

"Pandora Papers: The secret London properties of Nigeria's elite' https://www.financeuncovered.org/investigations/pandora-papers-nigeria-offshore-london-properties/ October 6, 2021

This AfricaFocus Bulletin contains (1) a brief excerpt and link to the State of Tax Justice 2021, released in November, (2) a short commentary on the Pandora Papers by your editor, entitled "The United States of Tax Havens, (3) a open letter by the ICRICT on the OECD deal, and (4) a commentary in Responsible Statecraft, co-authored by your editor with Anita Plummer and Daniel Volman, on how pressure from the Pentagon and White House for a new Cold War with China, has weakened U.S. anti-corruption pressures against the regime of Teodoro Obiang Nguema, who has ruled Equatorial Guinea since 1979.

For previous AfricaFocus Bulletins on illicit financial flows and tax justice, visit http://www.africafocus.org/intro-iff.php

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State of Tax Justice 2021

November 16, 2021

https://taxjustice.net/reports/the-state-of-tax-justice-2021/

Countries are losing a total of $483 billion in tax a year to global tax abuse committed by multinational corporations and wealthy individuals - enough to fully vaccinate the global population against Covid-19 more than three times over. The 2021 edition of the State of Tax Justice documents how a small club of rich countries with de facto control over global tax rules is responsible for the majority of tax losses suffered by the rest of the world, with lower income countries hit the hardest by global tax abuse. The findings are further galvanising calls to move rule-making on international tax from the OECD to the UN.

Key findings

* Countries are losing $483 billion in tax a year to global tax abuse - that's enough to fully vaccinate the global population against Covid-19 more than three times over.

* Of the $483 billion lost a year, $312 billion of this tax loss is due to cross-border corporate tax abuse by multinational corporations and $171 billion is due to offshore tax abuse by wealthy individuals.

* Global tax abuse continues to hit lower income countries more severely than higher income countries. While higher income countries lose more tax in absolute number, their tax losses represent a smaller share of their revenues (9.7 per cent). Lower income countries in comparison collectively lose the equivalent of nearly half (48 per cent) of their public health budgets. The taxes that lower income countries lose would be enough to vaccinate 60 per cent of their populations, bridging the gap in vaccination rates between lower income and higher income countries

For full report see https://taxjustice.net/reports/the-state-of-tax-justice-2021/

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The United States of Tax Havens

The Pandora Papers reveal how billionaires, oligarchs, and despots the world over exploit America's patchwork of tax havens.

By William Minter | November 3, 2021

Originally published in Africa Is a Country.

There are many ways in which the United States is not one country.

I'm not referring to the electoral reality of red states versus blue states, or to the split between a radicalized Republican Party and those of us who hope that an inclusive democratic vision of the nation might eventually prevail. Nor am I speaking here of racial or ethnic divisions, however defined.

Rather, what I mean is that the United States, where countless corrupt billionaires and dictators have stashed their loot, is not a single tax haven, but many separate tax havens.

Each state and territory has its own laws and regulations about financial transactions used for tax evasion or money laundering. Enforcement often also depends on municipal and other local officials, leaving ample opportunities for cronyism or simply failures to investigate.

The Pandora Papers, released on October 3, show that the United States is second only to the Cayman Islands in facilitating the secrecy of illicit financial flows. But it's not a simple picture. To analyze the role of the United States in global money flows, one must dig into a labyrinth of financial jurisdictions and players. Wall Street and the federal government in Washington are important actors, but they are not the central players who manipulate the entangled threads.

Based on an investigation by a network of 600 journalists around the world, the Pandora Papers revealed some 12 million financial documents-still only a tip of the iceberg. Among the national leaders exposed was Kenyan President Uhuru Kenyatta, who met with President Joe Biden at the White House on October 14.

Ironically, President Biden's home state of Delaware has long been renowned for its use as a tax haven, beginning in the late 19th century. Reliably Democratic in national politics, Delaware still ranks at the top among U.S. states providing secrecy for corporations and ultra-high-wealth individuals, both domestic and foreign.

