WORLD REPORT: POOR NATIONS LOSE KS 9 TRILLION ANNUALLY FROM OFFSHORE ASSETS

THE STANDARD
NAIROBI, KENYA
April 8, 2009
By Abiya Ochola and agencies

Developing countries lose more than Sh9 trillion annually from offshore assets.

A report by a British charity, Oxfam, says at least $6.2 trillion of developing countries’ wealth is held offshore by individuals, depriving developing countries like Kenya of huge tax revenue.

Oxfam says if the money held offshore by private companies was included, the figure would be higher. The scale of the losses could outweigh the Sh8.2 trillion developing countries receive annually in overseas aid.

And capital flight is a growing problem, with an additional Sh24 trillion moved offshore annually. The biggest culprits of the capital flight are former Nigerian President Sani Abacha and the late Zaire strongman Mobutu Sese Seko.

Oxfam is calling for reform over tax havens and change of the financial system to increase accountability and give developing countries greater say in the management of the global economy.

It is also pressing G20 leaders to agree on bail-out for poor countries to cushion them against the financial crisis.

Key boost lost

Oxfam Head of Policy and Advocacy Kirsty Hughes, said: "Developing countries are losing billions of pounds annually that would provide a vital boost to their economies and reduce poverty."

Oxfam says $16 billion a year would educate every child in the world. It also says $50 billion is needed to help poor countries protect their people from effects of climate change.

"The current financial crisis shows our leaders can no longer afford to stand idly as tax havens take billions of pounds from the pockets of taxpayers in rich and poor countries," said Hughes.

Relax Laws

Meanwhile, European countries Andorra and Liechtenstein have pledged to relax their bank secrecy laws.

This comes after international pressure mounted on tax havens to stop shielding the assets of the rich.

The global financial crisis has encouraged cash-strapped governments to crack down on the offshore industry, which helps wealthy clients evade billions of dollars in taxes.

The downturn has also exposed alleged financial fraud under lightly regulated jurisdictions such as Antigua and Barbuda, a tiny Caribbean nation that hosts scandal-plagued Stanford International Bank.

In an interview, Andorra Prime Minister Albert Pintat said yesterday: "Andorra is committed to changing its laws to ensure bank transparency."

The developments come two days after US President Barack Obama’s administration endorsed legislation in the US Congress, to crack down on countries that refuse to co-operate in multi-national tax and securities fraud inquiries.