Ghana weak laws offer 67% tendency for illicit financial flows
The Tax Justice Network, an organisation concerned with tax havens and tax evasion, ranked Ghana 48th out of 92 territories, in its 2015 Financial Secrecy Index which ranks jurisdictions according to their propensity to facilitate huge illicit financial flows.
Ghana’s rating is not too far behind Switzerland, which leads the ranking in financial secrecy with 73 per cent, maintaining the popular perception of Swiss banks as the most financially secretive and the most preferred destination for capital flight.
An estimated $21 to $32 trillion of untaxed or lightly taxed private financial wealth is located in tax havens around the world that use secrecy to attract illicit financial flows.
As the Tax Justice Network believes in the identification of tax havens as a first step to fighting illicit financial flows, it uses the Financial Secrecy Index to identify which territories offer greater platform for tax evasion and capital flight, by combining an assessment of the size of the territory with an assessment of its financial secrecy, measured by 15 indicators.
The indicators include banking secrecy, existence and availability of registers for trusts and foundations, companies, as well as register information for their beneficial owners, accounts and financial reports; the efficiency of tax administration; anti-tax evasion and anti-money laundering structures; scale and effectiveness of information exchange between tax jurisdictions; commitments to bilateral treaties and international conventions; and international judicial cooperation.
Ghana’s performance among the indicators, was weak in the availability of registered information on beneficial owners of companies, company accounts and country-by-country financial reports, and their accessibility and affordability to the public (Tax Justice Network considers a fee of less than $10 or £10 for accessing the information, to be affordable).
High weakness was also found in the efficiency of Ghana’s tax and financial regulations – Ghana does not require domestic tax payers to disclose to local tax administration authorities, their payments to non-residents.
African economies have lost over $1 trillion in capital flight since the 1970s while the combined external debts of African countries is less than $200 billion, the Tax Justice Network says.
“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.”
Among the 15 indicators, Ghana showed strongest performance in bilateral and international commitments to curbing capital flight – Ghana is a signatory to many conventions and has ratified the five most relevant international treaties relating to financial transparency.
Switzerland leads the pack in the ranking, and is followed by Hong Kong, the USA, Singapore, Cayman Islands, Luxembourg in 6th place, Lebanon, Germany, Bahrain and the United Arab Emirates in 10th position.
The Tax Justice Network says illicit cross-border financial flows are estimated at a minimum of $1 trillion per year, far outweighing the estimated $135 billion in global foreign aid.
The Network says world leaders are getting concerned and moving to tackle illicit financial flows and a global automatic information exchange system to help countries find out about the cross-border holdings of their taxpayers, is expected to be deployed in 2017.
By Emmanuel Odonkor