Africa must raise taxes to better fight climate change

Let us begin by welcoming international solidarity. Whether it was the United Nations, its field agencies or major NGOs, the mobilization was not long in coming to the aid of Zimbabwe, Malawi, and, especially Mozambique, devastated by Cyclone Idai last March. But as another tropical cyclone, Kenneth, has landed on the East African coast with even greater intensity, we cannot help but detect accents of guilt in this solidarity.

Mozambique is on its knees. Hit by what is considered the worst cyclone in the southern hemisphere, it saw its fourth city, Beira, practically wiped off the map. And since tropical storms know no borders, Idai has also killed in Zimbabwe and Malawi. More than a thousand people died and two million were affected, including 1.8 million in Mozambique alone. The damage caused by floods and wind gusts is expected to cost the region more than US $2 billion, according to the World Bank.

For researchers, there is no doubt that the alternation of cyclonic episodes and droughts that has hit the region in recent years is directly linked to the impressive temperature variations resulting from climate change. The irony is that Mozambique and its neighboring countries produce only a tiny fraction of the world’s carbon dioxide emissions. Moreover, Africa is the continent least responsible for global warming: barely 3.8% of greenhouse gas emissions are produced there, compared to 23% in China, 19% in the United States, and 13% in the European Union.

Beira is not an isolated case. Prolonged droughts, repeated floods, declining agricultural yields, increasingly limited access to water, global warming is already taking its toll in Africa. These natural disasters increase the risk of food insecurity and health crises. The cholera cases that have emerged in Mozambique since Idai and Kenneth passed through clearly show it.

In rural areas, survival is at stake, due to the disappearance of entire crops. Urban populations are also on the front line. High birth rates and rural exodus mean that 86 of the world’s 100 fastest growing cities are in Africa. And at least 79 of them – including 15 capitals – are facing extreme risks due to climate change, according to the risk consultancy Verisk Maplecroft.

In addition, natural disasters exacerbate poverty and inequality, and fuel conflict. Extreme poverty continues to increase in sub-Saharan Africa, unlike in all other regions of the world. If nothing changes, the region could account for 90% of people living on less than US $1.9 a day by 2050, the World Bank warns. Public infrastructure is unable to meet the growing demand, and disaster response mechanisms are inadequate. Kinshasa’s 13.2 million inhabitants, for example, are already regularly affected by floods.

In order to be better prepared, African States urgently need more resources. It is true that tax collection has improved on the continent, rising from 13.1% in 2000 to 18.2% in 2016, according to the Organisation for Economic Co-operation and Development (OECD). But this remains well below the averages in Latin America (22.7%) or in OECD countries (34.3%). Above all, even when they are honest, administrations do not have the necessary resources to thwart the increasingly sophisticated and aggressive strategies that multinationals employ to avoid taxes. Africa loses between US $30 and $60 billion every year, according to very conservative estimates by the United Nations Economic Commission for Africa (UNECA) and the African Union. This is much more than the amount of international aid.

All over the world, people are shocked by tax scandals exposed by government investigations and whistleblowers. In the United States, for example, a recent report revealed that 60 of the country’s top 500 most profitable companies, including Amazon, Netflix and General Motors, paid no taxes in 2018, despite a cumulative profit of US $79 billion. The impact on public finances is even more worrying in Africa, where corporate taxes represent 15.3% of government revenues, compared to just 9% in rich countries.

After years of silence, OECD has recently admitted the need to question the system that allows companies to declare their profits wherever they wish, in order to benefit from very low or even zero tax rates in tax havens – and this in a totally legal way. This is a requirement that we, the Independent Commission for the Reform of International Corporate Taxation (ICRICT), have been pursuing for years. Rich countries are now under pressure from the International Monetary Fund (IMF) and the UN, which, in recent months, have called for a major overhaul of international taxation.

This is a first step in the right direction, but there is an urgent need for developing countries to participate actively in the drafting of new tax standards. Africa is now the most vulnerable region to climate change, although it has only marginally contributed to it. It is time for the continent to make its voice heard to recover resources that will enable it to fight against its effects and better prepare its populations.

By Léonce Ndikumana,
Professor of Economics and Director of the African Development Policy Program at the Political Economy Research Institute (PERI) at the University of Massachusetts at Amherst, and a member of the Independent Commission for the Reform of International Corporate Taxation (ICRICT).

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