Both red states and blue states are destinations for those who seek to hide their money from tax collectors and public scrutiny. The U.S. federal system is a patchwork of states and territories, municipal and local jurisdictions, each with its own laws and regulations. This complex map provides ample opportunities for shell games of "hide the money.'

While the same is true to some extent of other nations with federal systems, and of the intricate financial network of the United Kingdom and its overseas territories, the United States offers unparalleled opportunities for concealment, lax enforcement, and legal obfuscation.

The Pandora Papers cite the example of South Dakota, an attractive destination for billionaires and others seeking to avoid estate taxes. The International Consortium of Investigative Journalists (ICIJ), which led the Pandora Papers investigation, obtained access to the records of the Sioux Falls office of Trident Trust. Among its clients were the family of Carlos Morales Troncoso, former president of Central Romana, the largest sugar plantation in the Dominican Republic. Owned principally by two Cuban exile billionaires in Florida, the plantation is notorious for its exploitation of Haitian workers.

South Dakota led the way in providing such trusts, as reported in detail even before the current revelations. But other states, including Alaska, Florida, Delaware, Texas, and Nevada, have followed suit.

The Pandora Papers also document the luxury real estate holdings of Jordan's King Abdullah. Like many other politicians and oligarchs around the world, King Abdullah owns real estate in many places outside his country. The ICIJ found records of his purchases in London and Washington, D.C., among other cities, as well as three side-by-side mansions in a luxury enclave in Malibu, near Los Angeles.

Money-laundering cases often feature luxury real estate, found in almost every region of the world. And the U.S. Financial Crimes Enforcement Network (FinCEN) has orders requiring stricter reporting of all-cash sales in 12 metropolitan areas. But fully tracking such transactions for shady deals or tax evasion is far beyond the capacity of FinCEN or the underfunded Internal Revenue Service, much less local or state governments with few incentives to investigate influential people.

Bottom line: those seeking to track down the hidden wealth that dictators, criminals, or jet-setting billionaires have lodged in the United States must not limit their efforts to supporting changes in national legislation in Washington, D.C. They must also turn the spotlight on state and local communities around the country, in both red and blue states.

In February 2017, for example, the Washington Post called attention to the fact that U.S. relations with Gambia and Equatorial Guinea were not just "foreign policy' but also a local story in Potomac, Maryland. The ousted Gambian dictator Yahya Jammeh lived at 9908 Bentcross Drive in the D.C. suburb. The U.S. Department of Justice filed a forfeiture complaint in June 2020 to recover $3.5 million of corrupt proceeds. His counterpart Teodoro Obiang Nguema, who has ruled Equatorial Guinea since his successful coup in 1979, still owns the house at nearby 9909 Bentcross Drive.

The message to look beyond the national political arena in Washington applies not only to tax justice advocates within the United States, who are now making significant progress in reform of national legislation. It also applies to global tax justice networks seeking to expand the transnational impact of their combined efforts. And it applies to African governments and international agencies tracking down the spoils of corruption, such as the still untraced portion of billions hidden overseas by Nigerian dictator Sani Abacha and his associates.

The same hidden mechanisms that siphon money upward to the rich are ubiquitous both in the United States and on the African continent. The effects are felt at all levels, from failure to address global crises such as climate change and the COVID-19 pandemic to gross inequality in housing and other essential needs.

Exposing those mechanisms and building the political will to curb illicit financial flows requires action not only in national capitals and global institutions, but also in all the jurisdictions where wealth is hidden. Nowhere is this more true than for the United States.

In the United States, new African immigrants have taken the lead in battles to defend social justice on many fronts. Prominent figures include Congresswoman Ilhan Omar of Minnesota, Nsé Ufot of the New Georgia Project, and Ayo (Opal) Tometi, one of the three co-founders of #BlackLivesMatter.

In Washington, this message from the Panama Papers is beginning to be heard if not yet followed.

On October 17, the headline of a Washington Post editorial read "States must stop letting the ultrawealthy dodge taxes -- and the law.' Despite the limited progress on national legislation, African and other global advocates for tax justice should recognize U.S. political realities and make good use of the many links they already have to states and local communities in the United States.

