CSOs: How multinational tobacco companies aid illicit financial flows in Africa

A report by the Tax Justice Network Africa (TJNA) and Civil Society Legislative Advocacy Centre (CISLAC) says multinational tobacco companies contribute significantly to illicit financial flows (IFFs) in Africa.

The report titled ‘Tobacco Industry and Illicit Financial Flows in Africa’ was launched on Wednesday in Abuja.

Speaking at the event, Waithaka Iraki, a consultant of Tax Justice Network Africa (TJNA), said IFFs were perpetuated by multinational firms operating in the continent mainly through tax evasion.

Quoting statistics from a 2020 report by the United Nations Conference on Trade and Development (UNCTAD) on economic development in Africa, he said Africa is now losing over $88.6 billion to IFFs annually.

“The AU/UNECA’s high-level panel on illicit financial flow (IFFs) report 2015 brought to the world stage the scourge of IFF on sustainable development and revealed that more than 50 billion U.S dollars annually was being siphoned on the continent,” Iraki said.

“Recent data from the United Nation’s Conference on Trade and Development’s ‘Economic Development in Africa’ report 2020 indicates that IFFs have nearly doubled and Africa is now losing over US$88.6 billion.

“Tax evasion strategies to include illegal and exports; such are taxed differently and the difference can lead to tax loss, illegal production and sale, fudging data to obfuscate information that would be used by tax authorities.

“It also noted that political instability could also enhance tax evasion.”

Iraki, who is also a lecturer at the University of Nairobi, Kenya, said tobacco firms’ revenues were surprisingly steady even during the COVID-19 pandemic, adding that laws should be tightened to reduce advertising and promotions which keep demand for the product high.

He said the incentives offered to tobacco firms by African governments were not commensurate with their contribution to the economy and seem to ignore the health cost.

“Tobacco money is made in Africa, money goes elsewhere to shareholders outside the continent. That is more reason higher taxes would benefit the host countries,” he said.

“We, however, risk having smokers spend more money on smoking than say education or food as the price of cigarettes and other tobacco products go up.”

He advised that regulation should induce competition along the tobacco supply chain because more competition would reduce the profits and disperse the power of tobacco firms.

Also speaking at the event, Alvin Mosioma, executive director, TJNA, said the report looked at the role of multinational companies, particularly those that are focused on tobacco cigarette production, in the continent.

Mosioma said the project brought together five organisations across the continent from Nigeria, Zambia, Senegal, Kenya, and the Democratic Republic of Congo (DRC) to seek ways to ensure that African countries initiate the right tax policies to control tobacco consumption.

“The report we are launching today tries to do an analysis of the avenues that tobacco companies in Africa are using to reduce the tax that they pay to our governments,” he said.

“There are two ways you can look at the tobacco discussions in the continent, one is from the health perspective looking at how to ensure that the right policies are put in place to reduce the consumption.

“The second is to ensure that even as we are reducing the consumption, the companies that are responsible for the production and the sale of tobacco products in the continent are paying their fair share of tax.”

On his part, Auwal Rafsanjani, executive director, CISLAC, said TJNA and his organisation conducted the research to show the effects of tobacco companies’ activities in Africa.

Rafsanjani said this was part of the contribution of the group to ensure that IFFs, money laundering, tax evasion, tax avoidance, which are directly affecting African economy and development are curbed.