02-05-18

24
BUSINESS A.M. FEBRUARY, MONDAY 05 - SUNDAY 11, 2018
WORLD BUSINESS & ECONOMY
Global illicit cross-border financial
flows peak $1.6trn annually
...Switzerland, U.S ranked top promoters of financial secrecy
Bukola Odufade
A
Financial Secrecy Index
published recently by
the Tax Justice Network
(TJN) has ranked Switzerland
and the United
States as the biggest promoters of
financial secrecy in the world. This is
just as over $1.6 trillion illicit crossborder
financial flows take place
annually.
The report stated that illicit crossborder
financial flows have been
estimated at $1-1.6 trillion per year:
dwarfing the US$135 billion or so in
global foreign aid, and that since the
1970s African countries alone have
lost over $1 trillion in capital flight,
while combined external debts are
less than $200 billion.
“So Africa is a major net creditor
to the world - but its assets are in the
hands of a wealthy élite, protected
by offshore secrecy; while the debts
are shouldered by broad African
populations, according to their findings,”
it said
It however stated that some rich
countries suffer as well too, citing
European countries like Greece,
Italy and Portugal, which have
been brought to their knees partly
by decades of tax evasion and state
looting via offshore secrecy.
The index, which ranks jurisdictions
according to their secrecy and
the scale of their offshore financial
activities, also indicated that an estimated
$21 to $32 trillion of private
financial wealth is located, untaxed
or lightly taxed, in secrecy jurisdictions
around the world.
According to the index, secrecy
jurisdictions is used as an alternative
to the more widely used term tax
havens as they use secrecy to attract
illicit and illegitimate or abusive
financial flows.
The ranking, which is politically
neutral, is a tool for understanding
global financial secrecy, tax havens
or secrecy jurisdictions, and illicit
financial flows or capital flight.
“The 2018 release confirms the
long-term picture, that the richest
and most powerful countries have
continued to pose the greatest
global risks – with Switzerland and
the U.S. established as the key facilitators
of illicit financial flows,” said
TJN chief executive Alex Cobham.
Switzerland, a well-known tax
haven, whose practices were uncovered
by ICIJ’s 2015 Swiss Leaks
investigation, is still the worst offender
as far as financial secrecy
is concerned, according to TJN’s
analysis.
“Switzerland has delayed the
implementation of automatic information
exchange, and in 2017
lawmakers attempted to stop it altogether
with countries they deemed
‘corrupt’,” the report noted.
As for the United States, it has
refused to take part in international
efforts to curb financial secrecy and
instead set up a parallel system that
seeks information on U.S. citizens
abroad but does not provide data to
foreign countries.
Several U.S. states are also considered
tax havens including Delaware,
which doesn’t tax intangible
assets such as intellectual property,
patents or trademarks.
“More than 66 percent of the Fortune
500 have chosen Delaware as
their legal home,” claims the state’s
Division of Corporations website.
Some of the criteria used to build
the index include the absence of
a public register, harmful tax residency
rules and whether the system
allows for bearer shares, which obscure
ownership.
TJN noted some improvements
since the 2008 financial crisis, most
notably the automatic exchange
of information that will be implemented
in 2018 for many countries,
including the Bahamas, Samoa and
St. Kitts and Nevis. The report also
underlines increased public pressure
in favor of public registers of
companies’ owners.
Yet, in the meantime the European
Union, put together a blacklist
of 17 secrecy jurisdictions last
month, only to delist eight countries
a few weeks later, including Panama
(ranked 12 on the secrecy index)
and Macao (ranked 22). In addition,
members of the EU themselves rank
high on the secrecy index: Luxembourg,
the Netherlands, Malta and
Germany are among the top 20
jurisdictions promoting financial
secrecy. As for the United Kingdom,
it continues to shelter financial secrecy
through its crown dependencies,
including tax havens Guernsey
(ranked 10), Jersey (ranked 18) and
the Isle of Man (ranked 42).
Among the countries that are
new on the TJN list are Kenya, with a
very high secrecy score of 80%, even
higher than Mauritius (72%), which
is one of Africa’s most high-profile
tax havens. Although Kenya ranks
high (9) on TJN’s secondary index
based on secrecy only, it is much
lower on the main index (27), given
its rather small market share. This “is
an example of how interests of western
financial service lobbyists have
successfully lured governments into
a race to the bottom,” said the report.
“The damage being done to
public services around the world is
incalculable, and the violations in
human rights are severe, whether
this be through a lack of access to
clean drinking water in sub-Saharan
Africa or the pressures facing public
health services in the UK and
U.S.,” said Liz Nelson, TJN Director
responsible for the Tax Justice and
Human Rights program.
2018 Secrecy Ranking
See full index here
1. Switzerland
2. USA
3. Cayman Islands*
4. Hong Kong
5. Singapore
6. Luxembourg
7. Germany
8. Taiwan
9. United Arab Emirates
(Dubai)
10. Guernsey*
11. Lebanon
12. Panama
13. Japan
14. Netherlands
15. Thailand
* British overseas territory or
crown dependency. If Britain’s
network were assessed together, it
would be at the top.
Electric cars, niche metals
lure cash to Africa’s mines
Rising commodity prices
may have revived enthusiasm
for African resources,
but it’s unlikely
to be the old mainstays
of coal and iron ore pulling crowds
next week as the mining industry
meets in Cape Town.
The electric-vehicle boom and
shifting industrial demand have
transformed formerly niche metals
-- from lithium and cobalt to
praseodymium and neodymium
-- into the hot new drawcards of
African mining.
Far smaller and cheaper than
the gargantuan mine, port and rail
developments pursued by the likes
of BHP Billiton Ltd. and Rio Tinto
Group during the last boom, these
next-generation mines may stand a
better chance of success.
Here are five metals grabbing attention
across the continent.
Rare Earths in Malawi
Struggling commodities trader Noble
Group Ltd. surprised metal market
watchers in November with a 12 million-pound
($17 million) investment
in a rare-earth project in Malawi. The
owner, Mkango Resources Ltd., says
its deposits of neodymium and praseodymium
will be used in magnets
for products such as electric-vehicles
and wind turbines.
Niobium in Tanzania
U.S. private equity firm Denham
Capital Management LP is backing
the Panda Hill niobium project in
northern Tanzania. Niobium --
named for a Greek goddess who
became a symbol of the tragic
mourning mother -- is used to
dramatically lighten steel for industrial
pipes and aircraft parts.
Panda promises to be the first new
niobium mine in 40 years. The
metal is currently mined in only
three places on Earth.
Graphite in Mozambique
Traditionally sold to steel mills
and the lubricants industry,
graphite is benefiting from new
demand for lithium-ion batteries
needed to power new electric
vehicles like Tesla Inc’s Model 3.
Australia’s Syrah Resources Ltd. in
November started shipments from
what it says is the world’s largest
deposit, located in northern Mozambique.
Cobalt in Congo
Although the world’s biggest
commodity trader, Glencore Plc,
was drawn to the Democratic
Republic of Congo for its copper,
by-product cobalt has become
the star performer. Prices for the
metal, another key component
in electric-vehicle batteries, have
tripled in the last two years and
Glencore is moving to capitalize
on the growing demand. It
will more than double its cobalt
production in the central African
country to at least 58,000 tons by
2019, approximately 40 percent of
global supply.