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ICRICT open letter to G20 leaders: "A global tax deal for the rich"

The Independent Commission for the Reform of International Corporate Taxation (ICRICT) is a group of leaders from around the world who believe that, at this moment in history, there is both an urgent need and an unprecedented opportunity to bring about significant reform of the international corporate taxation system. The Commission aims to promote the reform debate through a wider and more inclusive discussion of international tax rules than is possible through any other existing forum; to consider reforms from a perspective of global public interest rather than national advantage; and to seek fair, effective and sustainable tax solutions for development.

The Commission is chaired by José Antonio Ocampo and includes Eva Joly, Rev. Suzanne Matale, Edmund Fitzgerald, Léonce Ndikumana, Irene Ovonji-Odida, Jayati Ghosh, Kim Jacinto Henares, Ricardo Martner, Gabriel Zucman, Magdalena Sepúlveda, Thomas Piketty, Wayne Swan and Joseph Stiglitz.

October 12, 2021

https://www.icrict.com/press-release/2021/10/12/icrict-open-letter-to-g20-leaders-a-global-tax-deal-for-the-rich

Excellencies,

Eight years ago, you mandated the OECD to address corporate tax avoidance by multinationals, which cost countries at least $240 billion a year in lost fiscal revenues. After years of negotiations including 140 countries, the agreement announced last Friday shows that it is finally possible to change a system that was built one hundred years ago. The agreement recognises the basic principle of the need for a global minimum tax to put an end to the tax havens business model. With a global minimum tax, it doesn't matter in which countries multinationals record their profits, as these will be taxed at least at the minimum rate.

The agreement also finally recognises the principle that multinationals are unitary businesses, operating across jurisdictions and that their worldwide profits should be taxed in line with their real activities in each country on a formulaic basis, according to the key factors that generate profit (e.g., employment, sales, and assets) and so that multinationals can no longer pick and choose where to record their profits.

However, this reform process has been watered down in such a way that it will overwhelmingly benefit rich countries.

Proposals for a global effective minimum tax of 21% (or even better 25%, as we advocate) have been rejected in the pursuit of the lowest common denominator of 15%, a success for Ireland, a loss for the rest of the world.

A reform that could have delivered more than $200bn in increased fiscal revenues worldwide with a 21% tax rate, will deliver only $100bn with a 15% tax rate. By giving priority to apply the minimum tax to the countries where the headquarters of multinationals are located, the lion's share of the additional revenue is expected to be received by a small number of rich countries. This leaves aside the application of the principle of fairness you agreed, that corporations should be taxed in the jurisdictions where their profits are generated.

There are legitimate concerns that such a low global minimum will turn out to be the global standard, and a reform that was intended to make sure multinationals pay their fair share will end up doing just the opposite. Developing countries, which rely relatively more on corporate tax income as a source of government revenues, and suffer the highest losses from corporate tax abuse as a share of their current tax revenues, would be big losers. So too would small and medium-sized enterprises in developed countries, which will still pay the full local rate.

Particularly problematic is the proposal intended to address taxing rights, but which will apply to only the 100 largest and most profitable global multinationals and reallocate only a small fraction of their profits. The demand for a commitment from countries to withdraw or refrain from introducing measures to ensure that digital multinationals not covered by the current agreement pay taxes is simply unfair.

Concrete proposals put forward by developing and emerging countries, including some G20 members, to ensure all companies pay taxes in the countries where economic activities take place, and to allow source countries to apply the minimum tax on payment of services and capital gains (the so called "Subject to Tax Rule'), which are used by multinationals to shift profits out of their countries and into tax havens, have been ignored. Repeated concerns with respect to new rules for mandatory dispute resolution have also been given short shrift.

The negotiations are happening in the aftermath of COVID 19, at a time when developed countries are recovering faster than developing countries, who lack adequate fiscal space. Exacerbating this divergence by failing to provide sufficient revenues to sustain economic growth in developing countries is economically foolish. To do so during a global pandemic, when the need for revenue to support public health and economic recovery is greater than ever, is also socially inequitable. Coming on the heels of vaccine nationalism and hoarding by the advanced countries, this agreement is hardly one that enhances global solidarity. Moreover, it goes against global commitments grounded in the United Nations Charter, including those related to human rights and the Sustainable Development Goals, particularly Goal 10 on reducing inequalities within and among countries.

Overall, the current agreement is not grounded on a proper understanding of the economics of corporate profit taxation and reinforces global inequities. From the point of view of developing countries, it can only be seen as an interim solution which they have been forced to live with. In the absence of sustainable solutions, countries should not be restricted from continuing to pursue alternative measures, such as digital services taxes, which are already generating revenue today, or the solution for taxing digital services that has been developed by the United Nations Tax Committee.

The current negotiations must continue during the presidency of Indonesia in 2022 and India in 2023 but in a different format that recognises the failure of the 2019-2021 process to give effective voice to developing countries. This ultimately must provide the platform for a new, more inclusive, round of negotiations to deliver a new global tax deal for the world.

Addressing the complex global challenges that the world is confronted with today, from the adequate provision of public services to the existential climate crisis, requires visionary decisions that put national self-interest aside in the search for the common good. It means siding not with multinationals and tax havens but with citizens both in the Global North and in the Global South. History will judge you harshly if you miss the chance to get this right.

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For an in-depth analysis of the OECD process and its limitations, see "Tax Reforms and Global Redistribution: Situating the Global South' by Sakshi Rai, published in the Economic and Political Weekly in Mumbai, India on August 14, 2021,

"The current international financial system needs an urgent overhaul as it continues to undermine workers' rights. The recent agreement on the "Two- Pillar Approach' that aims to tackle global corporate tax avoidance and taxing the digital economy falls short of addressing the priorities of the global South, and threatens their sovereignty.'

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U.S. Cold War with China: First Stop, Equatorial Guinea

Officials are hyping the threat of a potential Chinese naval base facing the Atlantic to get yet more funding for military operations.

By William Minter, Anita Plummer, Daniel Volman | December 15, 2021

Originally published in Responsible Statecraft.

In the first Cold War, the Truman Doctrine laid out the premises for prioritizing an anti-communist crusade that lasted an entire generation and served as the pretext for U.S. support for apartheid South Africa and countless other anti-democratic regimes around the world.

Last week's Democracy Summit, noted CUNY Presidential Professor Branko Milanovic, is most likely "a prelude to the creation of an unwieldy association of states that will be used by the United States to spearhead its ideological crusade in the escalating geopolitical conflict with China and Russia.'

Milanovic, who earned his Ph.D. in 1987 at the University of Belgrade and later became chief economist in the World Bank's research department, recalled that in the first Cold War, there was at least the option of a non-aligned movement, in which his native country joined with India to offer an alternative to the Manichean geopolitical choice between the Soviet Union and the United States. "The clash between China and the United States is a clash driven by geopolitical considerations... It has nothing to do with democracy,' Milanovic concluded.

That logic was reflected on the eve of the Summit when unnamed "intelligence officials' and "senior administration officials' took the initiative to talk to the Wall Street Journal about the threat of a possible Chinese base in Equatorial Guinea. According to these officials, "[intelligence] reports raise the prospect that Chinese warships would be able to rearm and refit opposite the East Coast of the U.S. -- a threat that is setting off alarm bells at the White House and Pentagon.'

The article further explained that the United States does not oppose current close relations between Equatorial Guinea and China, which trains and arms the Guinean police and helped upgrade the commercial port at Bata on the mainland part of the country. Rather, the U.S. concern "is that the Chinese would develop a naval base in Equatorial Guinea, which would then give them naval presence on the Atlantic,' charged Maj. Gen. Andrew Rohling, commander of the U.S. Army Southern European Task Force-Africa, in a June interview.

Foreign military bases are located across Africa, especially in Djibouti where the United States and China each have a military base, as do six other countries including Japan, Saudi Arabia, and three European countries. Adding a Chinese base in West Africa as well would not be inconsistent with China's broad foreign policy goals of demonstrating a global presence. Private Chinese security firms have received contracts to work in some commercial ports. But there are no signs of new construction at the Bata port. And Chinese global naval strategy is still overwhelmingly focused on the area off the east coast of China.

Chinese military presence in Africa focuses on support for UN peacekeeping and military assistance to African countries, in line with policy established in 2006. An open question is how Xi Jinping and China's military will "fight terrorism' in Africa, one of the goals laid out at the annual China-Africa ministerial forum in Dakar in late November. China's military assistance to Africa, which includes training of both military personnel and police forces and the export of arms, is an important part of its overall Africa policy which tends to emphasize trade, investment and infrastructural development over security issues.

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Hyping the threat of a potential Chinese naval base facing the Atlantic is designed, in part, to obtain increased funding from the U.S. Congress for American military operations in Africa. General Stephen Townsend, Commander of the United States Africa Command, in his presentation to the Senate Armed Services Committee in April this year, cited the potential threat of a Chinese naval port in the Atlantic as "my number one global power competition concern.'

However, it also intended to make it clear that Washington will oppose Beijing pursuing military bases overseas as the United States has done.

"Having Chinese military vessels in the Atlantic represents a new phase of strategic competition,' Ioannis Koskinas, a senior fellow at the New America think tank, told the Turkish magazine TRT World. "It may be that China simply says, 'if the U.S. gets to send its carrier battle groups to the Western Pacific, China can send its ships to the Atlantic," he added.

The threat is really to the assumption that only the United States has the right to a worldwide military presence featuring overwhelming preeminence and a giant military budget to support it.

The "Atlantic base' scare is part of a broader Pentagon and bipartisan effort to exaggerate the military threat from China, also illustrated by the claim that China now has the world's largest navy, as measured by the number of ships instead of the more meaningful metric of tonnage. By tonnage, the United States still has by far the world's largest navy, comparable to the combined tonnage of the next thirteen navies and almost five times that of China.

Given that Equatorial Guinea is over 6,000 miles southeast of Miami, and that China has only 2 aircraft carriers in its entire navy compared to 20 for the United States, it is ludicrous to see the potential of a base there as a serious threat to U.S. security. China, for its part, is ringed by at least seven U.S. bases within 3,000 miles of its coast.

Yet, since 2019, according to the WSJ article and other sources, the U.S. policy towards Equatorial Guinea has been driven by this new Cold War agenda. This to the detriment of long-standing policy which has to some extent challenged the anti-democratic regime of Teodoro Obiang Nguema, who has ruled the country since 1979.

In September this year the Justice Department announced that $26.6 million confiscated from President Obiang's son's assets in the United States, including a Malibu mansion, would be used to support UN efforts against COVID-19 in Equatorial Guinea.

What if the U.S. had cited this to support Treasury Secretary Janet Yellin's new anti-corruption program announced at the Summit? The Justice Department could also have announced that it was filing for forfeiture of the mansion owned by President Obiang and his wife in Potomac, Maryland, as it did in 2020 for the mansion next-door, previously owned by ousted Gambian dictator Yahya Jammeh.

If the Biden administration were ready to "build back better' in its Africa policy, it could well experiment with a pilot project in Equatorial Guinea, based not primarily on the interests of the U.S. military and U.S. oil companies, but also on objectives such as democracy, curbing corruption, sustained development in the Central African region, and the transition away from fossil fuel. Both China and the United States would be well-placed to contribute to such a common agenda.

To begin with, it could propose, to the United Nations, the African Union, and other governmental and civil society stakeholders in the future of Equatorial Guinea, a consultative gathering at a neutral location, perhaps hosted by the UNDP. The United States would have standing to do this given the interest not only of the Defense Department but also the Department of Justice, the Treasury Department, and other agencies.

Tutu Alicante, executive director of Equatorial Guinea Justice, who was one of the recipients of the Global Magnitsky Awards in November, is also based in the United States and would be in a good position to advise on participation by global civil society in such an event. And civil society activists might raise questions about the potential threat from surveillance technologies supplied to African governments by China or Israel, its leading competitor in this field.

Such a gathering, instead of providing an opportunity for governments to make dubious claims and promises about their commitment to democracy, might instead contribute to building collaboration in support of common agreed agendas as well as space for honest debate about conflicts in values and goals.

AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter. For an archive of previous Bulletins, see http://www.africafocus.org,

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